Naresh Goyal may hold 57% in Jet Airways after Etihad deal

At present Goyal holds 80% in the airline of which 79.9% is held by Isle of Man registered Tail Winds Ltd

Jet Airways (India) Ltd chairman Naresh Goyal will hold a 57 per cent stake in the airline after the preferential allotment to Etihad Airways, company sources said on Tuesday. This structure, however, hinges on the Securities and Exchange Board of India (Sebi) accepting  Etihad as a non-promoter public share holder in the airline.

At present, Goyal holds 80 per cent in the airline of which 79.9 percent is held by Isle of Man-registered Tail Winds Ltd. In order to comply with Sebi's 25 per cent public shareholding norm, Goyal will sell five per cent from the Tail Winds stake through an offer for sale (OFS), enabling the airline to issue preferential shares to Etihad. The balance promoter shareholding will be transferred from Tail Winds to Goyal.

The OFS to dilute five per cent will be held in the last week of May and shares will be sold at the then prevailing price. According to the alliance agreement signed last week, Jet will issue 2.7 million shares to Etihad at Rs 754.73 each and Etihad's total equity in the airline would be over Rs 2,054 crore.

In the expanded share capital of the company, Goyal will own 57 per cent, while Etihad will have 24 per cent. The balance will be held by other public shareholders. Jet will present its case to Sebi and is confident of securing regulatory approval for the transaction. However, in case the stock market regulator rejects Etihad's categorisation as a public share holder, Goyal will dilute another six per cent bringing down his ownership to 51 per cent and this will increase  the public ownership to 25 per cent.

SES, a proxy advisory firm,  has in its report said the nature of  Etihad's investment in the airline will result in Etihad and Jet being treated as persons acting in concert as per the  Sebi norms. This  would trigger an open offer and since no announcement of open offer was made, Jet has violated the takeover norms.

Jet, however, said there was no violation of the rules. According to an official: "Etihad is a minority stake holder and will have three members on a 14-member board. The promoters (Goyal) will have four members on the board and there would be seven independent directors. So, there will be no control by Etihad. The investment does not confer any special privileges or voting rights to Etihad. We feel Etihad cannot be treated as a person acting in concert and hence there is no question of an open offer.''

The equity infusion 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.

The airline has also secured additional working capital limit of about Rs 1,100 crore and is negotiating with banks for an additional Rs 400 crore fund and non-fund limit. "We are current on our payments with banks, lessors and also on salary payments,'' the official said. "Operationally we are making money and there is no stress.''