Jet Air, Etihad in talks for stake sale; 24% could change hands
wide-body aircraft including six dedicated freighters) and plans to grow to 158 aircraft by 2020. The HSBC report noted that a key feature of Etihad’s strategy so far has been its strategic partnerships and code shares with airlines all over the world.
Jet and Etihad already have a code-sharing agreement, and a tie-up could see Jet emerging as more formidable rival to Air India, while Etihad would be able to offer greater competition to Dubai-based Emirates, which carries a big slice of traffic between India and the Middle East.
Jet losses have eroded its shareholders’ equity and the net debt as at the end of September 2012 was close to Rs 8,900 crore for the standalone entity; the group’s balance sheet debt is approximately Rs 12,000 crore. The group’s annualised interest expenses based on first half of 2012-13 are estimated at Rs 1,200 crore. Analysts point out the group is heavily leveraged and that the interest bill is rising due to the rising risk aversion of banks towards the aviation sector. Moreover, the depreciating rupee has resulted in a rise in interest costs on dollar-denominated loans. On a rough reckoning, an equity infusion of Rs 1,600 crore will lower Jet’s FY14E net debt to Ebitda from 6 times to 5 times and increase the interest coverage ratio from 1.8 times to 2.1 times, analysts estimate.
A civil aviation ministry official had said on Wednesday that for the consummation of the deal, Jet would have to restructure its shareholding pattern.
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