SpiceJet clears the runway: Airline settles PF dues for employees after Rs 3,000 crore QIP boost

Airline operator SpiceJet has made substantial strides in clearing its financial obligations, depositing 10 months' worth of Provident Fund (PF) dues for its employees on October 4, 2024.

According to a report by The Economic Times, this move by the struggling airline follows a series of recent efforts made by it to stabilize its finances, including clearing all Goods and Services Tax (GST) payments and settling salary arrears.

The airline attributed its ability to meet these obligations to the fresh capital it raised through a Qualified Institutional Placement (QIP). SpiceJet's spokesperson noted that within the first week of raising new funds, the company was able to pay off its pending salary and GST dues, deposit ten months of PF contributions, and make headway on settling other outstanding liabilities.

Understanding QIP and Its Role in SpiceJet's Recovery

A Qualified Institutional Placement (QIP) is a mechanism that allows publicly listed companies to raise capital by issuing equity shares, fully or partially convertible debentures, or other securities to institutional investors. The key advantage of a QIP is that it enables companies to quickly secure funds without the need to undergo extensive regulatory processes typically required for public offerings. In India, QIPs are governed by the Securities and Exchange Board of India (SEBI), which ensures transparency and efficiency in the process.

In September 2024, SpiceJet successfully raised Rs 3,000 crore through its QIP, which was instrumental in its financial turnaround. The airline attracted significant interest from major institutional investors, including Goldman Sachs (Singapore), Morgan Stanley Asia, Tata Mutual Fund, and Discovery Global Opportunity Ltd.

Settling Long-Standing Dues

The raised capital has enabled SpiceJet to make progress in settling long-standing disputes with multiple lessors, an essential step to maintain its fleet and operations. In one high-profile settlement, the airline resolved a financial dispute with Engine Lease Finance Corporation (ELFC) on September 24, 2024. ELFC had previously claimed $16.7 million, and while the settlement amount remains undisclosed, this resolution marked a key step in stabilizing the airline’s financial outlook.

Additionally, SpiceJet had previously acknowledged a backlog of approximately Rs 220 crore in tax deducted at source (TDS) from employees' salaries, which had remained unpaid between April 2020 and August 2023. The new funding has positioned the airline to address such liabilities and improve its financial standing.

A Renewed Focus on Financial Health

With its recent capital infusion and a strategic focus on debt settlement, according to the airline, SpiceJet is making a concerted effort to rebuild trust with employees, creditors, and regulatory authorities. This fresh financial backing, facilitated by the QIP, has indeed provided a lifeline for the airline, which has faced significant operational and financial challenges in recent years.