Jet Airways: Total capex till Oct 08 seen at $ 2.6 bln; Seen good improvement in international operations

Jet Airways has reported its numbers today. The FY07 standalone Net Sales were at Rs 7057.78 crore vs Rs 93.73 crore. The Net Profit is at Rs 27.94 crore vs Rs 452.04 crore. The Q4 Standalone Net Sales are at Rs 1978.27 crore vs Rs 1625.3 crore (YoY). The Net Profit was at Rs 88.01 crore vs Rs 227.12 crore (YoY). The results are in-line with market expectations.

The board has approved a $ 400 million rights issue and the pricing will be decided in 3-4 weeks. The airliner will also pay dividend of Rs 6/share.

Wolfgang Prock Schauer, CEO, Jet Airways says that they have seen significant improvement in international operations vs loss of $ 45 million in H1. The international business saw profit of $ 1 million in Q4. The total capex till Oct 2008 is seen at $ 2.6 billion.

The airline hopes to start Mumbai-New York service by August, Mumbai-Toronto by September, Mumbai-San Fransisco by October. They will infuse fresh capital in Jetlite in FY08. Speaking on the ticket prices, they feel that a Rs 400-500 hike in ticket prices necessary for the industry.

Domestic operations accounted for 76% of revenues as compared to 87% in the fourth quarter of last year, reflecting the growing scale and contribution of the Company‘s international operations. The fourth quarter is normally not the peak travel quarter in the Company's fiscal year. The company achieved a domestic seat factor of 70.3% in the quarter ended March 31 versus 73.8% in the same period a year ago and 70.1% for the quarter ended December 2006. Our full-fare versus discounted fare mix remained stable at approximately 30:70 and yields have increased by 5% YoY.

The company says that the rate of capacity induction during this quarter and more generally in the market has started to slow down. For the quarter ended March 2007, capacity grew by 36.7% over the same period last fiscal and this rate of growth is much lower than what the industry has been seeing over the last few quarters.

Fuel costs were higher marginally by Rs 1.4 crores (US$ 0.3 million) vs the same period a year ago. This was largely due to the larger number of flights operated. The average fuel rate was lower at Rs 36.55 per litre vs Rs 36.05 a year ago. The impact of fuel and other surcharges fully mitigated the high costs of fuel and additional costs related to congestion during the quarter. At the company level, the average staff numbers increased from 8,727 to 10,590 on account of the expansion in level of operations. New hires among pilots, engineers and cabin crew constituted the bulk part of this increase.

The increases in all other costs were in line with the increase in level of operation and in most instances even lower than that of the same period last year.

International operations:

The revenues from International operations now form one fourth of the total operating revenues for the company as compared to 13% in the fourth quarter of last year. The company achieved a record seat factor in international operations of 76.6% for the quarter. Higher seat factors on key routes and lower fuel costs led to the improved performance and the turnaround of the international operations. Over the last four quarters our international seat factors have gone up from 66% to 76%, which is highly creditable given the competitive nature of the International business segment.

The recent developments in the domestic aviation industry signal the strong need and the first signs of consolidation and this, we believe, will lead to more rational pricing and improved operating performance for domestic carriers in India over the next few quarters, the company said in a press release.

FY 2008, especially Q1 and Q2, will remain challenging because of a very rapid and huge fleet expansion especially on the international operations. In this year we plan to start our operations to North America / Canada / Africa and Gulf routes. The turnaround of JetLite (earlier Sahara) will also pose a key challenge to the Company's resources-both operationally and financially.

Jet Airways currently operates a fleet of 62 aircraft with 2 Boeing 777-300 ER, 48 classic and next generation Boeing 737-400/700/800/900 aircraft, 4 Airbus A330-200 aircraft and 8 modern ATR 72-500 turboprop aircraft. With an average fleet age of 5.1 years, the airline has one of the youngest aircraft fleets in the world.

Jet Airways operates over 340 daily flights to 50 destinations that span the length and breadth of India and beyond, including London Heathrow in U.K., Singapore, Kuala Lumpur in Malaysia, Colombo in Sri Lanka, Bangkok in Thailand and Kathmandu in Nepal. The airline plans to extend its international operations to North America, Europe, Africa and Asia in the coming years with the induction of wide-body aircraft into its fleet in 2007. Since inception in May 1993 until mid-June 2007, Jet Airways has flown over 73.5 million passengers.




JSW Steel, JSW Energy get over 5 mln Carbon Credits from UN body; JSW Group's 5 mln Carbon Credits estimated worth 65-81 mln euros

JSW Steel, along with group company JSW Energy, has garnered over 5 mln carbon credits under the clean development mechanism scheme of the Kyoto Protocol, according to data published by the UN carbon market regulator. JSW Energy was awarded 4.06 mln carbon credits for its electricity generation plant in Karnataka.

The JSW Energy project involves putting in place systems and infrastructure for generating electricity using waste gases that were otherwise being flared off in JSW Steel plants. JSW Steel also bagged 1.36 mln carbon credits for another electricity generation plant in Karnataka. At current prices of 12-15 euros (689-861 rupees) per credit, the revenue earned by the companies from these issuance of over 5 mln credits could be around 65-81 mln euros (Rs 370-470 crores). International partners for the projects include Noble Europe Ltd., EDF Trading Ltd., and Noble Carbon Credits Ltd.

Developed countries are bound by the Kyoto Protocol to cut greenhouse gas emission between 2008 and 2012 to at least 5% of the 1990 level. One way to cut emission is by buying certified emission reductions, or carbon credits, which are generated by clean development mechanism projects that reduce greenhouse gas emissions. A project becomes eligible to sell one credit if it reduces 1 tn of greenhouse gas emission.

