Jet shares rise on hopes of new own­er­ship

The Times of India (New Delhi edition) - - FRONT PAGE - Sau­rabh Sinha & Partha Sinha

New Delhi/Mum­bai: Shares of Jet Air­ways ral­lied over 17% in Mon­day’s rel­a­tively weak mar­ket on ex­pec­ta­tions that the strug­gling air­line will soon get an in­fu­sion of badly re­quired funds.

Sources in the know say tri­lat­eral talks are in the fi­nal stages be­tween Eti­had, Jet and a con­sor­tium of lender banks which would re­sult in a change of own­er­ship. “A res­o­lu­tion is ex­pected un­der which there will be a com­plete re­vamp of Jet. There will be a lot of changes (in the air­line) if this deal goes through,” said a source. Un­der for­eign in­vest­ment rules for In­dian air­lines, sub­stan­tial own­er­ship and ef­fec­tive con­trol must be In­dian.

Un­der for­eign in­vest­ment rules for In­dian air­lines, sub­stan­tial own­er­ship and ef­fec­tive con­trol must be In­dian. Which means, at least 51% must be with an In­dian group or a con­sor­tium of In­dian share­hold­ers. Eti­had is learnt to have agreed to hike its stake from cur­rent 24% and bring in ad­di­tional funds into the air­line in the form of soft loans.

“As per cur­rent rules, Eti­had can have up to 49% stake in Jet if the bal­ance 51% is col­lec­tively held by In­dian share­hold­ers. In Jet’s case this is a bit com­pli­cated as Eti­had al­ready holds 24% stake and the pub­lic has 25% stake with pro­mot­ers Naresh Goyal and wife Anita hav­ing 51% stake,” said a per­son in the know. For the Eti­had deal to go through, Jet will need In­dian in­vestors to hold 51% stake. Goyal had ap­proached NRI bil­lion­aire M A Yus­u­falli for pick­ing up a stake in the air­line so that the two to­gether can have the ma­jor­ity stake as Eti­had raised its stake.

Also, an open of­fer will be needed for Eti­had to raise its stake be­yond 25%. “Fresh shares will need to be is­sued to main­tain the own­er­ship struc­ture un­der SOEC norms where af­ter the fresh is­sue and open of­fer, the In­dian stake­holder/s have min­i­mum 51%. And the pub­lic (who choose to re­tain Jet shares af­ter Eti­had’s open of­fer) and Eti­had hav­ing the rest,” said the source.

On BSE, Jet Air­ways opened at nearly flat at Rs 255 but in late ses­sion ral­lied strongly to a high at Rs 297 and closed slightly off the in­tra-day high at Rs 294, up 16.1% on the day. The com­bined vol­ume of trade in Jet Air­ways stock on BSE and NSE was nearly four crore shares.

On the is­sue of rais­ing stake in Jet, Eti­had said it “does not com­ment on ru­mour or spec­u­la­tion.” Jet did not com­ment on how much stake will Naresh Goyal re­tain and if he will step down as chair­man. “As of now, we can’t com­ment but things will be clear in a few days, maybe this week it­self,” said an air­line of­fi­cial.

“The SOEC clause does not say there has to be one In­dian owner with 51% and that the for­eign air­line should not be the sin­gle largest stake­holder. The ma­jor­ity stake can be with a group of In­dian en­ti­ties and/or in­di­vid­u­als,” said the source. For ex­am­ple when AirAsia In­dia started about four years ago, Malaysia AirAsia Bhd had 49% in the JV, Tata Sons had 41% and Arun Bha­tia of Te­lestra Trade­place had the re­main­ing 10%. Later, Tata Sons raised their stake to 51% with AirAsia hav­ing 49%

Amid all the un­cer­tainty, what is how­ever al­most cer­tain is that Jet will need a dras­tic change in own­er­ship to sur­vive.

T

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