High crude, falling rupee dent the books of Jet, Kingfisher and SpiceJet in Q1.
Even as a debate is on over allowing foreign airlines to buy stake in Indian carriers, foreign institutional investors (FIIs) are pulling out their investments from the country’s listed airline companies. FIIs, though, are still evincing fair amount of interest in sectors like oil & gas and automobile firms.
According to Bombay Stock Exchange (BSE) data, all the three listed carriers — Jet Airways, Kingfisher Airlines and SpiceJet — have seen a decline in the FII stake during this July-September, compared to the previous (April-June) quarter of the current financial year.
Mumbai-based Jet Airways, which is India’s largest carrier in terms of passenger carriage, has seen a decline in FII stake from 5.77 per cent in the first quarter of this financial year to 4.67 per cent in the second quarter. As for Kingfisher, the UB Group subsidiary has also witnessed a less than one percentage point decline from 3.02 per cent to 2.11 per cent during the same period.
In the case of Sun Group-owned SpiceJet, the fall is huge because of an increase in equity base after allotment of 35.90 million shares to the promoter of the company. The FII stake in the company fell from 10.16 per cent in the first quarter of this fiscal to 6.17 per cent in the second quarter.
On the other hand, Indian Oil Corporation and Hindustan Petroleum Corporation have seen a marginal decline in FII stake — .07 and .09 per cent, respectively. Oil and Natural Gas Corporation has also seen an increase — by .33 per cent.
In the automobile sector, Bajaj Auto saw a marginal decline of .13 per cent, while Hero Motorcorp saw a rise of 1.13 per cent during the same period.
As for the aviation industry, rising costs due to high crude oil prices and depreciating rupee had led all the three listed carriers to make losses in the first quarter. They are all likely to report loss in the second quarter as well.
The high costs of jet fuel is largely because of high levies on the aviation turbine fuel and high airport charges, especially after private players started operating them. The average tax on jet fuel in India is 24 per cent, second only to Bangladesh (at 27 per cent) in the world, making the fuel cost half of the operating cost. Also, jet fuel prices have increased by 40 per cent in the past year.
SpiceJet and Jet Airways, which reported profits in the first quarter of 2010-11, posted losses of Rs 72 crore and Rs 123 crore, respectively, during the same period this financial year. Kingfisher’s losses in the first quarter of this financial year widened to Rs 263.5 crore from Rs 187 crore.
Analysts say the stock of airline companies has become less lucrative because of rising operation cost and less scope to pass it on to the consumers. “One reason for pulling out would be the trouble the aviation sector is in -- owing to high cost,” notes a Mumbai-based analyst.
“But FIIs are pulling out from the Indian market for the last few quarters. So, this could be a temporary phenomenon.”
According to Business Standard Research Bureau data, FIIs have taken out Rs 10,565 crore during the July-September quarter. This is the highest in the current calendar year. It was Rs 1,038 they together managed to pull out in the April-June quarter and Rs 7,931 crore in the January-March quarter of the current calendar year.
