Competition, losses turning FIIs away from Jet Airways, SpiceJet

While investors have been pumping funds into Indian markets, aviation stocks appear to be exceptions.

Foreign investors may have been pumping funds into the Indian debt and equity markets since the beginning of 2014, but aviation stocks appear to be clear exceptions.

Foreign Institutional Investors (FIIs), who have pumped in Rs 57,728 crore (Rs 22,196 crore into the equity and the rest into the country?s debt market) during the quarter ended March 2014, they have pulled funds out of the country?s two listed airlines.

While FII stake in Jet Airways has come down to 4.27 per cent in the fourth quarter from 5.85 per cent in the third quarter, the drop in FII stake in case of SpiceJet was even steeper from 2.01 per cent to 0.82 per cent, according to Bombay Stock Exchange data.

The two listed Indian airline companies have been reporting losses since FY11. Jet Airways, which made a profit of Rs 9.69 crore in FY11, has accumulated losses of Rs 1,513 crore since then. SpiceJet?s financial situation is no better and the airline has accumulated losses of Rs 1,477 crore after making a profit of Rs 101 crore in FY11. Both the airlines will announce their fourth quarter results by the end of the current month.

Air carriers

Market analysts say that the investors are keeping off the sector as the airlines are fiercely competing against each other by offering cheap fares, badly impacting their bottomline. ?The foreign investors are staying away, as fierce competition between the airlines does not make the return on stocks lucrative in the short-term. These investors are investing in banking stocks of private Indian banks,? said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. He, however, added that these stocks may spin back into favour with foreign investors in the long-term.

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First published on: 19-04-2014 at 11:40 IST