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Spicejet at Rs 58/59…what’s the Spice ?

Merrill Lynch Capital Markets Espana SA SV picked up 1.6 million shares of Spicejet at Rs 57.02 on February 26,2010 in a Bulk Deal…It has begun March closing at Rs 58.90 today with some heavy volumes of 6.6 million shares on the BSE

Earlier on February 5,2010 in Bulk Deals yet again,we saw Istithmar World PJSC Fund knock off 31.49 Million shares of Spicejet at Rs 52.01 to several Buyers….Reliance Growth Fund picked up 4.5 Million shares,Birla Mutual Fund picked up 10 Million,DWS got 8.85 Million and Damani Estates & Finance Pvt Ltd got 2 million

It’s moved up 10% in a month…and over 30% in Three months and a fabulous 265% in a year….so what’s the Spice?….the company yet has a negative Book Value

Equity is Rs 241 crs (FV Rs 10) with just under 13% held by those who ensure Spicejet remains in the air!…….Though December 2009 Quarter has seen a turnaround with a PAT of Rs 109 crs,the Accumulated Net Loss at December 31,2009 is yet very high at Rs 850 crs….netted of positive reserves of just under Rs 229 crs it yet reflect a negative Reserve of Rs 621 crs…..

However of Interest is the Infusion of US $ 100 Million into the Company by WL Ross & Co and the FCCB Conversion of US $ 80 million at Rs 25/share in 2010.This would increase the Equity to Rs 467 crs and  reduce Debt of @ Rs 500 crs to under Rs 300 crs…but importantly with Profitablity expected to be @ Rs 250 crs in FY 11,the Negative Networth of under Rs 400 crs expected at March 31,2010 will swing back to Positive in FY 11 with the FCCB Conversion and the  Turnaround Profitability….FY 11 EPS should try for Rs 5 levels

So FY 11 is going to be the turnaround Year for Spicejet…Back into the Black…a Positive and climbing Networth…New Strong Institutional Buyers….International Routes…Better Operations with higher occupancies over 80% and higher margins,especially if the Sales Tax on ATF is reduced from the average of 28% to just 4% as begged for by the Aviation Industry…and Valuation-wise,the market is offering competitor,Jet Airways a much higher latitude

Looks Like Spicejet will fly into the Rs 75-Rs 100 Zone this year



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