SpiceJet Stock Faces Volatility Following Supreme Court Ruling
Overview: On September 20, the shares of airline SpiceJet experienced notable fluctuations following a crucial decision from the Supreme Court. Initially, the stock rose in value but later suffered a downturn, ultimately closing with a 3% decline. This reaction stemmed from the Supreme Court’s upholding of a prior ruling by the Delhi High Court, which mandated that SpiceJet must cease operations with three aircraft engines due to undisputed defaults in payments to their lessors.
Supreme Court Decision
The Supreme Court bench, comprising Chief Justice DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Mishra, dismissed SpiceJet’s appeal against the order issued by the Delhi High Court on September 11. In their deliberation, the bench concluded, “We will not interfere. This is a correct order,” affirming the lower court’s ruling and directing SpiceJet to comply.
Stock Market Reaction
On the morning of September 20, SpiceJet’s stock opened at Rs 68.95 on the Bombay Stock Exchange. The stock climbed to a peak of Rs 70.40, reflecting a nearly 3% increase from its previous close. However, the market sentiment shifted quickly, and the stock plummeted to a low of Rs 65.51 before ultimately settling at Rs 66.16, marking a 3% decrease for the day. As a result, SpiceJet’s market capitalization has now diminished to approximately Rs 5,200 crore.
Performance Overview
Despite the recent setbacks, SpiceJet’s stock has shown resilience, gaining about 20% in the last quarter and an impressive 74% over the past year. This recent volatility, however, underscores the ongoing challenges faced by the airline industry, particularly with respect to its financial obligations.
Background on Delhi High Court Order
This tumultuous situation can be traced back to an order issued by a single judge bench of the Delhi High Court on August 14, which instructed SpiceJet to halt operations using three specific aircraft engines and return them to their lessors—Team France 01 SAS and Sunbird France 02 SAS—by August 16. Following this directive, SpiceJet sought to overturn the ruling, but the division bench of Justice Rajiv Shakdher and Justice Amit Bansal upheld the original decision, citing the airline’s violation of the payment agreement.
Outstanding Dues
In addition to the operational constraints posed by the Supreme Court’s decision, SpiceJet is grappling with significant financial challenges, including statutory dues that exceed Rs 601 crore. The ruling requires the airline to refrain from using the engines and return them to the respective lessors within 15 days, adding to the complexities of their current financial landscape.
Conclusion
The recent ruling against SpiceJet serves as a reminder of the precarious nature of the airline industry, where legal and financial issues can significantly impact stock performance and operational capabilities. Investors and stakeholders will be closely monitoring the developments as SpiceJet navigates these challenges and strives to avert further financial distress.
