Jet Airways grounded proposed plan to raise $400 million through a secondary rights issue

By Vipin Agnihotri

I still remember how investing during the Jet Airways market debut burned me real badly financially. The scrip, which listed at Rs 1,350, within a matter of two months of listing dipped to Rs 550. According to highly placed sources, Jet has put off the proposed plan to raise $400 million through a secondary rights issue. I think it’s a pretty wise decision from Jet because the global markets are quite weak at this moment of time and I don’t think Jet will get the valuations that they are looking for.

Company officials claims that Jet is doing well but the fact of the matter is that Jet Airways has only been making money over the previous quarters through sale-leaseback of aircraft. It is worth mentioning in this regard that last quarter (finished in June 2007), Jet Airways declared a net profit of Rs 30.8 crore on revenues of Rs 1,806.7 crore.

If experts are to be believed, Jet requires money because planes cost money. Point to be noted here is that a Boeing 777 costs $250 million, which is why Jet Airways need to raise funds for their expansion plans. It has come into the notice of The India Street that Jet wants to dramatically increase the number of planes in its fleet, particularly the long-haul ones such as the Boeing 777-300ers and the Airbus A330-200s from eight at the moment to as many as 40 by 2011.

In my opinion, Jet Airways is betting big on international services to fatten Jets profits. By the end of next year, Jet Airways will have services from eight Indian cities to Brussels and to eight points in America. Not so long ago, Jet received permission to fly to Kuwait, Muscat and Doha, becoming the first private Indian carrier to be allowed to fly on the lucrative Gulf routes from January 2008.

With Kingfisher also all set to enter the international market, there are some rumors going around in the Indian print media that Jet is playing a prominent part in scuppering Vijay Mallyas plans. Jet Airways is planning to work cohesively with national carrier Air India on the ground handling services part.

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