Jet Airways’ plans to sell 24 percent stake to the Gulf carrier Etihad Airways for Rs 2,042-crore faced fresh troubles as the key government department which clears foreign investment proposals put on hold its decision to on the deal, citing lack of clarity on control and ownership of the Naresh Goyal run airline.
"The Jet-Etihad proposal has been deferred. We need more details on effective control and ownership," economic affairs secretary Arvind Mayaram, who heads the Foreign Investment Promotion Board," told reporters after a meeting here. The deal was struck on April 24, ending months of speculation, making it the first FDI deal in the aviation sector after the government allowed direct foreign capital into the sector last September.
Market regulator Sebi and competition watchdog CCI have already sought clarifications from the premier private carrier on the transaction, to ensure that Etihad's ownership powers in Jet remains in line with its 24 percent stake in the company's equity capital. Asked about the development, aviation minister Ajit Singh said Sebi has raised some concerns and asked both the airlines to "rectify some parts of the pact." "I don't see any major problem for the deal," Singh said.
When contacted, Jet sources said they have already submitted the necessary clarifications to Sebi Once the FIPB clears it, the matter would be sent to the Cabinet Committee on Economic Affairs for approval. All deals over Rs 1,200 crore have to be approved by the CCEA. Jet shares closed at Rs 469.20, up 8.47 percent on the BSE, ahead of the FIPB meet.
The deal is the largest foreign investment proposal in the aviation sector after the government allowed foreign carriers to pick up stake in domestic airlines last September. In March, the FIPB had cleared Rs 81 crore investment proposal of AirAsia to set up a JV airline company, AirAsia India, with Tata Sons and another partner. The proposal taken up by the FIPB and deferred today was to permit the preferential allotment of 27,263,372 equity shares of Jet, with the face value of Rs ten each, to Etihad.
On the issues on which Sebi had sought clarifications from Jet, the airline sources said they had "reworked" the share purchase agreement and the Articles of Association of the company to ensure that effective control of the company was not transferred to Etihad. They also said Jet chairman Naresh Goyal was an Indian citizen residing outside India, while its board would be dominated by the Indian owners who would have complete control over the airline management.
Under the Jet-Etihad deal, after the transactions are cleared by the regulatory authorities, Goyal will directly own 51 percent in the airline while Etihad will own 24 percent. The FDI policy for civil aviation, which was revised in September last year, allows foreign airlines and foreign institutional investors to invest up to 49 percent in a domestic airline. NRIs are already allowed 100 per cent investment. Ahead of the FIPB meet, Jet yesterday named Australian aviation veteran Gary Kenneth Toomey as its new CEO in place of Nikos Kardassis, who had resigned on May 31.
