BackFIIs flee as Jet struggles with debt, Q1 financials
Foreign investors cut stake in airline in Jun quarter,tank up on rival IndiGo
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Bengaluru: Foreign institutional investors (FII) sharply reduced their holding in Jet Airways Ltd during the April-June quarter, even as India’s largest full-service carrier struggled to repay debt and deferred its earnings announcement.
Between the end of the March quarter and the June quarter, foreign institutions cut their stake in Jet from 5.23% to 3.81%, a decline of 27.15%, according to the latest shareholding pattern available. At the same time, FIIs raised their holding in low-fare airline Indigo, run by InterGlobe Aviation Ltd.
Mint could not ascertain the reason behind the sell-off in Jet nor identify the investors who sold their stake, as none of them hold more than 1% equity and so do not disclose the holding in the airline.
The FII action mirrors a broader trend of overseas investors trimming their stakes in high-profile companies, which have wrestled with issues ranging from corporate governance to leadership instability. From Infosys Ltd, ICICI Bank Ltd and Manpasand Beverages Ltd to PC Jeweller Ltd, Vakrangee Ltd and now Jet Airways, FIIs have fled each of these companies when controversies surfaced.
During the same period, foreign investors have preferred companies such as Tata Consultancy Services Ltd, HDFC Bank Ltd and Larsen and Toubro Ltd, raising their holding in these companies during the first six months of the calendar year, implying that corporate governance is seen as a hot-button issue for FIIs, according to some proxy advisory firms and analysts.
“One cannot generalize as every foreign investment group will have its own policy on stewardship and investments. But whenever there are issues like these on corporate governance, FIIs look at either intervening, if they have the requisite majority, or exiting," said J.N. Gupta, co-founder of Stakeholder Empowerment Services, a proxy advisory firm.
Since April 2016, Infosys has faced shareholders’ ire over some of the decisions taken by its board, including the earlier management’s decision to buy Israeli automation firm Panaya, and the earlier board’s decision to first pay and then abruptly halt a generous and unexplained severance to its former chief financial officer. From April 2016 until June 2018, FII holding in Infosys has dropped by 13.34%.
Since April, ICICI Bank has faced questions over issues ranging from giving loans to a company run by the spouse of chief executive officer Chanda Kochhar to allegedly inflating profits by at least $1.3 billion over eight years by delaying provisioning for bad loans. FII ownership in ICICI Bank has dropped by 2.49% over the April-June quarter.
Both Manpasand and Vakrangee faced issues of non-disclosure and saw their auditors quit, even as FII holding in them came down by 38.08% and 29.43%, respectively during the June quarter.
PC Jeweller, India’s second-largest jeweller, has seen its own issues, including scrapping a share buyback and an unexplained gift of shares by one promoter to his family members. Overseas investors have cut their holding by 38.85% over the three-month period.
Mumbai-based Jet Airways has been in the eye of a storm over the last three months.
On 3 August, the airline told the exchanges that it was advancing the timing of its results by a day and would declare its first-quarter earnings on 9 August, instead of 10 August. On 9 August, after a three-hour, 40-minute-long board meeting, Jet deferred the announcement of its earnings, saying the audit committee did not approve of the results, “pending closure of certain matters". The next day, Jet, in a response to a stock exchange query, said the reason for deferring the earnings was that the management needed more time to finalize the accounts.
Overseas investors are sceptical of Indian equities, as till date this year, FIIs were net sellers of Indian shares worth $200.05 million. Still, overseas investors have continued to retain and have, in some cases, even raised their ownership in companies perceived as being run without any uncertainty.
Jet Airways is still to disclose when it will declare its April-June quarter earnings.
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