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SpiceJet, GoAir poised to gain most on FDI

HT Correspondent, Hindustan Times  New Delhi, September 18, 2012
First Published: 22:33 IST(18/9/2012) | Last Updated: 02:08 IST(19/9/2012)

Low-cost carriers SpiceJet and GoAir would be the biggest beneficiaries of the move to allow foreign carriers to pick upto 49% stake in Indian airlines, a Kotak Institutional Equities report has said.


"The company (SpiceJet) could provide an attractive entry point for a foreign airline as it has 18% marketshare and a relatively unimpaired balance sheet," the report said.

Jet Airways, the report said, would not gain as it is already in violation of foreign direct investment (FDI) norms. The promoter (with 80% stake) is classified as an overseas corporate body.

"Kingfisher Airlines (because of large liabilities) and IndiGo (foreign ownership already 48%) also won't gain."

The government, it said, needs to introduce further reforms to rationalize taxes on fuel which make aviation turbine fuel (ATF) 40% more expensive in India.

"State sales tax on ATF (25% on an average) is the largest component and needs to be rationalized. Either individual states need to be convinced to reduce taxes or ATF could be moved to 'declared goods' category to attract uniform 4% sales tax across India."

"Even as the move is incrementally positive, we believe it is unlikely to solve problems of debt-laden carriers and banks which have lent to these companies."

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