Paving the way for the biggest ever foreign investment in the domestic aviation sector, the Union Cabinet, on Thursday, cleared the Jet Airways’ proposed sale of 24 per cent equity to Abu Dhabi-based Etihad, days after the Rs.2,058-crore deal got regulatory clearances.
“Yes, it has been cleared,” said Civil Aviation Minister Ajit Singh after a meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh.
Replying to questions, he said the deal had “gone through all the regulatory processes,” and would be “good for civil aviation and good for the passengers.’’
The proposal was of Etihad to subscribe 27.2 million Jet shares of Rs.10 each, amounting to 24 per cent of the post-issue paid-up equity share capital for Rs.2,057.66 crore.
The CCEA gave its nod on the conditions that, among other things, both airlines would adhere to the RBI policy guidelines as well as SEBI regulations and comply with all Indian laws and take prior FIPB approvals for any further changes in the shareholders agreement, commercial cooperation agreement, articles of association, investment agreement and shareholding patterns, sources said.
The deal has already been cleared by the Securities and Exchange Board of India (SEBI) and the Foreign Investment Promotion Board (FIPB), with the Minister saying that approval to the deal was delayed as it had to go through all regulatory processes, including twice to FIPB. Asked about the ongoing vetting of the deal by the Competition Commission, Mr. Singh said, “It is a continuing thing. Any time competition related issues come up, they have to look into it.”
Once the deal is clinched after CCEA approval, Jet promoter Naresh Goyal would hold 51 per cent stake and Etihad 24 per cent, with 25 per cent remaining with the public.
The Jet-Etihad deal is so far the single-largest FDI in the domestic aviation sector with Malaysian carrier AirAsia announcing that it would initially invest $30 million (over Rs.185 crore) in AirAsia India, its joint venture with Tata Sons and Telstra Tradeplace.
The Central Vigilance Commission is also understood to be considering closing the complaints of alleged irregularities in the Jet-Etihad deal lodged by BJP MP Nishikant Dubey, after examining clarifications sent on them by the Civil Aviation Ministry.
The stake sale deal was announced in April but had remained stuck due to objections from regulators, as it was felt that Etihad would yield effective control of Jet Airways.