Tatas,lookingtoboard Jet, begin due diligence Jet remains off course, posts third consecutive quarterly loss

STAKE SALE Chairman Naresh Goyal may give up control; Tata Sons CFO Saurabh Agarwal is leading the discussions

MUMBAI: Tata Group is conducting due diligence of Jet Airways (India) Ltd as the nation’s largest conglomerate explores the purchase of a controlling stake in the cash-strapped airline, two people directly aware of the development said.

Saurabh Agarwal, chief financial officer of Tata Sons Ltd, is leading the discussions while Jet Airways is represented by its chairman Naresh Goyal, the people cited above said, asking not to be named as the talks are private.

“An in-house team of Tata Sons is currently conducting due diligence on Jet Airways, which is expected to continue for the next few weeks,” said one of the two people cited above.

had reported on October 29 that Goyal had approached potential investors, including the Tata Group, to sell a significant stake in the airline. Tata Group, while showing initial interest, had made the deal contingent on Goyal relinquishing operational control of the company he founded.

“Things have moved at a fast pace since then and Goyal has in principle agreed to cede control to Tatas, subject to fulfilment of certain conditions,” said the second person.

“Such a condition includes how much premium the Tata group is willing to pay for Goyal to give up control and whether he (Goyal) will continue in some capacity if the talks are successful,” said the second person.

Spokespeople for both Jet Airways and Tata Sons declined Market share of domestic airlines (in %) Indigo Jet Airways Airasia Vistara Spicejet Air India Go Air Trujet requests for comment.

Jet Airways has said in the past that it is open to infusion of funds from external sources. Fresh funds could result in a change in the airline’s shareholding structure, where Goyal owns a controlling 51%, had reported on October 10, citing people aware of the matter.

“Tatas are also keen to acquire Jet’s stake in Jet Privilege,” the first person added. Jet Privilege is the airline’s loyalty programme.

had reported on October 10 that potential investors eyeing a stake in Jet Privilege—private equity (PE) giants Blackstone Group LP and TPG Capital— started having second thoughts due to worries over the airline’s financial health. The loyalty programme’s valuations are dependent on the airline’s well- Jet Lite being. Both PE firms have offered indicative term sheets valuing Jet Privilege at close to $900 million in their initial bids, while Goyal was reportedly seeking a valuation of over a billion dollars.

Tata Group already has a presence in aviation through budget airline Airasia India Pvt. Ltd and full-service carrier Vistara—a joint venture with Singapore Airlines Ltd.

Acquisition of Jet Airways will grow its combined market share about threefold to 24% from 8.2% as of end-september. Indigo, India’s largest domestic operator, had a market share of 43.2% as of end-september.

Jet Airways on Monday posted a loss of ₹1,297.46 crore in the three months ended September 30. It was the third consecutive quarterly loss for the airline. MUMBAI: Jet Airways (India) Ltd posted a worse-than-expected net loss for the third consecutive quarter mainly because of higher fuel costs and foreign currency losses. The airline said however that it is on course to save more than ₹2,000 crore in costs over the next two years as part of its strategy to achieve a financial turnaround.

Mumbai-based Jet Airways plunged to a net loss of ₹1,297.46 crore in the three months ended September 30, excluding its units. It had a net profit of ₹49.63 crore in the same period a year earlier.

Jet Airways had announced a plan to turnaround its financial fortunes after it posted a loss of ₹1,323 crore in the June quarter. It has saved more than ₹500 crore during March-august 2018, the airline said in a press release.

“At the strategic level, the company remains committed and is on track to realise most of the outcomes that were outlined as part of its turnaround strategy last quarter, including cost savings in excess of ₹2,000 crore over the next two years via strategic initiatives in the areas of sub-fleet simplification, reduction of maintenance, as well as selling and distribution expenses, renegotiation of contracts, together with a more productive resource deployment geared to enhance profit and revenue,” it added.