Jet Airways climbs higher as Naresh Goyal agrees to sell controlling stake

Last Updated: Wed, Nov 28, 2018 15:52 hrs
Jet Airways (Reuters image)

The stock price of Jet Airways took off around mid morning Wednesday, lifted by reports that the founder of the airliner, Naresh Goyal has agreed to sell his controlling stake and give up operational control of the struggling carrier.

The stock climbed to Rs 319.80 on both BSE and NSE today and despite coming off that higher, ended the session with a gain of about 5%.

The stock, which hit a 52-week high of Rs 883.45 in early January this year, climbed down to a low of Rs 162.80 by early October, before moving north again. In about two months, the stock has gained nearly 90%.

According to reports, Goyal met the three prospective buyers - Tata Group, Etihad Airways PJSC and a consortium of Air France-KLM and Delta Air Lines Inc. and communicated his decision to relinquish his controlling stake in Jet Airways. He is also said to have laid out certain conditions including retaining a minority stake of below 5% in the company and a board seat as well.

Stiff tariff war and higher crude oil prices contributed to the airliner's financials going off track. Naresh Goyal holds a 51% stake in the company.

Etihad Airways, which holds a 24% stake in Jet Airways, was said to be looking to raise its stake to up to 49%, the maximum a foreign airline can hold as per the foreign direct investment rules for the aviation sector.

Reports that Etihad was zeroing in on a local business partner were going rounds earlier. In response to a query by media house Financial Express, Jet Airways Spokesperson is reported to have said that in line with its policy, Jet Airways does not comment on speculation. Etihad’s spokesperson too did not give any response to the query of the newspaper.

Earlier this month, Jet Airways shares spurted nearly 15% ahead of Tata Sons' board meeting that was supposed to discuss buying out the airliner. Tata Sons has not made any proposal as yet to acquire controlling stake in Jet Airways.

In the July - September 2018 quarter, Jet Airways posted a net loss of Rs 1261 crore, lower than net loss of Rs 1323 crore in the preceding quarter. The fall in earnings was due to higher fuel costs and a falling rupee. In the second quarter of 2017-18, the airliner had posted a net profit of Rs 71 crore.

Jet Airways' debt stood at a whopping Rs 80.52 billion as of 30 September 2018 and the company has been searching for a deal to help wriggle out of the financial mess.

In August, it was reported that the airliner had asked employees to take a 25% cut in salaries as part of a cost cutting measure.

In the same month, the stock suffered a setback on reports that the airliner cannot fly beyond two months. However, the company denied the report and also dismissed reports about stake sale, but said it was considering various options to mobilse funds to meet its requirements.

Some global investement funds and U.S.-based Delta Airlines were reported to have expressed interests to buy Jet stakes from Naresh Goyal and Etihad Airways.
Earlier this month, the stock soared almost 25% in one session on reports that the airline was nearing a rescue deal with Tata Sons. The market was also reacting to another report that said the Indian government has asked Tata to explore buying the company.