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Jet Airways was eagerly waiting for the government's clearance to raise $400 million through the QIP route from foreign institutional investors to meet its cash flow requirements
Jet Airways, the Naresh Goyal promoted airline, has finally got clearance from the Indian government to raise $400 million through qualified institutional placements (QIPs).
The Cabinet Committee on Economic Affairs (CCEA) approved the Jet Airways' proposal, as recommended by the Foreign Investment Promotion Board (FIPB), to raise $400 million via equity investment through the qualified institutional placement (QIP) route from foreign institutional investors, an official statement said.
The airline had planned to raise funds from foreign institutional investors (FIIs) as the appetite for domestic investment in the aviation sector in India is not strong. Jet Airways has a consolidated gross debt of $3.10 billion, including $2.20 billion of aircraft debt. Its current payment obligations amount to about $330 million that include repayment of debt, payment to creditors and pending obligation to SICCI towards JetLite. After buying Sahara Airlines from the Sahara group, Jet Airways renamed it as JetLite.
Jet Airways, which holds the largest market share of 25.3% in the domestic aviation space, saw a 33% increase in passenger traffic during November, as compared with the industry average of 29%.
Earlier this month, speaking at the US-India Aviation Partnership Summit, Mr Goyal had said that consolidation among Indian airlines is inevitable and will be necessary to restore financial sanity to the market. He said the Indian aviation market suffers from high costs, a substantial volume of overcapacity and lack of adequate infrastructure at domestic airports.
For the quarter to end-September, Jet Airways reported a net loss of Rs4.10 billion from Rs3.80 billion as its revenues fell 27% to Rs23.80 billion from Rs32.60 billion, for the same period last year. The carrier has had to suffer a loss of Rs800 million due to a five-day pilot's strike in September that resulted in close to 1,300 domestic flights and around 200 international flights being cancelled.
"Domestic air traffic appears to have started reviving in the past few months based on recent traffic data. This, along with the peak season impact in the third quarter, will help airlines to improve yields, which otherwise had been severely impacted due to the recession and lean season impact in the second quarter," Jet Airways said in a release.
The company is planning to cut costs across its operations to improve its revenues. "We expect unit costs to be down by 10% year-on-year across all fields excluding fuel," the official added.
Jet Airways said that during the quarter, fuel prices increased by 17.4% as compared to the April to June quarter and this led to an additional cost impact of Rs1.10 billion.
IDFC-SSKI Securities Ltd in a report said, "With the macro-environment turning optimistic and the cost curve of the industry at its bare bones, we expect the cash losses of Jet to get limited, marking the beginning of a turnaround. However, with consolidated debt at $3.10 billion and payment obligations at around $330 million, capitalisation concerns continue to dominate. Jet's ability to raise funds through a QIP, sale and lease back of assets and sale of its land bank remain a critical monitorable going ahead."
During the quarter, Jet Airways reported revenues of about $35.50 million from its lease business. However, six out of its total nine aircraft currently on lease with various operators in the Gulf are expected to come off from September onwards. As per media reports, Jet was in discussions with Oman Air and Etihad to lease out two of its Boeing 777 wide-body airplanes.
Earlier, speaking with Moneylife, Saroj K Datta, executive director, Jet Airways, had said that the company was looking at expenses involved in each comparable item, specifically for Jet Konnect.
For example, the enhanced vision systems (EVS) costs are irrelevant and it would consider cost cutting in fuel consumption, engineering costs and such other fields.
Jet Konnect, which operates 130 flights daily, is the carrier's no-frills all-economy class service in key domestic routes and is designed to meet the needs of the low fare segment.
‘UTV Action’, a new action movie channel will be on air from January 2010. It will replace UTV’s ‘Bindass Movies’ channel which airs movies dubbed into Hindi
UTV Global Broadcasting is launching a new channel ‘UTV Action’, which will showcase fast-paced and high-octane Hollywood movies, dubbed in Hindi, besides some of the latest action movies from Bollywood. However, according to industry sources, this move may be just the renaming of an erstwhile channel, as the company is winding up its channel ‘Bindass Movies’, which airs the same content as that of ‘UTV Action’.
“With the movie business getting bigger and with the market maturing, the generic movie platform will have to pave the way for specialty movie offerings. The best opportunity and prospects in such a scenario lies within the action genre. We are hoping to receive great response from our audience. The channel has already roped in advertisers that include Hindustan Unilever, Asian Paints, TVS Tyres, HCL Computers, Hero Honda, Castrol, Bajaj, Airtel, Perfetti and Marico,” said MK Anand, chief executive, UTV Global Broadcasting, in a release.
UTV’s ‘Bindass Movies’ channel has a viewership of 4.3 over the past four weeks which is far better than Zee Action (1.5 over the past four weeks), an action movie channel. “The action channel is always for a niche market and I think they will adopt the pay mode for this channel. You can command some pricing for it rather than going free-to-air. They will try to earn approximately Rs10 crore-Rs12 crore annual subscription from such types of channels,” said Sheetal Malpani, media analyst, Brics Securities Ltd.
In January 2010, ‘UTV Action’ will be broadcasting 15 blockbuster titles like ‘Crouching Tiger Hidden Dragon’, ‘Men in Black’, ‘Black Hawk Down’, ‘End of Days’, ‘Bad Boys-II’, ‘Grudge’, ‘Vertical Limit’ and ‘Ab Tak Chappan’.
S&P has revised its rating outlook on Ballarpur Industries to ‘stable’ on the back of its operating performance, which is expected to continuously improve, according to the rating agency
Ratings agency Standard & Poor's (S&P) has said that it has revised its rating outlook on India's printing and writing paper manufacturer Ballarpur Industries Ltd (BIL) to ‘stable’ from ‘negative’ reflecting the company’s improved performance and stability in operations.
"The stable outlook reflects our expectation that BIL's cash flow measures will improve, supported by continued stable demand in the domestic paper market and better operating environment at its overseas operations," said S&P’s credit analyst Yasmin Wirjawan.
The ratings agency said it expects BIL's operating performance to continue to improve because of the company's cost efficiency measures and the stabilisation of its pulp operations at Sabah Forest Industries Sdn Bhd (SFI).
BIL acquired Malaysia's largest paper manufacturer SFI for $261 million in March 2007.
"We expect Ballarpur to complete its paper capacity expansion in 2010, which, in our view, will improve the company's economies of scale and strengthen its cash flows over the medium term," Ms Wirjawan said.
Domestic demand for paper products continues to be strong, and the company's pulp operations have stabilised after a weak performance. SFI's pulp operations have also stabilised over the past two quarters. The demand for paper products has improved in both the domestic and export markets since mid-2009. S&P said it expect the company's capacity utilisation to be high (at about 85%) in the next few quarters, and its proportion of domestic sales, which have higher margins than exports, to remain above 90%.
BIL has completed its paper capacity expansion in India. “We expect the company's profitability and cash flows to improve because of higher capacity and a better product mix. We expect Ballarpur's debt-to-EBITDA ratio, which was above 5x as at 30 June 2009, to improve to about 4x in the near term, supported by rising profit margins and higher production,” the ratings agency added.