Synopsis
SpiceJet’s stock saw a decline of over 8% following Nuvama's 14% cut in its target price. The airline faces challenges with transparency and operational issues, despite raising Rs 3,000 crore and reporting a profit of Rs 26 crore in FY25 Q3.Key Takeaways
- SpiceJet's stock dropped over 8% on target price cut.
- Nuvama reduced target by 14% and maintained 'hold' rating.
- Revenue declined to Rs 1,178.7 crore YoY.
- Net loss widened to Rs 441.7 crore in Q2 FY25.
- Successfully raised Rs 3,000 crore for operations.
Mumbai, Feb 27 (NationPress) SpiceJet's stock experienced a significant decline on Thursday, plummeting by over 8 percent during intra-day trading after the brokerage firm Nuvama reduced its price target by 14 percent while maintaining a 'hold' rating.
At the end of trading, the shares managed a slight rebound to close at Rs 44.72, marking a decrease of Rs 3.25 or 6.78 percent.
Nuvama expressed concerns regarding the airline's lack of transparency in financial reporting, a drastic 41 percent year-on-year (YoY) decrease in available seat kilometres (ASKM), and noted that 30 percent of its fleet remained grounded in the second quarter.
On February 26, the low-cost carrier reported a significant year-on-year drop in its revenue for the third quarter of the current fiscal year (FY25), falling to Rs 1,178.7 crore from Rs 1,850.4 crore in the same period last year (Q3 FY24).
In its exchange filing, the company revealed an increase in its net loss, which widened to Rs 441.7 crore for the July-September quarter (Q2 FY25).
Despite these challenges, SpiceJet successfully raised Rs 3,000 crore from institutional investors, increasing its net worth to Rs 70 crore, marking the first time in a decade that the airline is not operating at a loss.
However, Nuvama cautioned that the Rs 3,000 crore raised would mostly be allocated to settling debts and returning grounded aircraft to service, implying a gradual recovery process.
The brokerage also warned that should the economy weaken, both corporate and leisure travel demand could decline, adversely affecting the airline’s future earnings and valuation.
Nonetheless, SpiceJet reported a profit of Rs 26 crore in the third quarter of FY25.
The airline attributed its profit to strong passenger demand, improved efficiency, and enhanced pricing strategies.
“For the first time in a decade, the company has achieved net worth positivity -- a critical milestone that highlights the effectiveness of our turnaround strategy,” stated SpiceJet CMD Ajay Singh.
