Markets do not like uncertainty. So it gave thumbs up to Jet Airways on Thursday when its takeover of Air Sahara became certain. Jet share price recovered 3.24 per cent to move up to Rs 628.65. "The initial price Jet was willing to pay for Sahara was a negative and now if it has got a bargain of Rs 1,450, it is a healthy deal," says Kalpesh Parekh, Head-Institutional Sales, ASK Raymond James.
Opinion is clearly divided on the value of the deal as well as on the outlook for Jet share price. Gautam Roy, airlines analyst at Edelweiss Securities, has put out a reduce recommendation on Jet shares as he expects them to underperform. "Jet will underperfrom the next six months," says Avinash Gorakshakar, head of research, Emkay Share and Stock Brokers, too
However, brokerage firm SSKI has reiterated its January call of outperformer rating for Jet stock. "We always believed that Jet Airways was on a poor footing in the arbitration process and would have to do away with at least Rs 700 crore. Rather, we believe that Jet Airways has effectively got an incremental market share of 8 per cent at a value of Rs 550 crore," says the SSKI report.
To some extent the fact that Jet has bought over some competition is beneficial to other players in the industry as well, say analysts. "Pricing power will come back to the industry," says Parekh, adding, "Pricing behaviour would be more rational and that is a mild positive for other airline stocks." Sahara came up with aggressive pricing when the initial takeover talks failed.
Some of the issues crucial to performance of Jet’s shares would be the unveiling of the finer details of the deal and the integration process — whether Sahara would be merged or kept as a subsidiary and whether it would continue to operate as a low-cost airline. Next is the ability of Jet to retain people at Sahara and infusion of resources, say analysts.