Jet Air Valuation
Let's attempt a relative valuation on Jet.
In Mid January, 2006 when Jet made a Rs.2300 crores bid for Air Sahara, its (Jet's) stock price was Rs.1129 per share. Nifty was 2809.
In June 2006, Jet's stock price is about Rs.645. Nifty is hovering around 2943. There are broadly two stories floating around to explain the fall.
a) The Air Sahara acquisition is an expensive deal and for an ailing company like Air Sahara, a consideration of Rs.2300 crores is much on the higher side.
b) Jet is facing competition from most of the new entrants into the civil aviation industry.
I think it is the first reason that can partly explain the fall. No new entrant suddenly entered the market after January 2006. And when Jet went for the IPO, many analysts predicted revenue pressure because of the new entrants. So the market must have factored that in the pre-Januart price of Jet.
The first reason, however, partially explains the fall because the fall in the market capitalization in Jet is Rs.4152 crores that is about 180 percent of the total consideration that Jet pays for Air Sahara.
This seems little difficult to justify. Even if one puts zero value on Air Sahara, the fall in the market cap of Jet cannot be so high.
Unless of course the market puts a negative value on Sahara ...
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In Mid January, 2006 when Jet made a Rs.2300 crores bid for Air Sahara, its (Jet's) stock price was Rs.1129 per share. Nifty was 2809.
In June 2006, Jet's stock price is about Rs.645. Nifty is hovering around 2943. There are broadly two stories floating around to explain the fall.
a) The Air Sahara acquisition is an expensive deal and for an ailing company like Air Sahara, a consideration of Rs.2300 crores is much on the higher side.
b) Jet is facing competition from most of the new entrants into the civil aviation industry.
I think it is the first reason that can partly explain the fall. No new entrant suddenly entered the market after January 2006. And when Jet went for the IPO, many analysts predicted revenue pressure because of the new entrants. So the market must have factored that in the pre-Januart price of Jet.
The first reason, however, partially explains the fall because the fall in the market capitalization in Jet is Rs.4152 crores that is about 180 percent of the total consideration that Jet pays for Air Sahara.
This seems little difficult to justify. Even if one puts zero value on Air Sahara, the fall in the market cap of Jet cannot be so high.
Unless of course the market puts a negative value on Sahara ...
Mesothelioma Lawyer Counter
posted by Pitabas Mohanty at 2:52 AM
2 Comments:
Dear Sir,
as you said, this seems too difficult to justify. but the reason obv is not that market puts a negative value for sahara..
the reason might be that in this analysis, we havent included other events in the same time window that might have an impact on share prices.... for example, the quarterly results... quarterly PAT has dropped from 227.12 cr to -44.98 cr... this is because airlines have been slashing fares to increase market share and ensure high capacity utilization... moreover, fuel costs have gone up by 37% in the last 1 year... the problem of poaching is only too familiar to us.. employee costs are also going up....
kindly comment....
dear sir,
first of I am in love with your blog
and on jet valuation article
great analysis rishi..
also factors which came to light during this period were the fact that Mr Goyal of Jet may have been getting money from underworld..we also have money coming in from politicians.Things like these always work against company perception in the market.Don't they??
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