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Could pay a 25-50%
premium on Jet Airways stock's Wednesday closing price on BSE
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Abu
Dhabi-based Etihad Airways was close to buying 24 per cent
stake in Jet Airways in a Rs 1,500-1,800 crore deal,
likely to be concluded within ten days, top civil aviation functionary on
Wednesday said.
Etihad’s
investment in Jet would be the first by a foreign aviation company in an Indian one since
the sector was opened up to foreign investment last year. A Rs 1,500-1,800
crore deal would mean Etihad paying a 25-50 per cent premium on Jet stock’s
Wednesday closing price of Rs Rs 579.60 on the Bombay Stock Exchange (up 0.47
per cent over the previous close). Its current market capitalisation is a
little over Rs 5,000 crore.
Naresh Goyal owns 80 per cent in the airline through Tail
Winds Ltd (registered in Isle of Man) and the rest is held by individual and
institutional investors. It is not yet clear how the deal is being structured,
though earlier reports indicated the airline would issue fresh equity amounting
to 24 per cent. Government rules restrict foreign investment in airlines at 49
per cent.
The
deal would help Etihad and Abu Dhabi counter Dubai’s dominance in the region’s
aviation landscape. Abu Dhabi has 119 weekly flights from India while Dubai has
352 weekly flights to India. Only about 35 per cent of the traffic between
India and Dubai/Abu Dhabi is origin-destination traffic; the rest is onward or
transit traffic.
For
Jet, the deal means infusion of fresh capital for debt reduction and could also
lead to rationalisation of its long-haul network. An HSBC Research report says
Jet may drop Brussels in favour of Abu Dhabi as its international network hub.
Recently, Jet and Etihad had expanded their code-share agreement to include
Abu-Dhabi-Paris route, indicating an increased partnership.
An
Etihad spokesperson said: “We have not received details from our UAE and India
offices. The Indian aviation industry offers tremendous potential, with
significant passenger movement on domestic and international sectors. Etihad
Airways will invest where it believes commercial prospects are strong”.
Jet
Airways did not respond to an e-mailed query till the time of going to press.
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