Jet shareholders approve stake sale to Etihad

Etihad's investment is the first by an overseas operator in an Indian airline since ownership rules were relaxed

Jet Airways shareholders today approved the sale of 24 per cent equity to Etihad Airways. However, the airline management deferred a proposal to amend the company’s articles of association, following protests from shareholders and objections from the Securities and Exchange Board of India (Sebi).

• Etihad deal to improve profits, cut costs: Naresh Goyal

In an offer for sale on May 29 or 30, Jet Airways Chairman Naresh Goyal is set to dilute five per cent of his shareholding. Goyal holds 80 per cent stake in Jet Airways; the dilution is required to conform to Sebi’s minimum public shareholding norm. K G Vishwanath, vice-president (investor relations), Jet, told shareholders as part of the deal, there would be overall cash infusion of $750 million (Rs 4,169 crore), in debt and equity. The infusion would help the airline cut its debt from $2.1 billion (Rs 11,500 crore ) to $1.5 billion (Rs 8,200 crore), he added.

Goyal told shareholders the relaxation in foreign direct investment (FDI) norms was a game-changer and the alliance with Etihad would enable Jet to increase its network, reduce costs, improve profit and grow in a sustainable manner.

The resolution to amend the articles of association, put on hold by the Jet management, gives Etihad a say in matters such as appointment of vice-chairman, auditors, etc, despite the foreign carrier being classified as a public shareholder. A particular clause in the amendment, which stated the quorum of meetings would include a member each from Jet and Etihad, was also disputed.

• Etihad's premium play

At the extraordinary general body meeting today, a few shareholders voiced concerns and said the new articles of association were discriminatory to ordinary shareholders, adding the amendment was at Etihad’s behest. “It indicates Etihad is in joint management control and can be treated as a person acting in concert,” a shareholder said.

Vishwanath said the airline hadn’t received any letter from Sebi on the issue, adding it was too early to talk on possible implications. Goyal said the management had taken a prudent stance of deferring the resolution and this would now be taken up after receiving all regulatory clearances.

In the revamped Jet Airways board, the airline would have four members, while Etihad would have three. It would also have seven independent directors.
JET TO SHAREHOLDERS: DEAL BENEFITS

• $750 mn (Rs 4,169 cr) Overall cash infusion, in debt and equity
• $2.1 bn (Rs 11,500 cr) to $1.5 bn (Rs 8,200 cr) Cut in the airline’s debt after cash infusion