India: Promoter Naresh Goyal refuses to cede control of Jet Airways

Photo: Mint

The saga of Jet Airways (India) Ltd continues, with its founder and promoter Naresh Goyal making a financial offer to State Bank of India (SBI) to retain control of the ailing airline, even as its single-largest public shareholder, Etihad Airways PJSC, has sought to oust him in exchange for infusing much-needed funds.

Goyal has told SBI, Jet Airways’ largest lender, that he is ready to invest up to ₹700 crore and pledge all his shares, provided he retains at least a 25% stake in the airline.

“Should this not be possible, I will not be able to infuse any funds or pledge my shares, unless SEBI accords me an exemption permitting me to increase my reduced stake (if it is to be below 25%) without triggering the takeover code,” Goyal said in a 16 January letter to SBI chairman Rajnish Kumar.

A copy of the letter has been reviewed by Mint.

Kumar confirmed the investment offer from Goyal.

“We are working very fast. There are deadlines and it will be finalized very quickly,” Rajnish Kumar told reporters on the sidelines of an event in Mumbai. “Lenders are very clear (about) what needs to be done and there is no disagreement among lenders in their approach.”

Jet Airways has been struggling to run its operations for the past six months amid a cash crunch caused by rising costs and a bruising fare war. On 31 December, the airline defaulted on interest payments to a consortium of lenders led by SBI.

The financial troubles have forced the airline to halt deliveries of Boeing Co. 737 Max planes and delay salary payments to pilots. Jet Airways, which was scheduled to take delivery of 11 737 Max planes by March, has so far received five planes.

According to analysts, Jet Airways needs to raise at least $250-300 million immediately to clear its dues to lenders and vendors. The airline would need to raise another $450-500 million by the end of 2020 when some of its overseas debt mature, analysts said earlier.

Etihad Airways chief executive Tony Douglas has informed SBI that it will not exceed its offer of ₹150 per share of Jet Airways for making any fresh investment, according to reports. The Abu Dhabi-based airline has also demanded a complete exit of Goyal and his family from any management or even advisory role at the Mumbai-based airline.

Goyal and his family currently own 51% of Jet Airways. Etihad Airways has a 24% stake.

In the letter to the SBI chairman, Goyal said that under local laws, “amounts payable by the company to promoter group entities, should be treated on par with the other overdue creditors of the company and the same, and upon conversion into equity is considered cash”.

“I respectfully submit that unless my shareholding goes below 10% and/or my group is not represented on the board, I would continue to be held out as a promoter, and be faced with the attendant exposures/ risks of being a promoter—hence, it is only fair and equitable that our shareholding be at least 25%,” Goyal said in the letter.

A spokesperson for Jet Airways did not respond to queries.

A spokesperson for Etihad Airways said the airline “does not comment on rumour or speculation”.

An SBI spokesperson said that the lenders to Jet Airways “are considering a restructuring plan under the RBI (Reserve Bank of India) framework for resolution of stressed assets that would ensure a long-term viability of the company”.

“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 etc.) and/or Ministry of Civil Aviation and in compliance with all regulatory prescriptions,” the spokesperson said in a statement.

A meeting of lenders to Jet Airways on Wednesday to resolve the crisis appeared to be inconclusive, with neither Jet Airways nor Etihad issuing a statement at the end. The discussions contemplated options on the debt-equity mix, proportion of equity infusion by stakeholders and change in the airline’s board in case of a fund infusion.

Mint on Tuesday reported that Etihad might gain effective control of Jet Airways if the lenders approve a resolution plan for the cash-strapped airline. The plan could see Etihad Airways raising its stake from the current 24% and Goyal ceding control of the airline, the report said, citing two people familiar with the ongoing discussions.

“During the last two and half decades at Jet Airways, Naresh Goyal kept a tight grip on the airline that he built from scratch. As a result, Etihad had an uneasy relationship with him even after picking up a 24% stake in the airline,” said a person who had once worked closely with Goyal.

“While Etihad clearly doesn’t want him around if they are to increase their stake and infuse more funds into Jet Airways, Naresh Goyal will not relinquish control at Jet Airways easily,” the person said, requesting anonymity.

On Thursday, Jet Airways shares rose 5.09% to ₹284.80 apiece on the BSE, outperforming a 0.15% gain in the benchmark Sensex.

Shayan Ghosh in Mumbai contributed to this story.

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