Jet Airways may opt for a rights issue to raise $400 million needed to fund its expansion plans, according to a Reuters report from Brussels quoting Jet Airways director Vic Dungca.
Jet kicked off its second European hub in Brussels on Wednesday.
Jet Airways was earlier planning to issue shares at home and abroad to raise money to acquire planes. Jet was also exploring the private equity route but has now opted for a rights issue in view of its subdued share price over the year.
Jet did not respond to an emailed questionnaire seeking further details.
The Jet Airways scrip closed at Rs 718.35 on the Bombay Stock Exchange on Thursday. The shares had fallen below Rs 500 last year, after trading at a discount to the issue price of Rs 1,100 since the scrip listed in March 2005.
“It’s better to reward your existing shareholders than try to bring private equity investors or new investors. If the price is marginally higher than the prevailing market price, this will bring down the total acquisition cost for shareholders,” said Kapil Kaul, CEO, Indian sub-continent for Centre for Asia Pacific Aviation.
Original investors had bought the Jet shares for Rs 1,100. Now, if they get the rights issue at a price of Rs 700 or Rs 750, their average cost of acquisition will come down to Rs 850. This will offset the loss investors have made on Jet.
“The issue will find favour with institutional investors, who would like to look at the Jet stock from a long-term perspective,” added Kaul. Institutional investors like Temasek and Texas Pacific Group may have bought into Jet, though this could not be independently confirmed.
“In the long term, the Jet stock looks good. An institutional investor is not just investing in Jet Airways but investing in the Indian aviation, which has huge potential,'' added Kapil Kaul. Jet is likely to retain the merchant bankers that assisted it with the IPO in February 2005.