Jet to seek Sebi exemption to divest promoter holding

Jet Airways promoter Tailwinds Limited is said to be looking at seeking an exemption from the Securities and Exchange Board of India (SEBI) for divesting equity shares of the company in order to comply with the minimum 25 per cent public floating requirement prior to the proposed preferential allotment of shares to Etihad Airways.

In an application to the Foreign Investment Promotion Board (FIPB), Etihad Airways said, “Tailwinds Limited, an existing promoter of the Company (Jet Airways), will seek an exemption from SEBI for divesting equity shares of the company in the manner approved by SEBI in order to comply with the minimum 25 per cent public floating requirement prior to the proposed preferential allotment of equity shares to the investor (Etihad Airways).”

In the event SEBI does not grant the exemption, Tailwinds will sell five per cent stake through an offer for sale (OFS), enabling the airline to issue preferential shares to Etihad. The remaining promoter shareholding will be transferred from Tail Winds to promoter Naresh Goyal.

A Jet Airways source, however, said the airline has not sought an exemption from SEBI for dilution of promoters' stake to comply with norms . "Why would we seek an exemption in twelve week cool off period if the promoters do not wish to come up with an offer for sale'', said the executive in the airline. SEBI has relaxed the twelve week cool off requirement to enable Jet Airways to carry out of offer for sale.

Etihad Airways will have three members on the Jet Airways Board post the preferential allotment of shares to the foreign airline.

The directors nominated by Etihad Airways include James Hogan (CEO, Etihad Airways), James Rigney (CFO, Etihad Airways) and Harsh Mohan (vice-president, internal audit and risk management, Etihad Airways). Jet Airways will have four directors, there will also be seven independent directors on thje board.

The composition of the board is in contrast to that of Air Asia. According to sources, the joint venture company is likely to have at least six members on its board, comprising two nominees each from AirAsia and Tata Sons and one representative from Telstra Tradeplace.

According to the alliance agreement signed last month, Jet will sell 24 per cent stake to Etihad Airways by issuing 2.76 million shares at Rs 754.73 each. Etihad's total equity in the airline would be around Rs 2,058 crore.

The equity infusion from Etihad will help Jet retire a part of its Rs 11,000-crore debt. Totally, Etihad is committing investment of $ 600 million (about Rs 3,255 crore), which includes the equity investment, purchase of London Heathrow slots and investment in frequent flyer programme. In addition, Etihad is helping Jet source $150 million loan (about Rs 813 crore) through its bankers. The loan will carry an interest rate of a little over three per cent as per prevailing funding norms and this will help it refinance and retire high cost debt. Jet has about $800 million loans (Rs 4,340 crore), which carries interest of about 12 per cent.

CCI looking into the deal

The Competition Commission of India (CCI) today said it was examining the Rs 2,000 crore proposed deal between Jet and Etihad. CCI has received an application seeking approval for the proposed transaction.