SEBI Blocks Elara Fund’s Attempt to Convert SpiceJet Warrants
India’s market regulator, the Securities and Exchange Board of India (SEBI), has rejected a request from the Mauritius-based Elara India Opportunities Fund to convert its SpiceJet warrants into equity shares, citing non-compliance with beneficial ownership disclosure requirements.
Elara had sought to convert INR4.16 billion (USD48.7 million) worth of warrants into equity, but its license as a foreign portfolio investor (FPI) was revoked by SEBI in March 2024 for failing to reveal the identities of its ultimate beneficial owners—a mandatory disclosure under Indian regulations.
The fund had acquired 83.3 million SpiceJet shares at INR50 (USD0.59) each in January 2024, as part of a deal that required it to pay 30% upfront, with the balance payable upon conversion to equity. At the time of this report, SpiceJet shares are trading slightly higher at around INR51 (USD0.60).
Managed by Elara Capital, an investment bank based in Mumbai, the Elara India Opportunities Fund focuses on equity investments across sectors such as transportation, travel, and hospitality, typically from the seed stage to post-IPO. Like many similar funds, it is domiciled in a jurisdiction with favorable tax laws.
Despite losing its FPI status, Elara requested SEBI to make an exception to its “no license, no conversion” rule, arguing that the inability to convert the warrants renders them “virtually worthless.” The fund had intended to offload its SpiceJet investment via the open market following conversion. SEBI, however, denied the request.
Elara has now escalated the issue to India’s Securities Appellate Tribunal, seeking relief. If the tribunal upholds SEBI’s decision, the fund risks losing its initial INR1.25 billion (USD14.6 million) deposit, while SpiceJet would be left searching for a new investor to cover the INR2.91 billion (USD34 million) it expected to raise from the transaction.
SpiceJet, which has been actively raising funds over the past 18 months to stabilize its operations and strengthen its balance sheet, had initially hoped to generate INR7.44 billion (USD87 million) by issuing warrants and equity shares to a group of 54 institutional and sophisticated investors, including Elara. However, the airline fell short of that target.
In a more successful capital-raising effort, SpiceJet later secured INR30 billion (USD351 million) through an oversubscribed qualified institutional placement (QIP), providing a much-needed boost to its finances.
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