Exchanges seek clarification from grounded airline on abnormal stock movement
Jet’s stock has been in free fall all the way to ₹28 from ₹165 on 18 April when it halted operations
Shares of Jet Airways (India) Ltd surged 133% on Thursday, their sharpest intra-day gain ever, before finally closing 93.35% up at ₹64 a share. The abnormal price movement, on a day Jet was admitted for bankruptcy proceedings, prompted stock exchanges to seek clarification from the grounded airline.
While a response from Jet is awaited, analysts attributed the surge to short covering by investors in the derivatives segment.
“The stock has gained due to huge short covering today," said Chandan Taparia, derivative and technical analyst at Motilal Oswal Securities Ltd.
“The stock has been in free fall all the way to ₹28 from ₹165 on 18 April when Jet halted operations. So, investors were continuously adding short positions. However, with Jet going to NCLT (National Company Law Tribunal), investors are reducing position with a view that there may be a possibility of a revival," he added.
On Thursday, trading volumes of Jet were more than five times the average. The company’s traded shares volume was 9.69 crore on the NSE— much higher than the average of 1.5 crore daily trading volume in the last eight-nine days.
The Mumbai bench of the NCLT admitted Jet Airways on Thursday for bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC).
The court, presided over by V.P. Singh and Ravikumar Duraisamy, also approved an insolvency resolution professional (IRP) to oversee the insolvency proceedings.
The tribunal, which will hear the case next on 5 July, ordered the IRP to complete the IBC process in three months, even though the law allows six months, saying “the matter is of national importance".
It also asked the IRP to submit a report every 15 days. The IRP will also immediately take over all the assets of Jet Airways, including planes and other physical assets, and, along with the committee of creditors (CoC) will try and find a resolution to revive the company in 90 days. If a resolution is not found in stipulated time, the airline is expected to head for liquidation.
Cyril Amarchand Mangaldas’ Animesh Bisht, the counsel for SBI, told reporters that as on 15 June, Jet had total loan defaults worth ₹469 crore to SBI. While, Jet’s total debt to banks is ₹8,700 crore, it owes another ₹10,000 crore to operational creditors and ₹4,000 crore in salaries and statutory dues. The airline has 14 planes in its fleet as on date. All creditors are now expected to submit their claims to the RP.
On Thursday, Rajnish Kumar, chairman, State Bank of India, speaking to shareholders at the bank’s 64th annual general meeting justified the move to refer the airline to the NCLT, saying lenders had exhausted all options. Earlier, several shareholders raised concerns on the resolution process of the airline and asked why it was referred to the NCLT despite lenders’ efforts to settle it outside the tribunal.