Open offer unlikely for Jet, but stay invested: Angel

India’s Jet Airways sold a 24 percent minority stake to Abu Dhabi's Etihad Airways on April 24. After this Jet's shares climbed as much as 14 percent in trade today. The joint parliamentary committee (JPC) will be taking up the Jet- Etihad issue.

Sharan Lilaney, Aviation Analyst, Angel Broking sees a lot more positives than negatives in this deal. His advice to investors is to stay invested. He believes the deal will help in reducing Jet’s high cost working capital debt and the cash infusion would change its fundamentals. He also made it clear that there is no open offer expected at this juncture. Below is the verbatim transcript of his interview to CNBC-TV18 Q: You as analyst reached out to the Jet management, so any clarity on whether or not there is going to be an open offer involved in this deal? A: We haven’t spoken to the management. However, it was very clear from the very beginning that 24 percent stake won’t trigger an open offer. Q: There is some suggestion though that because of the structural nature and the fact that Etihad maybe looked upon as a co-promoter post the deal, there could be a suggestion of an open offer. Have you spoken to legal experts? A: I think Etihad always wanted first right to refusal, if they wanted to increase their stake via direct purchase from the company itself. However, they always have a strategy to buy minority stake and wait and watch for a couple of years that how things pan out. Only after that they will look how to increase stake via open offer, by increasing some stake by buying stake from the company itself. Q: Do you have a revised target price on the stock and what would you advise for people to do? Some of your peers have suggested this is an attractive exit point- do you agree with that? A: The company is going to receive USD 380 million from current issue, USD 150 million from sale of their subsidiaries and USD 70 million from their sale and lease back in Heathrow. There is significant amount of capital that is going to come into the company, which will help them to reduce their high cost working capital debt. This will free up a lot of cash flow and change the fundamentals of the company in the future. Again the alliance with Etihad can open a lot of new destinations for them. They are also planning to change their hub to Abu Dhabi, which will reduce their fuel cost significantly, offer cheaper rates and become very competitive in the future. Overall there is a lot more positives than negatives. I would say stick with the company for a few couple of years at least.