India's largest private sector airline Jet Airways has postponed its $400 million (Rs 1600 crore) rights issue slated for March this year by three or four months, the third postponement since the board approved it in June, owing to poor market sentiment.
The Naresh Goyal-promoted airline had postponed the rights issue in September and December last year.
The carrier has also postponed plans to raise another $400 million through a Qualified Institutional Placement, a private placement of shares with institutions approved by the market regulator, to September.
Both postponements have raised questions about the airlines' ability to retire its debt, finance its fleet acquisition plan and dilute the promoters' holding from 80 to 75 per cent to meet regulatory requirements.
Jet, which acquired Sahara Airlines (now JetLite) for Rs 1,450 crore last year, currently has a debt burden of more than Rs 9,000 crore and requires $2 billion for its fleet acquisition and expansion plans.
Money raised from the rights issue was meant to retire part of the debt, which has been a key reason for the airline's losses. The airline posted a loss of Rs 91.1 crore in the third quarter ending December 2007.
Jet said it will now have to raise $400 million of debt to tide over the postponement.
"The $400 million that Jet will raise now will go towards repaying the 100 per cent debt funding towards aircraft acquisition," said KG Vishwanath, senior manager, MIS and investor relations, Jet Airways.
On promoter holdings, Goyal and his associates, who hold 80 per cent, had to dilute their stake by 5 percentage points for which the deadline fixed under regulatory rules was end April 2008.
Goyal, who was planning to dilute the promoter stake in September by selling it in the market or through an off-market transaction and using the proceeds to part-fund his rights issue, is now planning to write to the Securities and Exchange Board of India for an extension of the April 30 deadline.
"Goyal now has to either dilute more than 5 per cent of his equity to raise funds for the rights issue because the stock price has fallen from around Rs 900 in September 2007 to around Rs 720 or will have to take recourse to borrowings. Both the options are under consideration currently," a Jet executive said.
Jet has already appointed SSKI and HSBC as its bankers for the rights issue.
"We are not in a desperate situation. There is no regret from our side that the issue did not come at the time we announced it first. There is still investor interest in the airline but the valuations have to be right," Vishwanath added.
