Change in Jet Airways ownership as Tail Winds transfers shares to Naresh Goyal

Sebi, CCI seek clarifications on Jet-Etihad deal

Jet Airways has kickstarted the process for change in ownership structure of the airline. On Thursday, Tail Winds Ltd which controls 79.99% in the airline sold 2.51 crore shares to company chairman Naresh Goyal at Rs 570 per share in a deal valuing Rs 1433 crore.

Tail Winds which is 100% owned by Goyal is registered in Isle of Man and holds 6.90 crore shares in Jet Airways. As per the plans Tail Winds entire share holding will be transferred to Goyal and a few more transactions could take place to complete the process.

The change of ownership has been necessitated ahead of Etihad Airway';s investment in Jet Airways. Tail Winds is categorised as foreign entity and the government rules do not allow foreign holding in an airline beyond 49%. Etihad has agreed to pick up 24% stake in Jet Airways in a deal valuing around Rs 2060 crore.

On Friday, Jet Airways seek share holder approval for sale of preference shares to Etihad and incorporating new articles of association in an extra ordinary general body meeting. Proxy advisory companies like SES have asked share holders to oppose the move as it empowers Etihad to have a say in critical matters such as appointment of auditors, appointment of vice-chairman and removal of directors.

Meanwhile the Etihad's stake purchase in Jet Airways has hit a regulatory air pocket, as regulators are seeking more clarity on the deal to ensure overall competition in the aviation market is not affected and interests of public shareholders and consumers are protected.

Separate clarifications have been sought on the deal by capital markets regulator Sebi (Securities and Exchange Board of India) and fair trade watchdog CCI (Competition Commission of India).

While the queries raised by the two regulators are different, both of them are concerned about certain contours of the transaction that indicate a larger control of Etihad in Naresh Goyal-led Indian carrier despite the purchase of only 24% stake, sources said.

In the revamped Jet Airways board Jet will have four board members while Etihad will get three seats. There will be seven independent directors. According to media reports Sebi's query pertained to whether Etihad enjoyed joint control in the airline functioning and whether it have a significant influence in its functioning.

Queries sent to Jet Airways remained unanswered on the clarifications raised by the two regulators including whether the company would be open to making changes in the deal to address the issues raised by Sebi and CCI.

An official  in civil aviation ministry said that the two airlines will have to respond to queries raised by Sebi.

"It is Sebi's mandate to check whether the share purchase conforms to its guidelines. In case it does not the parties may have to agreement. "The government's FDI norms require that 2/3rd of board members are Indian nationals. It does not say who has nominated the director.''