Kingfisher Airlines may be gasping for breath to stay afloat, but suprisingly is the most-traded airline stock on the Bombay Stock Exchange so far in April. The stock has overtaken India’s largest passenger carrier by revenue, Jet Airways, in most traded stock with 1.45 lakh trades, roughly double of Jet at 75,928 trades, data from the BSE show. There were five bulk deals executed by Transglobal Securities, a broker, in April and three helped them to make R2.92 lakh profit.
?The airline’s share price movement has been very volatile in recent months,? said a broker, who tracks aviation stocks at a Mumbai-based brokerage, on condition of anonymity. ?In April alone, the range of movement has been to the order of R10, which is a lot for a stock priced at these levels.?
?Buying Kingfisher stocks right now is risky, but it is also an ideal time to take risks in buying low and selling high,? he added.
The airline?s shares closed at R15.10 on April 2, with a market value of R872.24 crore. On Monday, the airline?s shares closed at R20.10 with its market value rising to R1,161 crore.
The airline, which defaulted in repaying its loan to its lenders, had been classfied as a non performing asset (NPA). Lenders classify a company loans as NPA when it fails to repay its interest in 90 days. Kingfisher, which has not made a profit since it started in 2005, has accumulated R6,500 crore losses until now and has to pay its lessors, airport operators and aviation fuel companies. It owes lenders R7,057 crore.
?Ideally, one should go long on this stock,? said Kishore Ostwal, chairman and managing director, CNI Research. ?The risk reward ratio clearly favours long as there is speculation that the airline will survive through a possible takeover. So buying it at low levels and holding it would remain the best option. In the medium to long term, the stock could hit a high of R32 or more,? he added.
On April 10, Kingfisher shut down its international operations and it is now flying 120 daily flights with 20 aircraft, nearly one third a year ago.
?The speculation of a stake sale to a foreign carrier results in the stock rallying for a day or two which witnesses high trading activity,? the Mumbai-based broker said.
International Airlines Group, the parent company of British Airways, and Abu Dhabi?s flag carrier Etihad Airways were speculated to be in talks to purchase a stake in the liquor-baron Vijay Mallya-owned airline, but neither of them have made their interest public. The government last week posponed a proposal to allow foreign passnger airlines to purchase up to 49% stake in Indian carriers.
But the long-term future of the airline sector continues to be in doubt. The airline needs about $600 million to stay in business says Centre for Asia Pacific Aviation (CAPA), aviation knowledge and consultancy firm, in a report released on March 22. ?Without these funds, its survival is extremely challenging,” CAPA’s South Asia chief executive Kapil Kaul said in the report.