Shares of Jet Airways continued to rise Monday as the Foreign Investment Promotion Board (FIPB) readies to take up the airline’s proposal for a stake-sale of 24 percent to the Abu Dhabi-based Etihad Airways.
The company’s scrip at the Bombay Stock Exchange (BSE) rose by 8.98 percent or 35.50 points around 2.00 p.m. at Rs.431 from its previous close of Rs.395.50 Friday.
Jet Airway’s scrip value increased by 17.43 percent Friday at Rs.395.50 after the company submitted an amended shareholding agreement to the finance and civil aviation ministries.
According to informed sources, the revised agreement was worked out after FIPB and stock market regulator Securities and Exchange Board of India (SEBI) raised concerns about the control and management of the company after the stake-sale.
The new agreement is said to have addressed the control and management issues, with Etihad agreeing to have only two board of directors from an earlier proposed four in the 10-member airline board.
Apart from the finance and civil aviation ministries, the FIPB, SEBI and the Department of Industrial Policy and Promotion (DIPP) have been studying the new agreement.
Earlier, on June 14, the FIPB had deferred a decision on approving the proposed stake—sale.
The deferral for the Rs.2,058 crore ($379 million) deal had come as SEBI and fair trade watchdog Competition Commission of India (CCI) sought clarity on some of the sticking issues like the number of Indian directors on board and the holding pattern of the merged entity.
Some MPs have alleged that the government gave huge concessions to Abu Dhabi by granting it 40,000 seat per week additional capacity as a quid—pro—quo to facilitate a private party deal.
The parliamentary panel on aviation chaired by CPI—M’s Sitaram Yechury is said to be investigating the newly assigned bilateral air agreement between India and Abu Dhabi.
Interestingly, the new bilateral air service agreement (BASA) between India and Abu Dhabi was signed hours after the announcement of the Jet—Etihad deal.
However, on May 24, Jet Airways’ shareholders approved the company’s plans to offload 24 percent stake to Etihad Airways for $379 million (Rs.2,058 crore).
The deal was ratified at an extraordinary meeting of Jet’s shareholders in Mumbai.
That time the company had said that the preferential allotment of shares to Etihad was subject to the fulfilment of certain conditions, including approval of the FIPB and the CCI.
On April 24, nearly eight months after the Indian government permitted international airlines to invest in domestic passenger carriers, Jet Airways had announced a 24 percent stake sale to Etihad Airways.
The two airlines were negotiating a Jet Airways’ stake sale since last September. However, the deal was delayed due to investment protection and management control issues.
The deal is expected to garner around Rs.2,058 crore ($379 million) for Jet Airways, which will enable the company to service its debts and provide passengers better connectivity.
The airline has reported a net loss of Rs.485.50 crore for the year ended March 31 as compared to a net loss of Rs.1,236.10 crore in 2011—12.