Jet stock soars on stake sale talks

Shares end 16% up at Rs 506 on buzz thatEtihad Airways may buy 24% in the carrier

Shares of Jet Airways surged 15.9 per cent to close at Rs 505.75 on Friday on speculation Etihad Airways may buy 24 per cent in the company. Market sources said Jet may issue fresh shares to the Abu Dhabi-based carrier at around Rs 800 apiece that will help the Indian airline raise about Rs1,700 crore and reduce its debt.

Such a deal would value the Naresh Goyal-controlled company at about Rs7,150 crore and indirectly bring down promoters’ shareholding, which is around 80%, to about 65% due to equity dilution, analysts said. Jet’s market capitalization on Friday was Rs4,366 crore. Etihad may secure a seat on Jet board, they said.

A Jet spokeswoman, in response to a query on this matter said, “ We are unable to comment on market speculation.”  Etihad did not respond to an email query till the time of going to print

Jet shares have surged about 36 per cent in the last 10 days. One theory that has been doing the rounds in the market is that the company’s promoters are looking to sell about 5 per cent stake to cut their holdings to 75 per cent to comply with Sebi’s minimum public shareholding norms. The regulator has mandated listed companies to ensure public shareholders hold at least 25 per cent. Some in the market said a group of operators are spreading rumours to push up the stock.

On the sidelines of the company’s annual general meeting in Mumbai in August, chairman Goyal had said “So far, as it stands, we will be controlling. If the sentiment improves and the overall situation improves, I will have an open mind to dilute, but have control over the company.”

The comment was made before the government raised foreign direct investment (FDI) limit in the country’s aviation sector to 49% in mid-September.

Goyal had said then. “Today, I do not need (FDI). Tomorrow I may need. There is nothing permanent in business.”
Etihad Airways, which has lapped up stakes in Air Berlin and Virgin Australia, will look to extend its geographical reach to India and other Asian markets, a top official had told Reuters in October.

If Jet raises Rs 1,700 crore through a fresh share sale, it would help the company bring down its debt, which is at around Rs12,000 crore.

“Such a deal has can help build a lot of synergies including expansion of the company’s business into the Middle East,” said an analyst with a domestic broking firm who tracks the stock. “ The company has resorted to asset sales in the last few months to reduce debt,” he said.

Broker CLSA, in an earlier report, said the company is targeting to reduce debt by $ 400 million (Rs2,200 crore) during the year.