Jet Airways founder Naresh Goyal, who was forced to step down as chairman recently, has pulled out of the race to regain control of the airline. His consortium partner Future Trends Capital has also withdrawn from the process, it is learnt. Goyal was among the five entities to have submitted an expression of interest (EoI) to buy up to a 75 per cent stake in Jet as part of a lenders-led resolution plan to rescue the airline from going under.
While the cash-starved airline hasn’t shut down operations yet, CEO Vinay Dube on Tuesday sought Rs 400 crore from the lenders immediately, warning that any delay in funding would ground the airline. Initially, the lenders’ consortium, led by State Bank of India, had committed Rs 1,500-crore in emergency funding to Jet, and then the figure was lowered to Rs 1,000 crore. Due to lack of consensus among the lenders, emergency funding has been negligible so far and it has come in very small tranches.
The lenders, sources said, were watching the developments on the bidders’ side before deciding whether they were throwing good money after bad or not. Also, in a chicken and egg situation, potential bidders were believed to be tracking whether the lenders were willing to infuse funds into Jet or not, before submitting their binding bids. For instance, Delaware-based Future Trends Capital Chairman Lalit Kumar informed SBI Caps, the banker for the bidding process, that the situation had changed over the last three days as the company had been unable to receive funds from the banks, sources in the know said.
“Kumar also said the time was too short to submit all necessary documents to qualify as a bidder. Without a partner, Naresh Goyal will not be eligible to participate in the bidding process as he doesn’t qualify the net worth criteria,” said a senior banking executive aware of the development. Future Trend Capital had tied up with Naresh Goyal-owned JetAir to bid for the airline.
Sources said Delaware was ready to invest $500 million and hence partnered Goyal, who was allowed to bid by the lenders.
There are only four bidders qualified to submit the bid. “Etihad Airways, TPG Capital, government-owned sovereign fund NIIF, and Indigo Partners have qualified to participate in the bidding process. The bid documents will be out by tomorrow,” the executive said.
In a board meeting held by Jet Airways on Tuesday morning, the management is said to have indicated that banks are still divided on the interim funding issue. In the absence of interim funding, the board felt that the airline has no option but to halt operations. “The management sought permission from the board to shut down operations. However, the board asked Dube to make a final attempt to convince the banks for releasing Rs 400 crore,” an executive of Jet Airways said.
In a late night communication to the staff on Tuesday, Dube said the company has stressed upon State Bank of India (SBI) for urgent funding requirements.
“In the said communication to lenders we have highlighted how operations will be impacted should the funding not come,” Dube wrote. Jet Airways executives said that the lenders should have brought Goyal and Etihad on the same table to avoid this scenario. “Etihad is dragging feet on investment but no question is asked to them.Banks should have brought Goyal and Etihad together. They were talking to both sides separately. The two sides never came face to face,” an executive said. An official of a public sector bank, however, said the lenders had still not agreed to the demand and a nominal funding of around Rs 20-25 crore was likely to be given to keep the operations running. “Even if the airline is grounded, there will be no impact in the bidding process as it is almost shut now,” the official said.
The airline, due to paucity of funding, has been unable to pay to its lessors and oil companies for the last three months. Even salaries to its employees have been on hold. Pilots joining rival airlines however said they were mulling to take the company to insolvency court due to non-payment of salary. “Employee salary are non-negotiable. Funding has to include component for salaries too. The union is exploring the option of taking the company to the NCLT,” said Parikshit Joshi, member of the managing committee of the National Aviators Guild.