Beware Of Buying Jet Airways As Shares Will Likely Be Suspended

Jet Airways Ltd. shares hit their lower circuit of 5% today, and the stock has corrected 40% year-to-date, but that doesn't mean a buying opportunity. Investors should be cautious of buying shares of the grounded airline as they are likely to be suspended by the national bourses soon.

The Supreme Court on Thursday ordered the admission of Jet Airways into liquidation and ordered the Mumbai bench of the National Company Law Tribunal to appoint a liquidator for the process. "This litigation has been an eye opener," the top court said while pronouncing its verdict.

The shares of the airline fell as much as 5.01% to Rs 37.7 after the top court pronounced its verdict. This compares to a 1.08% decline in the benchmark Nifty 50 as of 2:20 p.m.

The stock of the airline has fallen 37% during the last 12 months and has declined by 40% on a year-to-date basis. Total traded volume on the stock surged to 7.1 times its 30-day average, as sellers rushed to offload their holding after Supreme Court's liquidation verdict. The relative strength index for the counter was at 32, only two points ahead of the oversold territory.

The price to earnings of Jet Airways stood at -0.58 times while its peers Interglobe Aviation Ltd. and Spice Jet Ltd. had a P/E ratio of 23.32 times and -10.54 times, respectively. A negative P/E ratio, indicates that the company has negative earnings, but it may not always indicate that the company is a bad investment.

The Supreme Court verdict to liquidate Jet Airways will likely result in the airline's shares being suspended in the BSE and the National Stock Exchange. Jet Airways went into insolvency after facing a severe funding crunch in 2019.