IndiGo is now 6th largest airline globally; Vedanta raises $1.25 billion loan

The Federal brings you the latest business stories on Thursday (December 14).

Vedanta Resources' fundraising initiative

Vedanta Resources, the holding company of Vendata Group, has raised a $1.25 billion loan from global private credit lenders. The fundraising initiative aims to establish a sustainable long-term capital structure, a statement from the group said on Wednesday (December 13). The loan was secured from an unnamed group of lenders meant to refinance existing liabilities. It is set to mature in April 2026.

The parent company faces repayment of notes worth $2 billion in 2025-26. The company also has a debt repayment of $3.6 billion scheduled for 2024-25. In October this year, Vedanta announced it would de-merge its various businesses into six independent companies to unlock potential shareholder value.

According to Systematix Institutional Equities, the demerger is unlikely to resolve or change the debt positions at Vedanta Ltd and the parent company, Vedanta Resources Limited.

SpiceJet set to raise Rs 2,254 crore

SpiceJet's board of directors approved a plan to fund Rs 2,254 crore by issuing up to 130 million convertible warrants and 320.8 million fresh equity shares at an issuance price of Rs 50 per share.

These convertible warrants will be distributed to 64 organisations, including Prabhudas Lilladher Advisory Services, LKP Finance, Martina Developers, and Fincon. It's worth noting that the issue price of Rs 50 marks an 18.4 per cent reduction to SpiceJet's December 11 closing market price of Rs 61.3.

SpiceJet managed to lower its net loss to Rs 431.54 crore in the quarter ended September 2023, a substantial improvement from the Rs 837.8 crore loss reported the previous year. SpiceJet's market value is now Rs 4,000 crore. Ajay Singh, the CEO and MD, and the company's promoters own 56.5 per cent of the corporation, with 37.9 per cent pledged as collateral to various lenders. This equity infusion could be a last-ditch effort from the promoters to save the airline as it faces multiple headwinds like repaying around Rs 479 crore to the former promoters, led by Kalanithi Maran.

$5 trillion economy goal impossible to achieve: Rajan

Former RBI governor Raghuram Rajan attributed the sharp increase in GDP in the first half of the current fiscal year to infrastructure spending and strong performance by large economies worldwide. However, he added that India still has a long way to go and that the $5 trillion economy goal for 2025 is nearly impossible to achieve.

Rajan, a severe critic of the BJP government at the Centre, believes that despite the robust GDP growth, points out that private investment and consumption have not seen a corresponding increase. This suggests that while government spending on infrastructure has driven growth, there might be limitations to sustaining this growth without a more significant contribution from the private sector and individual consumers. He pointed out that to achieve the $5 trillion economy goal by 2025, India would need to grow at a remarkably high rate of 12 per cent to 15 per cent in real terms over the next two years. While there has been significant growth, questions remain about the sustainability of this growth, the role of private investment and consumption, and the need for transparent and well-defined economic strategies.

IndiGo's growth

IndiGo Airlines continues to surge ahead, securing its position as the sixth-largest airline globally in market capitalisation. The airline's valuation now stands at $13.80 billion, surpassing United Airlines, valued at $13.48 billion, following a 1.73 per cent increase in parent company InterGlobe Aviation's shares, which closed at Rs 2,982.50 on the BSE. Delta Air Lines leads the pack, with a market capitalisation of $26.54 billion. China Southern Airlines, Turkish Airlines and China Northern Airlines form the rest of the pack of 10. IndiGo currently has a market share of around 63 per cent. While the air traffic is growing month after month, a lot needs to be fixed in terms of service, which is below par, and the unmanageable airports, which cannot handle huge passenger influx.