Aviation stocks rally on CCEA meet clearing FDI in airlines

September 14th, 2012 - 4:33 pm ICT by IANS  

Pranab Mukherjee New Delhi, Sep 14 (IANS) Aviation stocks rallied Friday as the cabinet committee on economic affairs (CCEA) is set to take up a proposal to allowing foreign airlines to invest up to 49 percent in domestic carriers.

Scrips of the three listed airlines - Kingfisher, Jet Airways and SpiceJet - saw good buying as investors expected the government to allow foreign airlines to pump funds into the financially stressed domestic airlines.

The Kingfisher Airlines scrip on the Bombay Stock Exchange (BSE) was up 8.88 percent in late afternoon trade at Rs.10.91 a share. The scrip touched a high of Rs.11.40.

Kingfisher promoter Vijay Mallya is betting on the FDI clearance to bail out his cash-strapped carrier.

“I am an avid supporter of FDI. I don’t see any reason why FDI from strategic partners like an airline should be banned or not permitted. Who would understand an airline better than another airline,” Mallya had said.

Jet Airway’s scrip was also up by 4.57 percent at Rs.377.75. The scrip touched a high of Rs.379.90 in the trade.

Budget carrier SpiceJet saw a 5.14 percent increase and stood at Rs.34.75. The stock climed to a high of Rs.35.80.

FDI in airlines is listed as an additional item for the CCEA’s meeting scheduled for Friday evening. If cleared the directives for the implementation of the policy will be issued within a month.

The FDI proposal has been stuck for quite sometime as no political concusses is reached on the issue. According tp Civil Aviation Minister Ajit Singh, the government this time has consulted all allies and is hopeful of a positive outcome.

All the major financial departments of the government like department of economic affairs, Commerce Ministry and Planning Commission have backed the proposal.

Foreign airlines are currently not allowed to directly invest in Indian carriers for security reasons. However, 49 percent FDI is allowed by non-airline players.

A group of ministers (GoM) headed by then Finance Minister Pranab Mukherjee had agreed Jan 17 to draft a cabinet note proposing a 49 percent cap on FDI by foreign carriers in domestic airlines.

Before that decision, various departments had proposed different investment caps - from 24 percent to 26 percent.

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