MUMBAI:
As arch rivals Naresh Goyal's Jet Airways and Vijay Mallya's Kingfisher AirlinesBSE -4.98 % woo Abu Dhabi's Etihad Airways to pick up a stake in their respective
airline, investors hardly had a choice, propelling shares of the two airlines
into a higher orbit on Thursday.
Etihad CEO James Hogan was expected to make a presentation on both Jet and KFABSE -4.98 % before its board on Thursday, said a senior official from one of the Indian carriers. The meeting was earlier scheduled for the coming Monday, but has now been advanced.
The market is anticipating a deal to be announced soon. Jet Airways emerged as the favourite, soaring 7.29% to Rs 603.65, a share, a 52-week high in the BSE. Mallya's Kingfisher Airlines' fleet may be grounded since October, but its shares jumped only to be restrained by the upper circuit, to end the day with a gain of 4.98% to close at Rs 17.27, a share. Jet has gained 231% since January 1, gaining Rs 3,743 crore as market capitalisation. Bulk of the gains, came about after reports swirled about Etihad eyeing a stake in Jet Airways.
"The market obviously sees a Jet-Etihad deal as a more serious one that is likely to materialise. As far as Kingfisher's deal is concerned (with Etihad), it will depend very much upon the crucial issue whether the promoter, Vijay Mallya, can infuse at least Rs 3,000-4,000 crore, in his own capacity as equity into the airline," SP Tulsian, independent market analyst, said.
A snippet in a Mumbai-based newspaper of the Sultan of Abu Dhabi visiting Goa on December 17, to attend Vijay Mallya's birthday bash further fanned rumours of a possible deal between Etihad, the sovereign airline of Middle Eastern nation, and Kingfisher. Interestingly, the lenders to KFA are meeting on the same day to chalk out their strategy.
Kingfisher Airlines is pulling out all stops for a deal with a foreign investor to materialise. Its board met on December 12, to keep the company's "capital structure in readiness for transactions". It capped FII investment to a maximum 3% equity in the airline, so that the foreign strategic investor eyeing a stake will not have any impediments in acquiring up to 49%. Analysts said that this move by the airline shows it is preparing grounds for a strategic foreign investor to come in.
Etihad CEO James Hogan was expected to make a presentation on both Jet and KFABSE -4.98 % before its board on Thursday, said a senior official from one of the Indian carriers. The meeting was earlier scheduled for the coming Monday, but has now been advanced.
The market is anticipating a deal to be announced soon. Jet Airways emerged as the favourite, soaring 7.29% to Rs 603.65, a share, a 52-week high in the BSE. Mallya's Kingfisher Airlines' fleet may be grounded since October, but its shares jumped only to be restrained by the upper circuit, to end the day with a gain of 4.98% to close at Rs 17.27, a share. Jet has gained 231% since January 1, gaining Rs 3,743 crore as market capitalisation. Bulk of the gains, came about after reports swirled about Etihad eyeing a stake in Jet Airways.
"The market obviously sees a Jet-Etihad deal as a more serious one that is likely to materialise. As far as Kingfisher's deal is concerned (with Etihad), it will depend very much upon the crucial issue whether the promoter, Vijay Mallya, can infuse at least Rs 3,000-4,000 crore, in his own capacity as equity into the airline," SP Tulsian, independent market analyst, said.
A snippet in a Mumbai-based newspaper of the Sultan of Abu Dhabi visiting Goa on December 17, to attend Vijay Mallya's birthday bash further fanned rumours of a possible deal between Etihad, the sovereign airline of Middle Eastern nation, and Kingfisher. Interestingly, the lenders to KFA are meeting on the same day to chalk out their strategy.
Kingfisher Airlines is pulling out all stops for a deal with a foreign investor to materialise. Its board met on December 12, to keep the company's "capital structure in readiness for transactions". It capped FII investment to a maximum 3% equity in the airline, so that the foreign strategic investor eyeing a stake will not have any impediments in acquiring up to 49%. Analysts said that this move by the airline shows it is preparing grounds for a strategic foreign investor to come in.
(The transaction) may be identified in the
future for the benefit of all investors as the airline is advised that a fresh
infusion of capital by a financial or strategic, Indian or non-resident
investor is a "possible alternative", KingfisherBSE -4.98 % said in a notice to BSE.
"The proposal to hike the FII limit could be a precursor to a deal, in which a foreign investor may pick up a substantial stake. However, procedurally, many companies increase their FII investment limit in line with sectoral caps in which they are operating. So, even if there is no deal in the immediate future, the hike in FII limit will provide a ready platform to the acquirer," said Ajay Pandey, head, institutional sales, at ITIBSE 0.90 % Securities.
Tulsian too agrees. "What Kingfisher is doing, it is closing the door for any other FII to come in as it caps these investments at 3%. In September, the total FII investment in Kingfisher was about 2.46% which might have gone up to 2.9% of late. So, essentially this means that Kingfisher is keeping at least 46% for any strategic investor, an airline in this case, which is planning to pick equity," he said.
Equity analyst at ICICIDirect, Rashesh Shah agrees that the buzz on possibility of Etihad picking up stake in an Indian carrier is what is driving up the stocks of late, he also made a point that airline stocks are up also because there is a very near chance that the government might bring the much needed reform in the air turbine fuel price rationalisation and that there might be a uniform tax structure for ATF rather than a varying sales taxof 4% in some states to as high as 28% in other states.
"The proposal to hike the FII limit could be a precursor to a deal, in which a foreign investor may pick up a substantial stake. However, procedurally, many companies increase their FII investment limit in line with sectoral caps in which they are operating. So, even if there is no deal in the immediate future, the hike in FII limit will provide a ready platform to the acquirer," said Ajay Pandey, head, institutional sales, at ITIBSE 0.90 % Securities.
Tulsian too agrees. "What Kingfisher is doing, it is closing the door for any other FII to come in as it caps these investments at 3%. In September, the total FII investment in Kingfisher was about 2.46% which might have gone up to 2.9% of late. So, essentially this means that Kingfisher is keeping at least 46% for any strategic investor, an airline in this case, which is planning to pick equity," he said.
Equity analyst at ICICIDirect, Rashesh Shah agrees that the buzz on possibility of Etihad picking up stake in an Indian carrier is what is driving up the stocks of late, he also made a point that airline stocks are up also because there is a very near chance that the government might bring the much needed reform in the air turbine fuel price rationalisation and that there might be a uniform tax structure for ATF rather than a varying sales taxof 4% in some states to as high as 28% in other states.
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