FIPB to consider Jet deal today

FIPB to consider Jet deal today

The fate of the multi-crore Jet-Etihad deal is expected to be known on Monday when the Foreign Investment Promotion Board (FIPB) takes up the matter for consideration.

Last month, FIPB had deferred a decision on giving clearance for the deal.

The Rs 2,058-crore deal between the Indian and Abu Dhabi carriers had run into rough weather as government agencies and a section of MPs had raised concerns over several issues after Etihad bought 24 per cent stake.

Last week, Jet Airways had provided the new shareholding agreement to the finance ministry. The amended agreement, which will be considered by FIPB in its meeting on Monday, seeks to address the concerns of authorities and regulators. Though Etihad has agreed to halve the number of directors to two, there will be no change in the share pattern, with the foreign carrier having 24 per cent stake and key promoter Naresh Goyal owning 51 per cent.

The remaining 25 per cent stake will be with others, including institutions and individuals.

According to experts, foreign airlines will be watching with interest the outcome of the deliberations on the deal as the decision will have impact on the investor sentiment.
International consultancy firm Centre for Aviation said the expansion of the bilateral traffic rights agreement between India and Abu Dhabi coincided with the announcement of the partnership and it has made the approval process "more complex".

"Further watering down is expected as a result of further agencies such as the Central Vigilance Commission and the tax authorities taking interest in the case.

The final agreement may be quite different from the intent in the original document and as a result, Etihad may seek a revised valuation," it said.

It also said that despite these challenges, it expects that the transaction will eventually be concluded in August.

"If the deal does not proceed, this will be a particularly negative outcome for Jet Airways which has been completely focused on this transaction and has developed its new business plan around it," it added.

The decision to revise the agreement by Jet and Etihad also resulted in a surge in share prices of the Indian carrier last week.

Comments (+)