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Jet Airways may cede reins to Etihad, puts Tatas' proposal on back burner

Abu Dhabi-based airline may also bring in an Indian entity to invest in the troubled carrier

Shrimi Choudhary & Arindam Majumder  |  Mumbai/New Delhi 

Jet Airways
Jet promoter Naresh Goyal’s holding may drop to, from the current 51%, though he will remain chairman

Naresh Goyal-run is said to have agreed to give up its controlling stake, paving the way for Abu Dhabi-based Etihad Airways to increase its holding in the troubled Indian airline up to 49 per cent — the maximum permissible limit for a foreign entity.

At present, Etihad owns 24 per cent of Jet Airways, while Goyal holds a 51 per cent stake.

According to sources, founder and chairman Goyal, who has been reluctant to give up control, is now preferring Etihad’s offer to the ones being discussed with Tata Sons and other private equity funds.

“He has agreed to give up control. It was imperative,” said a person privy to the developments. If the deal materialises, Etihad will increase its stake to 49 per cent and, in return, the West Asian carrier will infuse cash through equity and loans.

“Etihad is likely to bring in another Indian entity, which too can invest alongside,” said a source. It is learnt that the airline is in talks with NRI businessman M A Yusuf Ali, the owner of Lulu Group, which owns hypermarket stores and shopping malls. Ali had joined the Air India board as an independent director in 2010. He has also invested in Cochin International Airport and sits on its board.

According to foreign direct investment (FDI) norms, an NRI is allowed to hold a 100 per cent stake in an airline. Ali didn't respond to multiple calls and text messages seeking response on the matter.

The shares of on Wednesday surged over 5 per cent amid reports that Goyal would sell a stake in the company. The stock soared 5.20 per cent to end at Rs 308.80 on the BSE.

The mechanics of the deal are still being discussed but if Etihad were to get in the driver’s seat, it would trigger an open offer, said sources.

Goyal’s holding is likely to drop to around 26 per cent, said a source, but he would continue to remain chairman of the airline. The deal is expected to be concluded in four-six weeks, he added.

To finalise the terms and conditions of this strategic alliance, Jet has involved Hameed Ali, who was instrumental in Etihad picking up a 24 per cent stake in Jet in 2013. Ali has been attending board meetings for the past few months, a source confirmed to Business Standard.


According to civil aviation regulations, a foreign player can buy up to 49 per cent in an Indian airline withcondition that its chairman and at least two-thirds of its directors will be Indian. Further, its substantial ownership and effective control should be vested with Indian nationals.

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This would give Jet rights to nominate at least two directors on the board and the remaining four would be appointed by Etihad.

Meanwhile, Jet has put Tata Sons’ proposed acquisition on the back burner as the terms placed by the conglomerate were not acceptable to Goyal, said a company insider.

A source said Tata Sons had proposed that Goyal retain a stake of less than 10 per cent, and while it was not keen on giving a board seat originally, it agreed to appoint Goyal’s son Nivaan to the board.

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Under Sections 241, 242 and 244 of the Act, which deals with oppression and mismanagement of minority shareholders, a shareholder who holds a minimum 10 per cent share in a company can challenge board decisions taken by the majority shareholders. Ousted Tata Sons chairman Cyrus Mistry had exercised the same power against the Tata group. The matter is pending before the National Company Law Appellate Tribunal.

Tata Sons declined to comment on queries, while a spokesperson said the company would not comment on speculation. Etihad, too, did not respond to Business Standard’s questions.

Jet Airways is struggling to continue operations and has defaulted on salary payments and is renegotiating payments with lessors. According to a senior DGCA official, the aviation regulator is approving the schedule of the carrier on a monthly basis after the airline guarantees availability of fleet. “Jet Airways' schedule has been approved up to December now. We have asked them to provide us with availability of aircraft on a daily basis following which their schedule would be approved further,” said an official.

First Published: Thu, November 29 2018. 01:23 IST