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Wednesday, April 7, 2010

SpiceJet shares surge on stake sale report

Shares of budget carrier SpiceJet Ltd surged on Tuesday on a report that its promoters were in talks with a Religare group firm to sell stake, and analysts said the stock could rise further if a bidding war were to emerge between interested parties.DNA Money reported on Tuesday that promoters of SpiceJet were in talks with Religare Voyages, a Malvinder Singh-operated air charter and travel business firm to offload stake in the budget airline. The paper cited no sources.

Malvinder Singh, the billionaire chairman of Religare Enterprises Ltd, who stepped down earlier today, declined to comment.“I cannot comment on speculation,” he said.Last week, Indian newspapers said the founder of Sun TV Networks was keen to acquire a 51% stake in the carrier, and that that the Anil Dhirubhai Ambani Group had also shown interest.

SpiceJet director Ajay Singh said on 31 March the airline’s promoters were not interested in selling their stake at current valuations.The reports of a number of interested bidders for the budget airline has led to talks of a bidding war, which analysts say would be positive for the stock price.“If there is a bidding war, then the stock price is expected to move up sharply, we can expect a premium of 20 to 30% from current levels,” said an analyst with a local brokerage who declined to be named.

Meanwhile, $68 million of foreign currency convertible bonds in 2008 held by US investor Wilbur Ross are also due for conversion to equity by December this year, which may give him about 30% stake in Spicejet, the analyst said.

Ross may make an open offer for additional stake under Indian takeover rules after the conversion, he added.SpiceJet has been looking to raise up to $75 million in the current fiscal to power its growth, SpiceJet CEO Sanjay Aggarwal had told Reuters in February.Aggarwal did not respond to calls from Reuters seeking comment on the recent media reports.

SpiceJet, which is looking to open up its flights to the Middle East and south-east Asia has also benefited from improving load factors and better yields.It had reported a net profit of Rs1.08 billion versus a net loss of Rs179.64 million for Oct-Dec.Shares of SpiceJet, valued at $325.7 million, rose 10.44% on Tuesday. It closed up 7.29% at Rs61.1.Its shares have stayed almost flat so far this year.

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