With the cabinet's approval of 49 per cent foreign direct investment (FDI) and fuel prices cooling, the aviation sector is showing signs of revival.
With record profits of SpiceJet at Rs 102 crore and Jet Airways at Rs 93 crore in the quarter ended December, foreign institutional investors (FIIs) increased their stakes, whereas the FII stake in Jet airways has stabilised. Stakes of domestic institutional investors (DIIs), including those of mutual funds and insurance, increased a percentage point in both the listed carriers.
Mumbai-based Jet Airways, India's second-largest carrier in terms of the number of passengers, saw the stake of FIIs dip slightly from 4.81 per cent in the quarter ended September to 4.27 per cent in the quarter ended December. The stake of FIIs in Sun Group-owned SpiceJet rose from 2.86 per cent to 5.22 per cent.
In the corresponding period last year, the stake of FIIs in SpiceJet was 3.81 per cent. In the past one year, there were three rounds of funds infusion by promoters of around Rs 419 crore.In Jet Airways, the stake of FIIs was 5.42 per cent.
Rashesh Shah, aviation analyst at ICICI securities, says, "The increase in FIIs in SpiceJet could be because of the favourable regulatory changes that the aviation sector has witnessed in last couple of months. With the cabinet approving of 49 per cent FDI, cooling off ATF prices, stabalization of rupee and more pricing power with the airlines, there is revival of interest from foreign investors.
Not much variation in FII interest is found in Jet airways on a sequential basis.
The stock of Spicejet is priced at around Rs 47 and for Jet airways, it hovers around Rs 600.The primary reason for this has been Jet's strong international presence. Jet has more international exposure and 60 per cent of its revenues come from international operations and rest from domestic operations. Spicejet has around 7 per cent of the revenues coming from international operations, Shah added
There is more or less stability in investor interest from foreign and domestic investors as with the Jet-Etihad deal going ahead, the future ownership pattern of Jet is still unclear.
With the promoter shareholding of around 80 per cent and Etihad expected to buy 24 per cent, how exactly the shareholding pattern will change is yet to be seen.
Kingfisher Airlines' closure and the Air India employees' strike helped other airlines increase load factors and gain ticket-pricing power. Last year, the aviation sector had struggled with high costs of jet fuel, primarily because of high levies on the fuel and high airport charges, especially after private players started operating these. The average tax on jet fuel in India is 24 per cent, second only to Bangladesh (27 per cent). Due to this, fuel costs account for about half the operating cost. In the past year, jet fuel prices rose 40 per cent.