Mumbai: Jet Airways is planning to raise funds for its low-cost arm, JetLite, via the private equity route. Though the airlines Chairman Naresh Goyal has denied it, sources told CNBC-TV18 that Jet has been talking to private equity players to offload some stake in JetLite to be able to raise money.
The erstwhile Air Sahara is being converted into a low-budget carrier and will be named JetLite in the next few weeks, analysts say. JetLite needs capital infusion of $50 million, sources said. Jet may consider private placement to raise funds.
The talks are still in the initial stages and Jet is considering all options. Goyal denied looking at private placement and said JetLite will be funded by Jet Airways as long as it is a 100 per cent subsidiary of Jet. However, he did say that if it becomes a separate company, they might talk to private equity players.
It is probably Goyal's biggest challenge — to transform high-cost Sahara into low-cost JetLite. Jet requires about $50 million immediately for the relaunch. And, sources say, Jet has been in talks with private equity players like Temasek to invest in its new airline.
And going by the amount that Goyal paid for Sahara, he will have to sell at least 10 per cent stake in JetLite to raise $50 million. But he claims that there is no such plan at the moment.
"There is no discussion betwen us and Temasek for any equity or other investment, but we can talk to them. We have an excellent relationship with Temasek and others," Goyal said.
Jet is currently fueling JetLite; but that cannot go on for long. Soon the airline will need money for its US operations and fleet expansion. But it is not going to be easy for JetLite to find private equity investors.
Experts say while interest in the Indian aviation industry is quite high, the valuations are also very high. That is one reason why Jet could not get private equity money for the parent airline and has now opted for a rights issue. For JetLite too, experts say Goyal will have to temper down his epectations.
Source: Moneycontrol.com
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