Istithmar sells India SpiceJet stake for $35m

Mumbai: The investment arm of Dubai World, Istithmar, has sold its entire holding in Indian budget airline SpiceJet, the airline’s spokeswoman said on Friday.

Istithmar sold its stake in the airline via block deals to a couple of domestic mutual funds and a foreign institutional investor (FII), for $35.23 million, a source with direct knowledge of the deal told news agencies.

"We have been informed that Istithmar World has sold its equity stake in SpiceJet. They remain invested in the company through FCCBs," a spokeswoman for the airline said in New Delhi.

Foreign currency convertible bonds, or FCCBs, are debt instruments with an option to convert into equity shares at a later stage.

Istithmar could not immediately be reached for a comment. Bank of America Merrill Lynch was the sole arranger of the Spicejet deal, the source said.

Dubai World is seeking to offload assets as part of a restructuring plan after the state-owned conglomerate asked for a standstill on paying $26 billion in debt last November linked to its main property units.

"The aviation sector is turning around in the last two quarters due to increased passenger traffic as well as improvement in the global economic front," said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.

"It could be a better time to exit as Istithmar is trying to encash its assets. The stock has run up sharply after the company swung to profits this quarter," Mathews said.

The block deals were struck at an average price of 52.12 rupees per share - a 46 percent increase over the price at the end of September.

Though the Asian skies are getting crowded and doggedly competitive, squeezing budget airlines, India may be one of the regions bucking the trend.