Jet Airways shares soar on reports deal with Tata is close

By Chris Thomas

BENGALURU (Reuters) - Shares in India's Jet Airways Ltd jumped 25 percent on Thursday following media reports that the debt-laden airline was nearing a rescue deal with Indian conglomerate Tata Sons Ltd.

Tata SIA Airlines, a joint venture between Tata Sons and Singapore Airlines, which operates domestic carrier Vistara, is eyeing an all-stock merger with Jet, the Economic Times reported earlier in the day, citing sources.

As part of the deal, Singapore Airlines would also buy out Jet founder Naresh Goyal's 51 percent stake, the report said.

A deal with Jet would transform Tata, India's largest conglomerate, from a fringe player in the airline industry into the country's dominant, international carrier.

India is the world's fastest-growing domestic aviation market with annual passenger growth of about 20 percent, but rising fuel costs, a weak rupee and intense competition have wrought havoc on the finances of carriers such as Jet.

Jet said the report was speculative.

"There are no discussions or decisions by the board which would require a disclosure," it said in a statement to the stock exchange.

Meanwhile, local daily the Times of India, citing people close to the situation, said that Tata Sons Chairman N. Chandrasekaran was expected to present a business viability plan to the board on Friday on a proposed acquisition of Jet.

Tata Sons did not immediately respond to a Reuters request for comment. Naresh Goyal and family were not immediately reachable for comment.

The Indian government has asked Tata Sons to explore buying struggling carrier Jet Airways, according to a Bloomberg report late on Thursday, citing people familiar with the matter.

Tata Sons, the holding company of the salt-to-software conglomerate, is also in talks with New Delhi about a potential forgoing of part of the debt Jet owes to the country's state-run banks, Bloomberg added.

Jet shares, which had fallen 69 percent this year, rose as much as 30 percent before ending almost 25 percent higher at 320.9 rupees on record volumes. That was their best closing level since late August and their best performance in percentage terms since listing in 2005.

Jet posted its third consecutive quarterly loss on Monday and said it was undertaking a review of its business to cut costs and boost revenues in order to stay afloat. The airline is seeking funds by raising equity and selling a stake in its loyalty programme.

"We are actively pursuing both the transactions and are currently at various stages of discussions with multiple interested parties," Chief Financial Officer Amit Agarwal told analysts on a call on Tuesday.

Jet's market capitalisation was 36.45 billion rupees ($506.46 million) at the close of trading on Thursday, while its net debt on Sept 30 was 80.52 billion rupees ($1.12 billion), of which 60 percent is dollar-denominated.

The carrier's survival is crucial for the host of companies from which it leases more than 100 of its aeroplanes. The airline also has 225 Boeing Co 737 MAX jets on order.

Sources told Reuters earlier this week that Tata was in active talks to acquire a controlling stake in Jet but had not reached the stage of conducting due diligence.

($1 = 71.9700 Indian rupees)

(Reporting by Chris Thomas and Aditi Shah; Editing by Himani Sarkar and Elaine Hardcastle)