SpiceJet surges after the government announces amendment in the ECLGS scheme for airlines

As per a media report, SpiceJet may get an additional Rs 1,000 crore under the amended scheme.

The shares of SpiceJet Ltd, an S&P BSE 500 company, are buzzing on the bourses today. As of 12.49 pm, the shares of SpiceJet Ltd are trading at Rs 40.55 apiece, higher by 5.46% over the previous close. Meanwhile the frontline index S&P BSE Sensex is up by 0.69%.

Even in the pre-opening session today, the shares of SpiceJet Ltd witnessed huge demand from investors. During this time, the share price of SpiceJet Ltd was up by 7.02% to trade at Rs 41.15 apiece.

This rally has come after a significant announcement was made by the government recently.

As per the announcement, the government modified Emergency Credit Line Guarantee Scheme (ECLGS). The intent was to enhance the maximum loan amount eligibility for airlines under ECLGS 3.0 to 100% of their fund-based or non-fund-based loan outstanding as on the reference dates or Rs 1,500 crore, whichever is lower.

Why is the scheme important?

The ECLGS was introduced in May 2020 by the Indian government as a part of its Covid-19 Financial Relief package. Under the ECLGS, banks provide additional loans to existing borrowers without asking for extra collateral to aid them to deal with the liquidity crunch resulting from COVID curbs. Also, these loans are fully guaranteed by the government against credit losses.

How will it help SpiceJet?

Like many other businesses, SpiceJet’s business took a hit with the onset of the Covid-19 pandemic. Owing to this, for months now, the airline company has not been able to pay its employees’ PF or deposit their tax deducted at source with authorities due to a scarcity of funds. 

Further, as per a media report, SpiceJet may get an additional Rs 1,000 crore under the amended scheme. This shall help SpiceJet in clearing all statutory dues, and lessor payments and inducting new Boeing 737 MAX aircraft into its fleet.