Jet Stock Soars 150% On Speculative Trading Before NCLT Admits Insolvency Plea
Jet Airways’ shares closed 90 percent higher on the exchanges, their biggest ever jump since listing in 2005.
Shares of Jet Airways (India) Ltd. saw a sudden spurt in the last hour of trading due to speculation ahead of the National Company Law Tribunal admitting an insolvency case against the cash-strapped carrier.
Jet Airways shares closed 90 percent higher on the bourses—it’s biggest ever gain since listing in 2005. Towards the end of today’s trade, the share price rose up to 150 percent—hitting an intraday high of Rs 82.75 apiece from an all-time low of Rs 27. The scrip finally closed at Rs 62.85 apiece.
Trading volume for the stock was six times the average volume for the last 20 trading sessions. Over nine crore shares changed hands—of which 1.2 crore were traded just in the last 15 minutes.
Still, delivery volumes remained low, suggesting that the stock price movement was highly speculative in the cash segment. Only 3.3 percent of the total shares that were traded today on the National Stock Exchange, will actually be delivered to investors.
Even in the derivatives market, investors scrambled to cover their short positions. Open interest—the number of outstanding contracts—in Jet Airways' futures fell 8 percent, indicating that investors squared off their bets. Outstanding contracts in options declined 13 percent.
Jet Airways will be moved out of the derivatives segment after June 27 and no fresh contracts will be available—something that may explain today's fluctuations. Even in the cash market, from June 28, the stock will be shifted to the trade-to-trade segment where investors will have to compulsorily take delivery and cannot settle their bets intra-day.
The stock has declined 84 percent in the last one year—bulk of the fall coming after it shut operations as lenders failed to find any buyers for airline.
Jet Airways, which owes lenders more than Rs 10,000 crore, had halted operations after failing to pay employees, lessors and lenders. State Bank of India and Punjab National Bank are its largest lenders with close to Rs 2,000 crore in loans.
Left with no other option, the lenders decided to approach the NCLT to initiate bankruptcy proceedings against Jet Airways. The decision to use the Insolvency and Bankruptcy Code to find a resolution for Jet Airways was a consequence of extremely unfavourable terms offered by the Hinduja Group, the only remaining potential investor in the airline.
The Hinduja offer would have meant that the lenders would take a 95 percent haircut on their fund-based exposure to Jet Airways, BloombergQuint had reported.
Lenders, led by State Bank of India, had originally planned to enter into a restructuring deal with Etihad Airways, which owns 24 percent stake in Jet Airways. But that plan fell through due to Etihad’s stringent conditions. A round of bidding for the airline also failed after the Abu Dhabi-based carrier emerged as the only bidder. Etihad offered to maintain its 24 percent stake and left it to the lenders to find a majority investor.
With no access to additional funds, the airline was grounded earlier this year. Since then, it has lost some of its slots at airports across India and has seen its planes being repossessed by lessors. Senior management officials at Jet Airways also resigned over the last few weeks.
