The loss-making Indian aviation industry seems to be turning off institutional investors — both foreign and domestic. In the space of one quarter, institutional holding in Jet Airways and SpiceJet has come down between 96 and 322 basis points, according to shareholding pattern data on the BSE, for the quarter ended September 30.

Mounting losses

“The reduction in Foreign Institutional Investors and Domestic Institutional Investors’ exposure is largely due to mounting losses in the Indian aviation sector. Moreover, industry trends show that the economy is nowhere close to staging a recovery as there is a direct correlation between the performance of the airline sector and the economy’s revival,” said Kishor Ostwal, Chairman and Managing Director, CNI Research.

According to a recent report by airline consulting firm Centre for Asia Pacific Aviation, India’s five functioning airlines are expected to make losses of over Rs 3,000 crore in the September quarter. Recently, Jet Airways announced a quarterly net loss of Rs 891 crore, the highest in its operating history, largely due to high fuel costs, depreciating rupee and one-time maintenance costs.

The maximum fall in FII holding of 322 basis points (to 4.7 per cent from 7.92 per cent as on June 30) was seen in Jet Airways, which is in advanced stages of selling 24 per cent stake to Abu Dhabi-based Etihad Airways. During the same period, its stock price came down by around 31 per cent.

Promoters hold on

SpiceJet recorded the steepest fall of 211 basis points in DII holdings to 5.58 per cent from 7.69 per cent.

Even in the case of the now grounded Kingfisher Airlines, FII and DII holdings came down to 0.02 per cent (from 0.07 per cent) and 12.61 per cent (from 12.79 per cent), respectively. For all three airlines, promoter holding remained unchanged quarter on quarter.

Do these trends indicate that institutional investors would continue their selling spree in the subsequent quarters? A sector analyst said that the reduction in holding could be a one quarter blip, as airlines are preferred bets for institutional investors globally. Moreover, the recent changes in policy, which have attracted new business entrants, such as Air Asia and Singapore Airlines (both in partnership with Tata Group), augur well for the sector, he added.