SpiceJet to benefit most from FDI in aviation: Antique

The government is likely to give its decision on a proposal to allow foreign carriers to invest in local airlines today.

Rising fuel costs, high taxes and fierce competition have hit the Indian aviation sector severely. The government is likely to allow 49% foreign direct investment (FDI) in the aviation sector. Like most experts, Vikram Suryavanshi of Antique Stock Broking also feels if the government gives nod to FDI to invest directly in the sector, it would be a big relief for debt ridden aviation companies. According to Suryavanshi, the Indian aviation sector is fast growing at a pace of 13-15%. Foreign players will be willing to consider investing in Indian aviation sector due to strong domestic demand, he explained. From the aviation pack, SpiceJet is his preferred pick because of the company's clean balance sheet. He expects SpiceJet to gain the most if direct FDI in aviation is permitted. Below is the edited transcript of interview. Also watch the accompanying video. Q: What is your sense if this were to indeed happen would all the three stocks mentioned above would be beneficiaries? Which one would you pick? A: If FDI in aviation by foreign airline company is allowed it will be a big relief for all the players, in particular debt laden companies. It will give them one more option to strengthen their balance sheet and their operational parameters of businesses. One must keep in mind that it will be a long drawn process and there will be issue related to valuation looking at the historical profitability or regulatory overhang on this sector. But the potential buyers who will try to come and capture Indian space because we are one of fastest growing country in the world. If you look at the February number we are the second fastest with 13.2% growth rate and again the penetration level is very low. We are talking of 4 times growth from current market in next 7-10 years. That is very encouraging for the foreign players to come and take exposure to Indian market. Q: For a stock investor looking at all these three stocks what would you advice, which one should he place his bets on? A: I will place bet on SpiceJet because of light balance sheet and the company is growing at a very fast and promoters are putting in money and strengthening the balance sheet. If you look at the valuations in terms of PB/sales it is trading at almost one times which is almost lowest as historical bottoms. Compared to other companies with high debt burden and market share SpiceJet is a good bet to put in money. Q: Kingfisher Airlines is the one which needs the money so do you expect if FDI is allowed foreign carriers to pickup stake in Kingfisher Airlines, how would you map the stock performance of that? A: The company is in very much need, but the company which is going to put in money for Kingfisher will look at the profitability and the overall competitive scenario. Otherwise it will be recurring phenomena where company will always require more and more cash. It will be very challenging for the company to raise more money at this level unless and until there is clear debt restructuring for the company.