Mumbai: Brokerage firm Edelweiss Tuesday downgraded the Jet Airways stock from from ‘hold’ to ‘reduce’ owing to the mounting risk on the financially troubled airline.
The report said that Jet may eventually lose 50 planes to lessors which would cut its fleet size down to 73 in the financial year 2020-2021.
The brokerage firm also cut Jet’s target price(TP) by 22 per cent to Rs 177 and also the full service carrier’s earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) forecast by 35 per cent for the current fiscal, and by 49 per cent for the financial year 2020-2021.
“We continue to assume a swerve back to profit during FY21E and a fair EV/EBITDAR of 7x. But given mounting risk, we are cutting the TP by 22 per cent to Rs 177 and downgrading the stock from ‘HOLD’ to ‘REDUCE’,” Edelweiss said.
“We believe JAL’s (Jet Airways) EBITDAR shall witness a sharper contraction due to operating leverage; it would, therefore, record another quarter of losses exceeding Rs 10 billion.” The downgrade comes at the time when three-fourth of Jet’s original fleet has been grounded with consequent flight cancellations.
The brokerage said: “While varying possibilities are emerging, including the hunt for a new buyer and a debt write-off, Jet’s viability has taken a hit.”
SIX EOI FOR JET: Global private equity firm TPG Capital and international airline such as Lufthansa are among six entities who are believed to have shown interest in the “expression of interest” stake sale process of the debt-ridden Jet Airways, sources said.
The development comes as lenders of the debt-ridden airline invited EoI for stake sale in the airline to recover their dues worth Rs 8,000 crore.
Sources said that TPG Capital, private equity firm KKR, Blackstone, Lufthansa, Singapore Airlines and Delta-Air France-KLM are among the companies approached by the lenders.
When contacted, a Tata Group spokesperson, said: “We don’t comment on market speculation.”
As per the document issued by the State Bank of India (SBI), the lead lender in the consortium, it offered stake from 31.2 to 75 per cent of the company on a fully diluted basis.
However, it was not known whether ex-Chairman Naresh Goyal or major equity owner Etihad Airways would be selling their stake on a pro-rata basis. The deadline for submission of EoI is till 6 pm April 10.