Bloomberg News

Jet Air Climbs to 22-Month High on Possible Etihad Deal

December 03, 2012

Jet Airways (India) Ltd. (JETIN) rose to its highest in 22 months after a government official said the carrier may raise about 16 billion rupees ($290 million) from the sale of its 24 percent stake to Etihad Airways.

Jet Airways rose 4.5 percent to 579.9 rupees as of 10:22 a.m. in Mumbai trading, poised for its highest level since January 2011. The stock has more than tripled this year, compared with the BSE India Sensitive Index’s 25 percent jump.

The airline may seek approval from the Foreign Investment Promotion Board and the deal could conclude by the end of this month, the Indian government official, who asked not be identified citing rules, said yesterday. The proposed sale values the world’s second-best performing airline stock at about 772.50 rupees apiece, or 39 percent more than yesterday’s closing price, according to data compiled by Bloomberg.

Etihad Chief Executive Officer James Hogan said yesterday the carrier is “continually looking” for long-term prospects and bringing them before the board, with India and China the key regions of focus. The airline is in due diligence with a “couple” of Indian carriers, he said.

Ragini Chopra, a spokeswoman at Mumbai-based Jet Airways, didn’t respond to two calls on her mobile phone today.

Carriers in Asia’s third-largest economy are considering equity alliances with global airlines for the first time after Prime Minister Manmohan Singh allowed as much as 49 percent international investment in aviation.

‘Policy Reforms’

“The money will help Jet bring down its cost of debt,” said Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai. “But the entire benefit of the deal can accrue only when the deal is accompanied by policy reforms” such as reduction in taxes on jet fuel, he said.

The carrier’s weighted average borrowing cost more than doubled in four years to 11.5 percent in the 12 months through March, while that for Singapore Airlines Ltd. (SIA) was 1.92 percent, data compiled by Bloomberg show.

At least 5 percent of Jet Airways must be sold by June to meet a rule capping founders’ holdings in companies at 75 percent. Jet Air is selling and leasing back planes to free up cash to meet a goal to more than double loan repayments to $600 million in the year ending March 31, Chief Financial Officer Ravishankar Gopalakrishnan said on a Nov. 5 conference call.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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