WL Ross exits SpiceJet at a premium

The restructuring and turnaround firm originally invested in SpiceJet in July 2008, paying around $80 million for convertible bonds.

This still ranks as one of the biggest investments to date in India’s travel and aviation sectors. Dubai investment group Istithmar Capital also invested at the time, as well as Goldman Sachs, which now holds around 6% of the business. Ross himself joined the SpiceJet board in January 2009, alongside Ranjeet Nabha, MD and CEO of WL Ross India.

Billionaire Sun TV Networks head Kalanithi Maran, long regarded as eager to enter the sector, picked up the stake through his unlisted business Kal Airways, taking a further 7.7% from Bhupendra Kansagra, one of the original promoters of the business. He has now made an open offer for a further 20% of SpiceJet to other shareholders, following Indian takeover rules.

Ross said of the exit, “We think it’s a fair price for the new owners to come in and a fair price for us to come out… Now, we think it is time for a new owner and a new group to take it to the next level.” Reports that Istithmar is cashing out of its stake in SpiceJet remain unconfirmed. Goldman is believed to be exting through the tender offer.

Ross commented favorably on the success of SpiceJet’s management, installed by WL Ross & Co., to turn the business around, describing the investment and the exit as dictated partly by oil price movements. Prices fell over the period of the investment, bringing down SpiceJet’s costs. The airline declared a profit in its financial year ending March 2010, one of the few in the Indian budget space to record such a result.

AVCJ sources also see the exit as particularly well-timed for these reasons. “This is probably the most positive environment we’ve seen in aviation for the last three years,” said Binit Somaia, Director, South Asia, at the Centre for Asia Pacific Aviation. “Fuel prices are relatively stable … Load factors are up, yields are up, and the overall outlook for the Indian economy is very strong.”

Ross’s exit may also dispel one of the lingering clouds over the business – the distractions created by his presence in the ownership structure. “SpiceJet has been reasonably successful. Ever since they launched, they have built quite a strong brand,” noted Somaia. But he added, “For the past couple of years they have seen management distracted quite a bit, because there have been these constant questions about ownership issues.” 

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• Topics
• South Asia
• Infrastructure
• Infrastructure
• Exits
• Wilbur L. "Ross Jr."
• WL Ross & Co.