India's average annual greenhouse gas reductions are pegged at 23.00 mln credits by 2012. This is about 15.13% of the world's total annual reduction average of 151.97 mln.

The UN body also registered CESC Ltd.'s coal-fired thermal power project in West Bengal. The CESC project is expected to reduce 31,878 tn of carbon dioxide equivalent emissions for a fixed period of 10 years. With these registrations, India's total number of projects registered with the UN reaches 250, the highest in the world.




Not received any inquiries from Canara Bank, main holding in OBC intact: LIC

S Sarkar, ED-Investments, LIC said we have not received any enquiries from anyone nor from Canara Bank. The news of Canara Bank buying 14% stake in LIC is entirely wrong. We are not in talks with anyone. Our bulk of holding in Oriental Bank of Commerce is intact.

LIC is a long-term investor in large number of stocks and we will remain a long-term investor. Infrastructure related, construction, engineering and capital goods sectors are the sectors we are looking for investments, he added.

Earlier today, the DNA Money had reported that LIC has recently sold its 14% stake in OBC to Canara Bank. The report added that Canara could end up acquiring both Dena Bank and OBC.

However LIC & Canara Bank have denied the report. Canara Bank claims they hold marginal stake in OBC as part of cross holding. As per RBI regulation, any entity acquiring more than 5% stake in Banks requires RBI nod.




DNA-Canara Bank acquires LIC’s 14% stake in OBC, May take over the bank; LIC & Canara Bank deny the report

Chairman and Managing Director of Canara Bank M B N Rao is determined to expand the bank's network across the country. To do that Canara Bank has identified a second acquisition target if efforts to strike a deal with Dena Bank fail. It has short listed Oriental Bank of Commerce (OBC) as a possible acquisition candidate based on the synergies between the branch networks of the two banks.

Canara Bank has 2,400 branches concentrated mostly in southern India while Oriental Bank's 530 branches are largely in the western belt, a market that Canara Bank is eager to break into. While Canara Bank is still pursuing the possibility of a merger with Dena Bank, sources close to the deal have told that OBC would make an equally good partner.

"There are synergies between the two banks. The branch networks are synergistic and also in terms of technology both banks are on the same platform making it easier to merge," said Jignesh Shah, Head of Equity, ABN Amro.

For Oriental Bank of Commerce a merger at this stage could help ease capital crunch within the bank. The bank has nearly exhausted its capital raising ability with government holding close to the minimum limit of 51 %. Loan growth at the bank slowed to near 15% and profits also declined nearly 70% in the quarter ended March 31 leaving the bank with little money to implement any expansion plans.

Canara Bank also expects the management of Oriental Bank of Commerce to be more receptive to the possibility of a deal between the two banks. Canara Bank and OBC have already tied up to set up a life insurance business and a merger could be seen as extension of their partnership.

Also, the new Chief Managing Director of the Oriental Bank of Commerce has just moved up from Canara Bank where he was serving as an executive director. For now both managements deny any talks of a merger but sources close to the deal say that the possibility of Canara Bank-OBC combine is very much on the cards.

Meanwhile, the DNA Money reports that LIC has recently sold its 14% stake in OBC to Canara Bank. The report added that Canara could end up acquiring both Dena Bank and OBC.

However LIC & Canara Bank have denied the report. Canara Bank claims they hold marginal stake in OBC as part of cross holding. As per RBI regulation, any entity acquiring more than 5% stake in Banks requires RBI nod.




Buzz is still in the air - Jet Aairways is looking at a stake in SpiceJet

Jet says no, and SpiceJet says no. But the street is buzzing with speculation that jet is in talks to buy a controlling stake in SpiceJet.

Market buzz says that Jet would consider rights issue of $ 400 million or Rs 1,628 crore. Rights are likely to be used for aircraft acquisitions. There are several scenarios that are possible:

To see dilution of 23.9% stake at Rs 789

To see dilution of 25.2% stake at Rs 750

To see dilution of 27% stake at Rs 700

To see dilution of 29% at Rs 650

Market Share:

Jet Airways + Jetlite: 32%
SpiceJet: 6.5%

Competition:

Kingfisher + Deccan: 32%
Jet + SpiceJet: 38%

If the deal goes through, Jet gains instant market share and fleet compatibility. It will also get access to trained human resources along with an edge over competition.





ICICI plans to knock the FIPB door again - hopes to get a nod for insurance stake sale

ICICI Bank is hoping to get back to the FIPB to present its arguments on the issue of selling a 5% stake in its subsidiary, ICICI Financial Services, to a bunch of foreign investors. Late last week, the FIPB turned down this proposal, apparently on the ground that it would breach the current rule that caps foreign ownership in an insurance company at 26%.

Prudential has a 26% stake in ICICI Pru's life insurance JV and Lombard has a 26% stake in bank's non-life JV. So if ICICI were to sell stake in it's holding company to foreigners it will raise the indirect foreign holding beyond 26%.

But industry insiders say that so far, the government has not counted indirect holdings in either the insurance or the telecom space.

Standard life has a 26% stake in its life insurance JV with HDFC. And HDFC, which owns 74%, is itself owned by several FIIs.

The FIPB ruling, they say, may open a can of worms for many such joint ventures. The government had recently said it would go into the rules and the actual foreign ownership in telecom and insurance companies, and see if the rules need to be tweaked.

Companies like Allianz have brought in more capital than the permitted 26%. Financial companies have actually provided more capital than non-financial partners. Banks can't invest over 20% of their net worth in their NBFC subsidiaries. Insurance companies could be starved of capital.