SpiceJet admits to ₹350 crore unpaid TDS, PF to employees

SpiceJet admits to ₹350 crore unpaid TDS, PF to employees
18 Sep 2024

SpiceJet, an Indian budget airline currently facing significant financial difficulties, has confessed to not paying ₹220 crore in tax deducted at source (TDS) and ₹135.3 crore in provident fund (PF) dues to employees.

The unpaid amounts date back from April 2020 to August 2023.

The airline is now seeking to raise ₹3,000 crore through a share sale to eligible institutional participants via a Qualified Institutional Placement (QIP), aiming for financial stability and resolution of outstanding liabilities.

Financial woes and plan for recovery
Recovery plan

In a preliminary placement document (PPD) filed with the Bombay Stock Exchange (BSE), SpiceJet disclosed that it has an additional disputed TDS amount of ₹72 crore for the assessment years 2009-10 to 2013-14.

The airline also acknowledged significant dues in customs, service tax, and goods and services tax (GST).

"Owing to our constrained financial position, we have delayed in depositing/payment of the statutory dues," the airline stated.

Fundraising efforts and future plans
Fundraising strategy

SpiceJet is working toward raising ₹3,000 crore by the end of this month through a QIP.

Yes Bank has already approved the QIP, while ICICI and Indian Bank are still considering it.

The airline intends to use these funds primarily to clear overdue taxes and contributions amounting to ₹601.5 crore, including TDS, PF, and GST.

An additional sum of ₹750 crore will be allocated for settling debts with creditors like aircraft and engine lessors, engineering vendors, and financiers.

Legal challenges and operational setbacks
Operational challenges

SpiceJet is currently dealing with over 25 pending litigations, barring those against its promoter.

The airline has also reported significant defaults under aircraft lease agreements, resulting in more than half of its fleet being grounded and legal actions started by lessors and other vendors.

As of June 30, 2024, out of SpiceJet's total fleet of 64 aircraft, 36 were grounded due to financial issues and maintenance problems.

SEBI fines and pandemic impact on SpiceJet
Pandemic impact

The Securities and Exchange Board of India (SEBI) has imposed multiple penalties on SpiceJet for non-compliance, in at least 20 instances over the past three years.

The airline, which was expanding aggressively pre-pandemic, faced significant setbacks when travel halted in 2020 and restrictions persisted into 2022.

The complete stop in passenger traffic severely impacted revenue, leading to grounding of flights due to missed lease payments.