Jet Airways gains 6% on reports of stake sale; up 57% in November

NEW DELHI: Jet Airways Ltd surged over 6 per cent in opening trade on Tuesday on reports of a possible deal between the airliner and Etihad Airways, which came in post the market hours on Monday.

Jet Airways has agreed to sell a 24 per cent stake to Etihad Airways for Rs 1600 crore, ET NOW reported. The deal will be completed by year-end and the entity will seek MHA and FIPB clearance next year, aviation ministry sources told ET NOW.

At 09:20 am, Jet Airways pared some of its morning gains and was trading 5 per cent higher at Rs 584.10. It has hit a low of Rs 567.25 and a high of Rs 590 in trade today.

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The stock rose over 57 per cent in the month of November alone on the back of stake sale reports, while for the year 2012 it has doubled.

On the other hand, SpiceJet is also trading 4 per cent higher at Rs 45.20. It has hit a low of Rs 44.75 and a high of Rs 45.40 in trade today. Shares of the airliner have been in focus on reports of stake sale talks with Malaysia’s AirAsia.

Aviation stocks such as Jet Airways and SpiceJet cruised above investor expectations in the month of November on the back of stake sale reports.

Most analysts are of the view that these stocks are not more than trading bets as the sector still faces lots of challenges and expensive valuations compared to their global peers.

Jet and SpiceJet are now quoting at an enterprise value to sales of 0.94 and 0.65, respectively.

The overall industry faces a lot of problems as it is a capital-intensive industry and faces higher ATF fuel charges, which make it difficult for the companies to generate any positive cash flow, say analysts.

Even though Jet Airways and SpiceJet have moved quite sharply in the month of November on deal talk hopes, analysts see some more upside in the case of Jet Airways compared to SpiceJet.

"Jet's premium valuation is justified considering its size and international operations. What makes airlines in India less attractive is the tough operating environment," ET reported.

Vinayak Kanvinde, Portfolio Manager, Right Horizons, feels that from a long-term perspective, only Jet Airways and possibly unlisted candidates such as Indigo can offer some chance to investors to make money. However, at this moment these stocks at best are only a trading opportunity and nothing more.