SBI chief seeks Sebi's views on Etihad bailout proposal for Jet Airways

SBI Chairman Rajnish Kumar, Sebi's Ajay Tyagi discuss Jet rescue plan besides other issues

State Bank of India (SBI) Chairman Rajnish Kumar on Wednesday had a discussion with Securities and Exchange Board of India (Sebi) chief Ajay Tyagi on Jet Airways’ bailout plan, besides other issues. 

According to Sebi sources, the public sector lender has sought the regulator’s views on the possibility of modifying the regulator’s pricing rule on preferential issue and open offer guidelines.

The move is seen as readying the ground for a possible bailout of Jet by Abu Dhabi-based Etihad Airways. Etihad Airways has offered a resolution plan with certain riders. 

According to the bailout offer, Etihad has proposed to invest in Jet Airways at only Rs 150 per share, much lower than Jet Airways’ current market price of Rs 265. 
 

Further, it has said it will neither pledge its holding in Jet Airways with domestic lenders nor issue any corporate guarantee for any loan restructuring package. 
 

It has sought Jet Chairman Naresh Goyal and his family’s complete exit from management or advisory roles in the Indian carrier. 

Etihad is willing to immediately release $35 million if its conditions are met. While some see the riders as unrealistic, the bailout of the airline has become a national issue with more than 20,000 jobs at stake.

Sebi often provides relaxation in preferential issue pricing and open offer norms when government infusion happens in state-owned companies, particularly banks.
 

Sources said similar relaxations were being sought in the case of Jet Airways in order to give a lifeline to the cash-strapped airline. 

According to Sebi’s takeover code, change in control at a listed company triggers an open offer to purchase an additional 26 per cent stake. Similarly, capital infusion in a listed company has to be done under Sebi’s pricing formula.

SBI had last week said lenders were considering a resolution plan for Jet Airways to ensure its long-term viability.

The public sector lender statement, which came a day after crisis hit the airline, said discussions were “progressing well” with stakeholders on a comprehensive resolution plan, which contemplates equity infusion and consequent changes in its board of directors.

“There are rising concerns over the financial health of Jet Airways, whose shares have also taken a beating at the stock exchanges. We would like to state that lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long-term viability of the company,” SBI had said in a statement. 

“Any such plan would be subject to approval of boards of the lenders and subject to adherence and clearance, if required, from the RBI and/or Sebi (takeover code, ICDR regulations) and Ministry of Civil Aviation and in compliance with all regulatory prescriptions,” the statement had said.