Business Daily from THE HINDU group of publications
Friday, Jun 23, 2006
Business Daily from THE HINDU group of publications Friday, Jun 23, 2006 |
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Markets
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Stocks Logistics - Airlines Our Bureau
`Jet may have done right by jettisoning a questionable purchase at a time when the operating environment is anyway more expensive due to fuel price, it has nevertheless freed up Air Sahara for another prospective buyer.'
Mumbai , June 22 Intra-day gain notwithstanding, the stock of Jet Airways remained sober to the news of the lapsed deal with Air Sahara, closing Thursday at Rs 704.35, down 0.19 per cent. Intra-day, the company's share had surged almost nine per cent. The market attributed the impassiveness to two factors - first, given that the news was not wholly unexpected some of the prospective benefits of not going through with Air Sahara's acquisition had already been factored into the Jet Airways stock in rallies last week. Second, the clear upsides were also subject to the litigation process being completed. A section of the market believes that eventual outcome should favour Jet but it would be premature to translate that into stock price gains at present. "In the backdrop of rising fuel costs and intensifying competition, the parting of ways means that Jet would have lesser liabilities to manage,'' the business advisory head of a domestic brokerage, said.
Rate revision likely
Rumours were also rife that the airline may look to revise fares, in which case growth delayed by the lapsed deal could be made up at a lesser cost. Optimists maintain that the Jet stock could reach its levels of early 2005 over the next four-five months. Aside from this benefits-driven angle, there was also a probable downside to the aborted deal restraining Jet's stock price gain. According to this train of thought, while Jet may have done right by jettisoning a questionable purchase at a time when the operating environment is anyway more expensive due to fuel price, it has nevertheless freed up Air Sahara for another prospective buyer. To that extent competition to Jet may have grown. "The stock market has already reacted at one level. Further reaction will depend on clarity in what happens to the deal itself - whether it is a clean break or not. Will Jet get the money in the escrow account? What happens to Air Sahara? "Are we looking at a possible Air Sahara-Kingfisher combine and if so, what would be the ramifications for Jet,'' Mr Naresh Kothari, Head (Institutional Equities), Edelweiss Securities, said. Musings on stock price apart, the market noted the absence of official communication from Jet to the bourses on its final stance regarding the Air Sahara deal. The share price of Jet Airways had plunged almost 42 per cent since the Air Sahara deal was first announced in January 2006. The stock, quoting at around Rs 1212 level post-listing in March 2005, slid to Rs 996.50 by January 30. Following the announcement of the prospective acquisition, the share price dipped further. A rather volatile stock due to limited float, part of the price erosion was also courtesy the general market decline that happened over the past few months. Deccan Aviation, which touched an intra-day high of Rs 93.50 on Thursday, also pared its gains to close at Rs 89.75 on the BSE. However, bargain hunting pushed up SpiceJet by 10.53 per cent at Rs 47.25.
More Stories on : Stocks | Airlines | Jet Airways (India) Ltd
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