SpiceJet’s 42% Surge: Why is the Stock Flying as the Airline Warns of ‘Collapse’?
SpiceJet Limited shares hit the 5% upper circuit on Thursday. It marked a massive 42% gain over the last nine trading sessions. The stock reached an intraday high of ₹14.14, driven by aggressive short-covering and speculative value buying. The rally stands in contrast to the airline's warnings in the Delhi High Court, where it recently claimed it could collapse if forced to immediately deposit ₹144.5 crore in its long-standing legal battle with Kalanithi Maran.
- Republic Business
- 3 min read
Shares of SpiceJet Limited extended their winning streak on Thursday. It hit the 5% upper circuit for the fifth time in six sessions as speculative demand continues to overwhelm the airline's deepening financial and legal woes.
As of 12:30 PM IST, the stock was trading at ₹14.14, up 4.97%. The low-cost carrier has now surged by approximately 42.4% since April 2, a rebound from its 52-week low of ₹9.53.
The rally is a technical "reset" after the stock entered oversold territory in March. The rally comes despite a UK court recently ordering the airline to pay approximately $8 million (₹70 crore) to an aircraft engine lessor, Sunbird France 02 SAS.
‘Collapse’ Warning in Delhi High Court
The euphoria in the markets is not reflected in the courtroom. Earlier this week, SpiceJet told the Delhi High Court that its operations could "collapse" if it is forced to make an immediate cash deposit of ₹144.5 crore in its ongoing dispute with former promoter Kalanithi Maran and KAL Airways.
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Senior advocate Mukul Rohatgi, appearing for the airline, cited high aviation turbine fuel (ATF) prices and the impact of the West Asian conflict on Gulf routes as primary reasons for the airline’s liquidity crunch. The carrier has sought more time to monetize assets, including a commercial property in Gurugram, to settle the dues.
Operational Struggles vs. Market Share
While the stock price flies high, SpiceJet continues to grapple with a shrinking fleet and auditor warnings regarding its "going concern" status.
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- The airline has seen its domestic market share recover slightly to 4.3%, up from 1.9%, as it attempts to unground aircraft.
- The airline recently completed a restructuring that removed roughly ₹442 crore in liabilities, but legacy costs remain a significant drag on earnings.
- Investors are pinning hopes on a potential government-backed relief package for the aviation sector. The management hinted that this could allow for fresh loans from PSU banks.
Technically, SpiceJet faces immediate resistance at the ₹15.30 level. While the 9-day rally has provided temporary relief for retail shareholders, the stock remains highly volatile. A failure to secure a stay on the ₹144 crore deposit deadline in the next hearing could trigger a reversal.
Brokerage Insights
Institutional reports from firms like HDFC SKY and Multibagg.ai suggest the surge is a "speculative technical rebound" rather than a fundamental recovery. HDFC SKY recently noted that the stock's upper-circuit streak appears to be a “momentum trade.” This means that investors are temporarily brushing aside severe legal and operational risks. Similarly, Multibagg.ai flagged a "disconnect" between the stock price and the airline’s financial health. It is pointing to a negative price-to-earnings (P/E) ratio of -2.40 and its status is well below long-term moving averages despite the recent spike. Trendlyne noted 11 distinct technical weaknesses. This included decline in net cash flow and high promoter pledge levels. Collectively, these reports warn that while "bottom-fishing" and short-covering are driving the current 9-day streak, the airline remains a high-risk bet.
Disclaimer: This article is for informational purposes only.