Jet Airways share price falls over 2% after HSBC cuts target price citing operational concerns

The Jet Airways share price fell in trade today after the brokerage HSBC cut its target price for the airline stock. Jet Airways share price fell 2.79% to 225 level compared to the previous close of 231.45 on the BSE. Jet Airways share has been falling for the last three days and lost 2.21% during the period. Jet Airways share price has lost 69.82% during the last one year and fallen 18.28%  since the beginning of this year.

HSBC in note said, "Board approved bank-led resolution plan to restructure debt, convert debt into equity, and infuse capital. This will inject liquidity, but, operationally, a lot needs to be changed to ensure sustainability." The brokerage reduced its target price to Rs 190 from Rs 200 citing operational concerns for the airline. The turnover for the small cap stock stood at Rs 5.36 crore with 2.36 lakh shares being traded on the BSE.

Also read: Naresh Goyal's exit from Jet Airways key to its survival, says industry expert

Post debt rejig and investments by Etihad Airways as well as National Investment and Infrastructure Fund (NIIF), loss-making Jet Airways is likely to receive fund infusion worth over Rs 3,000 crore while founder Naresh Goyal might remain the promoter with less than half of the existing majority stake of 51 per cent, according to reports last week.

Tracking the positive development, the Jet Airways share price rose 7.55% to 242.85 compared to the previous close of 225.80 on February 15. While the final contours of debt-restructuring and consequent changes are being worked out, an analyst said that Etihad Airways should come as the main driver for Jet Airways as lenders and shareholders would not be able to bring in much value addition.

Also read: Naresh Goyal to lose control of Jet Airways as board clears resolution plan

Abu Dhabi-based Etihad, which currently owns 24 per cent in the full service carrier, is a strategic partner and is expected to pump in around Rs 1,400 crore, sources said. On February 14, Jet Airways' board approved a Bank-Led Provisional Resolution Plan (BLPRP), whereby lenders would become the largest shareholders in the airline.

After receiving approval from shareholders, during their meeting scheduled for February 21, part of debt would be converted into 11.4 crore shares at a consideration of Re 1 apiece as per RBI norms.

Later, appropriate interim credit facilities by domestic lenders would be sanctioned to the airline, as per a regulatory filing made on February 14.

The government-backed NIIF, where Abu Dhabi Investment Authority is a key stakeholder, is likely to acquire little over 19 per cent stake in the ailing airline, they added.

They said that NIIF is likely to put in Rs 1,400 crore while lenders, led by the State Bank of India (SBI), are expected to convert debt into equity worth around Rs 600 crore.

Sources also said that Etihad's proposed investments would hike its stake only marginally and that would not trigger the requirement for making an open offer for shareholders of Jet Airways under Sebi regulations.

Together, the fresh funding for the airline would amount to about Rs 3,400 crore and Goyal's stake could reduce to 20 per cent from 51 per cent at present. 

Edited by Aseem Thapliyal