Wednesday, 17 September 2014

Case Study: SpiceJet

It's not just Spicejet that's in trouble, it's the entire aviation sector with accumulated losses of 49,000 crore (June 22, 2014, Times Of India )

Spicejet has a market capitalisation of about Rs. 739 crores, and Contingent Liabilities of around 15,435 Crores. Its Equity Reserves stand at  Rs.  minus 1588 Crores.

Its NPM and OPM have been under water for many years now. It has no P/E. No P/B. And its book value is negative. Minus 26 rupees.

It has no ability, currently, to service even the interest on its loans, because its Interest Coverage Ratio stands at minus 6.5 rupees.

Promoters have pledged 29% of their holding.

In the last 10 years, SpiceJet has seen positive Net Profit only twice, in 2010 and 2011.

Neutral Point:
Its Working Capital has remained negative since 2006, and stands at Rs. minus 300 crores currently. Which may noy be a bad thing:

Quote:Economic Times:Negative Working Capital:

Typically, large companies have a consistent negative working capital since they have the muscle power and can demand longer credit periods from their fragmented suppliers.

On the positive side…
SpiceJet has seen positive “Earnings Before Interest Depreciation and Taxes” (EBIDT) for 5 consecutive Financial Years, from 2006 to 2011. (

Its Capital Work In Progress was very healthy between 2006 and 2011, between 300 to 600 Crores, so that means perhaps they have been developing their infrastructure. CWIP is low now, which would perhaps mean they have managed to complete their internal development.


SpiceJet is owned by the Chennai based SUN GROUP:


Sun Group owns Thirty Three Television Channels reaching 95 million households in India.
Also viewable in U.S.A, Canada, Europe, Middle East, Singapore, Malaysia, Sri Lanka, South Africa, Australia and New Zealand.

It also has 45 FM Radio Stations, Two Daily News Papers and Five Magazines.
Sun Direct  DTH  has 9 million subscribers, Sun Pictures is the film division of Sun TV Network.

So perhaps it is safe to assume that the Sun group can and will use their media presence to promote SpiceJet.


1. The Sun Group is increasing its stake in Spicejet (SCREENER.IN).

2. Spicejet recently started its first international flight.

3. Oil prices have been down for a long time now, and are in a bear market currently. 


SpiceJet is a loss making company with Contingent Liabilities of 15,435 Crore on a MCapitalisation of only 739 Crore. No P/E. No P/B. Book value is negative. Promotors have pledged 29% of their shares. Net Profit has been negative for 8 out of the last 10 years. The industry is in shambles because of Govt policies and high tax on Jet fuel.


  1. Positive EBIDT in 5 consecutive years, 2006 to 2011.
  2. Owners are increasing their stake.
  3. Oil prices in a bear market.
  4. Owners have strong media presence.
  5. Heavy investment in development of internal infrastructure between 2006 and 2011 (Heavy Capital Work In Progress.)

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