The Hindu Business Line : Royal Airways flies high on FII fuel

Royal Airways (formerly Modiluft Ltd) is one such company in which FIIs have taken more than 8 per cent stake in the last one month. All these purchases have been made through secondary market purchases. Some of the FIIs that have made investment in Royal Airways include Goldman Sachs, Citigroup and ABN Amro Bank.

In January alone, FIIs had bought 1.25 crore shares of the company from open market. This works out to over eight per cent of the company equity, which is Rs 154.44 crore, comprising 15.44 crore shares of Rs 10 each.

But at the end of December quarter, FIIs holding in the company was just 0.26 per cent (4.06 lakh shares)

According to brokers, the promoters of the company - Royal Holdings Services Ltd, sold most of these shares. The promoter in the last month sold around 1.76 crore shares or 11.39 per cent of the equity. Their holding at the end of December was 52.59 per cent.

Since the beginning of January, the stock price of Royal Airways has gained from Rs 31 to today's closing price of Rs 56.50, up 82 per cent. In today's trading, the stock was locked in 10 per cent upper circuit, which was also its new 52-week high. Brokers said the FIIs interest in Royal Airways is coming due to the company likely to start low cost carrier airline soon. They said FIIs are upbeat on the Indian aviation sector as there is huge growth potential in the sector.

But some brokers cautioned over the sharp rise in the stock price. They said the details of the company's plans are yet to be made public.

"Valuation of the company is more than Rs 850 crore based on current market price despite the company not operating its airlines. Such high valuations are unwarranted," said a broker.

He said the uptrend in the stock price and the valuation is primarily due to the forthcoming IPO of Jet Airways. However, he said Jet has large number of aircrafts and the company is operational while Royal Airways is not operating even a single aircraft till now.

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