HSBC has issued a reduce call on SpiceJet, slashing its target price from ₹40 to ₹26 per share. The downgrade comes amid concerns about the airline’s financial health, particularly its ability to manage losses and working capital in light of its current operational challenges.
The brokerage noted that SpiceJet could potentially utilize ₹3,000 crore from a Qualified Institutional Placement (QIP) to address these financial strains, especially given the absence of aircraft affecting its operations. There is significant uncertainty regarding the airline’s capacity growth and profitability, compounded by its substantial debt and only a 3% market share in the industry.
HSBC’s analysis raises a critical question about whether SpiceJet can revive its business from such a low performance level, suggesting that its current valuation appears too high given these circumstances.
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