Revival hopes fuel 500% surge in Jet Airways stock since September 2020

Shares of defunct airline Jet Airways (India) have found their feet, thanks to hopes of revival over the last few weeks. They have risen from about Rs 25 apeice towards the end of September, to Rs 163.4 apiece on Friday, on the BSE. 

Analysts, however, advise caution against excessive speculation in the counter.

“I see little merit in the stock, based on publicly known facts. Investors should be clear that they are only riding the momentum. And they have only themselves to blame if the expected fundamental change does not happen. They should either keep some stop loss or keep taking partial profits,” said Deepak Jasani, head (retail research), HDFC Securities.

Jasani noted that according to the the annual report for FY19, Jet had a negative net worth of over Rs 10,000 crore. Market capitalisation now stands at over Rs 1,800 crore. While the value itself is not large, there remain many things that need to happen before the airline takes off, according to Jasani. “Between now and the restart of operations, there could be many hiccups,” he said.

Independent market analyst Ambareesh Baliga said: “The stock is rising because there is the buyer for the airline, and there is an expectation that operations will revive. There is no rationale behind this enthusiasm. Investors are lapping up any stock that is going up. There is nothing left in the company. Generally, in these cases, there is nothing left for existing investors.”

Jet had shut down operations temporarily in April 2019. State Bank of India took the airline to the bankruptcy court in June the same year, since when proceedings have been on. 

Two bidders submitted resolution plans in July 2020. Changes to the plans were made in discussion with lenders. Then, the plans were put to vote in October, in which the Kalrock Capital-Murari Lal Jalan consortium emerged victorious.

The airline has significantly diminished in the interim. Jet had 112 aircraft in March 2019. It owned three, while 96 were on operational lease and 13 on financial lease. This has now reduced to 12 aircraft, including six Boeing 777, three Airbus 330, and three Boeing 737 planes. 

However, this is not the first instance of companies in trouble having seen a surge in their share prices. Earlier, too, shares of companies facing trouble paying back their loans or undergoing bankruptcy proceedings have witnessed a jump on the bourses.  

Lanco Infratech had surged 104.5 per cent during a three-month period. Jaypee Infratech, which had trouble finishing its real estate projects, also saw its share price rise 67 per cent in a span of three months. 

Videocon Industries gained 65.3 per cent in the same period. The Reliance Communications stock, too, witnessed a massive 216 per cent jump in just a one-month period, during that time. 

Corporate bankruptcy proceedings have been put on hold till March 2021, in the aftermath of the Covid-19 pandemic.