GROUP 1

• Asmit Keetey 1(valuations and post merger part)• Prateeksha Bhosale 5(introduction and information of both the companies)• Tejas Durugkar 10 (Key financials {Key ratios, balance sheet, income statement, cash flow statement}, Motivation for acquisition)• Riyam Jain 18(valuations and post merger part)

Before Acquisition of Air Sahara by Jet Airways Was Second largest aviation industry of the world 7 per cent increase in the number of flights into

and out of India Estimated By 2010 - India's fleet strength will

stand at 500-550. the domestic market size will cross 60 million and international traffic 20 million

Incorporated as an "air taxi“ operator on 1 April 1992

Started commercial airline operations on 5 May 1993 with a fleet of 4 Boeing 737-300 aircraft

Global Sales of Rupees 5387 crores Largest private domestic player with a market

share of 25%. Operates around 330 flights in over 60

destinations, both national and international.

• The airline was established on 20 September 1991

• Began operations on 3 December 1993 with two Boeing 737-200 aircraft as Sahara Airlines

• Global Sales of Rupees 1290 crores.• Second largest Private player in the aviation

industry with a market share of around 6%.• It flies 115 flights on a network of 20

destinations, operating a dozen Boeing 737 airliners and seven regional jets.

Key Benefits for Jet from the acquisition• Dominance of parking bays and airport

infrastructure• Analysts estimate that a cost saving of Rs. 150

crore -200 crore is achievable• Jet will now be the only private Indian carrier to fly

international with no competition • If Jet can bring Sahara up to its own standards and

charge its own fares, there is a revenue upside• A dominant market share of about 29 per cent. Jet

can increase its capacity without expanding supply.

• A perfect strategic fit to Jet’s scheme of things in the years to come

• Increased prime time departures and frequencies through a subsidiary

• Obtain access to skilled personnel such as Pilots and Engineers, categories of which there presently was a significant shortage in India

• Unit cost savings and improved levels of productivity due economies of scale and common utilization of facilities and resources

Key benefits of Sahara from the Merger Huge long-term and short-term

liabilities Mismanagement of the airline Needed money to pay off the debts Exit the Aviation Industry in favour of

lucrative Real Estate Industry

The entire business of Air Sahara was valued at 2300 crore by Jet Airways. The merger was proposed to acquire only assets of Sahara and not its liabilities.

Post this Jet faced losses of around 100 crores within few months of operations and sought for revaluation. Sahara did not concur with the revaluation clause and launched an appeal against Jet.

Jet on the other hand was stuck with the 500 crores it had paid as a refundable deposit towards the merger. However Jet managed to win the case since the deal was not final due to regulatory concerns.

Since the first valuation of 2300 crores, Jet had lost 35% of the market capitalization and hence the second valuation was done at 1450 crores.

Rupees in Crores

276,115,409. Shares of Jet Lite (India) Limited (Erstwhile Sahara Airlines Limited)

[Out of above, 276,115,403 shares have been pledged with

IDFC Ltd as security for Term Loan of Rs. 40,120 lac

granted by them to Jet Lite (India) Ltd]

1125

Fully Paid Preference Shares of Rs. 10/- each - Non-cummulative

fully convertible:340,000,000

340

At the same time Air Sahara got a beating on its valuation due to failure of the deal. So it proposed new negotiations at revised valuations.

Finally the deal came through and Jet paid 400 crores upfront in addition to the 500 crores it had already deposited ad advance. The balance amount of 550 crores was to be paid four interest free annual equal instalments.

Hence Sahara became a 100% subsidiary of the company. From 15th May 2007, Sahara Airlines was renamed as JetLite. This merger led to Jet airways enjoying a 29% market share.

Phase 1 of Operational integration› aircrafts of Sahara were brought into service› approximately 200 crores were spent on fleet

refurbishment› Bulky insurance policies were removed

Phase 2 Operational integration› reduce maintenance costs of a different aircraft› loss making flights were discontinued.› training programmes were implemented for Sahara

employees

In 2008-09› all airlines slid deep into red with the combined losses

of industry being Rs 48 billion› Jet Airlines began to make profit only in early 2009› emerged as the largest player in the domestic airline

market› 53% increase in domestic passengers› combined market share was 26.5%› exits the aviation market to concentrate on its lucrative

real estate market

Deal helped Jet Airways consolidate their position in the market

Got opportunity to gain entry into the low cost segment through JetLite

benefited Sahara› By doing away with its liabilities› exits the aviation market to concentrate on its

lucrative real estate market

Jet Airways

2004-05 2005-06 2006-07 2007-08 2008-09

Operating Profit

Margin

33.2% 24.8% 14.7% 8.6% 5.2%

Gross Operating

Margin

24% 19.8% 6.6% 4.1% -6.4%

Net Profit Margin

9% 7.9% 0.4% -2.9% -3.5%

ROCE 31.6% 21.2% 13.8% 6.3% 4%

RONW 22.4% 21.1% 1.3% -13.7% -31.1%

Debt-Equity Ratio

1.7 2.3 2.9 6.5 12.6

EPS 45.4 52.4 3.2 -29.3 -46.6

PE 27.6 18.5 195.8 -17.7 -3.3

Strategic decision taken by both the parties Sahara was perfect acquisition in theory as it

already operated international flights and had parking bays

Overall Jet Airways has been able to post positive operating margins post merger

But parameters like EPS, PE etc are negative Hence it has not created enough shareholder

wealth post merger

http://www.jetairways.com/EN/IN/InvestorRelations/financials.aspx

http://www.rediff.com/money/2006/jan/19jet.htm

http://articles.economictimes.indiatimes.com/2007-04-12/news/28415041_1_jet-airways-sahara-airlines-air-sahara

http://www.slideshare.net/vikzara/jet-sahara-merger-16529656