India's Airlines Jump as Billionaire Jhunjhunwala Buys Stake

  • IndiGo seeking valuation five times the size of Jet Airways
  • Jhunjhunwala now owns stake in IndiGo, SpiceJet, Jet Airways

Jet Airways India Ltd. and SpiceJet Ltd. surged for a second straight day in Mumbai after billionaire investor Rakesh Jhunjhunwala bought airlines shares and the pricing of market leader IndiGo’s initial share sale boosted other airline stocks.

Jet Airways climbed 3 percent to 450.75 rupees, while SpiceJet shares surged 5.9 percent to 49.50 rupees at the close . IndiGo shares are expected to begin trading Nov. 10.

Last week’s initial public offering by InterGlobe Aviation Ltd., which runs IndiGo, raised about 30 billion rupees ($460 million), valuing the airline at $4.2 billion and making it the third-largest low-cost carrier in Asia. IndiGo’s market value is five times as big as Jet Airways’s and nine times that of SpiceJet, the other two listed Indian airlines. IndiGo shares are due to begin trading Nov. 10.

Billionaire investor Rakesh Jhunjhunwala bought about a 1 percent stake in Jet Airways on Friday, exchange data showed, after he bought 7.5 million shares of SpiceJet last year. Jhunjhunwala bid for shares in IndiGo’s IPO, according to the ET Now television channel.

IndiGo’s IPO priced at 765 rupees a share, the top of its marketed range, giving the airline an enterprise value-to-sales ratio of 2.1 using last year’s earnings, according to Mumbai-based IIFL India Private Clients. Jet Airways and SpiceJet both have a ratio of 0.7, the brokerage wrote in an Oct. 26 note.

IndiGo is the only airline to turn a profit in each of the past seven years in India, where provincial taxes make jet fuel the most expensive in Asia and below-cost fares stress carriers’ bottom lines. Local carriers have lost a combined $10 billion in the past six years, according to the Sydney-based CAPA Centre for Aviation.

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