Kolkata, Jan. 19 Aviation stocks gained height on Monday as a section of market players placed bets on the prospect of fresh investments by foreign airlines.
Last week the Civil Aviation Minister, Mr Praful Patel, indicated that the Government might allow foreign airlines to buy up to 25 per cent stake in local carriers. Industry watchers said that the Ministry’s proposal note is ready for circulation among other Ministries.
“The Government has roughly six weeks to act on any proposals before the elections. If cross-currents within the Government do not come in the way, the Cabinet approval could come quickly,” an observer said.
Industry insiders said there could be positive response from some foreign airlines for even a minority stake of 20 to 25 per cent. Keeping in view a long-term growth potential, a toehold now would be a win-win situation for the investor and the local operator.
“In aviation industry, equity investment normally opens up opportunity, operational partnership reduces cost and competition and thrives on cooperation. Moreover, the current valuation of Indian airlines’ stocks would amply justify investments. On the other hand, local players would be benefited from additional cash infusion,” said the CEO of an investment banker.
All private domestic carriers want to expand overseas operations and survive the present negative growth. After reporting 32 per cent and 26 per cent growth rates in 2006 and 2007 respectively, the aviation sector has in 2008 seen a negative growth of 4.8 per cent due to high ATF prices and de-growth in domestic air travel.
Jet Airways had recently raised about Rs 1,250 crore from banks. It plans to raise Rs 750 crore through more borrowings shortly. Equity investment would obviate the need to borrow at higher cost. Currently, local airlines are bleeding, but expectations were that 2009 could prove to be better than 2008, on a stable ATF price regime.At the end of the trading session, Jet Airways shot up 19.18 per cent, SpiceJet moved up 13 per cent while Kingfisher gained 7.68 per cent.