Rush to cash in on Jet’s soaring market

MUMBAI - Jet Airways' initial public offer of at least US$375 million ($518 million) was fully sold within minutes of opening on Friday, as investors rushed to the first Indian airline issue in a decade on hopes of robust travel growth, bankers said.

The initial public offer (IPO) for 17.27 million shares, or 20 per cent of the expanded equity, generated demand for 73 million shares at the end of the first day, they said.

The entire issue was sold 10 minutes after opening and bankers said most institutional bids came near the upper end of the offered range of 950 to 1125 rupees ($29.93 to $35.44).

"The sector is poised for growth," said Suhas Naik, director of equity markets at ING Vysya Mutual Fund, which manages 14.42 billion rupees in stocks and bonds.

"For investors looking at the India story, Jet is a perfect launching pad," said Naik, whose fund is bidding for the offer.

At the top end, Jet would be valued at about 97 billion rupees, and the IPO is expected to raise between 16.4 billion and 19.4 billion rupees.

"Buoyant economic growth, increasing leisure travel and changing demographics and habits are propelling fast growth in domestic air travel," CLSA Emerging Markets said in a report released this week.

"Jet is best positioned to exploit the opportunities given its high service standards, brand equity and track record."

Founded by London-based Naresh Goyal, a former travel agent, the company has grown rapidly since it began operations in 1993. It overtook state-owned Indian Airlines which for decades was a monopoly provider of domestic air services.

CLSA expects Jet's earnings to expand at a compounded average growth rate of 18 per cent between the 2005 and 2007 financial years, with 26 per cent growth forecast in the year to March 2006.

At 950 rupees, the stock is valued at 21.5 times estimated earnings in the 2005 financial year, while peers in the region such as Cathay Pacific Airways trade at about 11 times, according to Reuters Estimates.

"Investors are bidding higher for Jet as it is operating in an expanding market, unlike regional peers, which are in a saturated market," Naik said.

Domestic competitors include unlisted Air Sahara and Air Deccan. Royal Airways will launch services in May.

Strong demand for Jet's IPO drove Royal shares about 5 per cent higher to 57.30 rupees on Friday, while mid-size Taneja Aerospace and Aviation, a maker of light transport aircraft, jumped by a similar margin to end at 32.35 rupees.

The Jet Airways IPO is the first in a series of share offers scheduled by Indian companies this year as they respond to the country's rapidly-growing economy.

- REUTERS