Mumbai: The strategic investment by the Abu Dhabi-based Etihad Airways in Jet Airways could be a game-changer for the latter and its shareholders. According to the deal, Jet will be issuing 27.2 million shares to Etihad for Rs 754.7 apiece totalling Rs 2,060 crore. In the short term, the deal brings much-needed cash and will help Jet improve its debt-laden balance sheet and improve its financial ratios. In the long term, too, the strategic alliance with Etihad will make Jet more competitive in the domestic market as well as on international routes, which now account for 60 per cent of its revenues and operating profits. Jet’s stock, which scaled to its two-year high of Rs 625 levels in December 2012, is thus expected to rule firm on Thursday.
The deal could be a game-changer for Jet. Says Sharan Lillaney of Angel Broking, “The deal is a positive as Jet will be able to refinance its high-cost debt and improve its cash flows. In addition to improving its balance sheet, the company can also look at expansions, both in the domestic as well as international markets.” On the valuations front, the deal implies a market capitalisation to sales of 0.3-0.4 times (and 31 per cent premium to current market price), a decent premium, believe analysts. This could set a benchmark for similar deals in future, says Lillaney.
24/04/13 Krishna Kant & Ram Prasad Sahu/Business Standard
