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How much is Sahara really worth?

How much is Sahara really worth?
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First Published: Thu, Apr 12 2007. 10 45 PM IST
Updated: Thu, Apr 12 2007. 10 45 PM IST
Mumbai: How much is Air Sahara actually worth? Its new owner Jet Airways values the Lucknow-based carrier with a net present value of nearly “Rs1,200 crore at the current interest rate”.
On the other hand, Sahara Group asserts that the enterprise value of its carrier is ”close to Rs 2,000 crore”.
With the exact financial details of the takeover deal not being made public, it was a field day for speculators who love to indulge in different number crunching games.
As per Jet’s communique to the BSE, all shares of Air Sahara will be transferred to Jet for Rs 1,450 crore inclusive of the Rs 500 crore, which Jet has already paid last year.
Jet will pay Rs 400 crore on or before April 20 and another Rs 550 crore in four interest free annual equal instalments starting March 2008.
”It is a good deal which will help us...the deal is 40 per cent cheaper than the one (Rs 2,300 crore deal) signed last year,” Jet Chairman Naresh Goyal said. If the deal is 40 per cent cheaper than the earlier value of Rs 2,300, then Air Sahara is worth just Rs 1,380 crore!
Yet, Air Sahara has a different view on the valuation. ”The deal is closed at an enterprise value of close to Rs 2,000 crore and some adjustments of about Rs 500-odd crore were made,” Air Sahara President Alok Sharma said.
Sources close to the negotiations of the deal, however, maintained that considering the Rs 680 crore already paid by Jet, the immediate payment of Rs 400 crore, coupled with Rs 150 crore of liabilities, Rs 120 crore for carved out assets, Rs 50 crore of interest and the Rs 550 crore to be paid in four equal instalments, the enterprise value of Air Sahara comes to Rs 1,950 crore.
So how much Air Sahara is worth depends on how and where the calculation is being done.
A Rs1,450-cr deal: Earlier, Jet Airways (India) Ltd agreed to buy Sahara Airlines for Rs1450 crore ($338 million) to stem the erosion of its market share by new low-fare airlines.
Jet submitted its bid in an arbitration court in Mumbai, Harish Salve, the airline’s lawyer, said today. The bid, which was approved by Sahara, ends 10 months of legal disputes between the two airlines arising from a failed Rs2200-crore takeover plan last year.
The takeover gives Jet access to Sahara’s pilots, planes and airport infrastructure in a nation where low-fare carriers may double market share to 70% by 2010. The acquisition may be the best outcome for Jet in the arbitration case, although it may raise the carrier’s debt, Mark Webb, an HSBC Group Plc analyst in Hong Kong, wrote in a report today.
“The primary risk we see is the cost of the acquisition,” wrote Webb, who has an “underweight” rating on the airline’s stock.
Shares of Mumbai-based Jet Airways gained after the announcement. The stock rose as much as 4.6% to Rs 636.75 on the Bombay Stock Exchange. It changed hands at Rs632 at 2:38 p.m. in Mumbai.
Jet will pay Rs400 crore before April 20 and the remainder in equal annual installments from March 2008, Chairman Naresh Goyal told reporters in Mumbai. Jet has already paid 5 billion rupees as part of the failed takeover attempt last year.
Jet will pay the installments without interest, Goyal said. The company will announce more details about the deal on April 16, he said. (Bloomberg)
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First Published: Thu, Apr 12 2007. 10 45 PM IST
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