“Premium” for “Discount”?!?!

IIPM MANAGEMENT INSTITUTE

Then comes Sahara’s total equity valuation of Rs.14.5 billion (what Jet agreed to pay as fair value for ‘all Sahara shares’ on April 13, 2007), Rs.500 million in interests paid over last year and an added Rs.1.5 billion worth of Sahara’s liabilities absorbed by Jet. Add to all these Sahara’s full-year losses of Rs.4.0 billion, and we have the mighty Naresh shelling anywhere close to a colossal Rs.28.50 billion! Now, did someone confuse the word “premium” for “discount”?!?! Surely, a deal deserving a ‘tip of the hat’ from CEOs who’ve ‘successfully’ led the worst and the most over-valued mergers ever! For what corporate high-flying logic does it make to shell out such a colossal sum for an entity that possesses zero assets (with all 24 aircraft s being leased till just 2010 and which have depreciated over last year)? Surely the answer is clear. As Praveen Vetrivel, Aviation Analyst, International Bureau of Aviation states, “The deal will mark a compromise for Jet... In short, an additional burden that Jet could have done without...”

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative