Shareholdrs of Jet Airways on Friday approved the sale of 24 per cent stake to Abu Dhabi-based Etihad, with the Indian carrier's Chairman Naresh Goyal saying that the deal will improve profitability, reduce costs and lower the debts.
At the airline's Extra Ordinary General Meeting (EGM) convened here, shareholders approved the proposed issue of shares on a preferential basis to Etihad. The shares will be allotted after the completion of all regulatory approvals.
The resolution to amend the Article of Association was deferred, apparently, following the market regulator Sebi and competition watchdog Competition Commission of India seeking more clarity on the deal.
Goyal said, however, that the airline has not yet received anything in writing from Sebi on the issue of AoA amendment. The deal is being looked into by Competition Commission of India (CCI) and Securities and Exchange Board of India (Sebi) besides other regulators.
Goyal said his strategic alliance with the Gulf carrier would improve Jet's profitability and bring down the costs. “Etihad investment will help us to deleverage and grow in a sustainable manner,” Goyal said, adding that “the commercial agreement with Etihad will help us to expand network, reduce costs and increase profitability”.
As part of the deal, Etihad will acquire 24 per cent stake in Jet Airways for about Rs 2,058 crore. The deal marks the first investment by a foreign carrier in an Indian airline since the change in the country's FDI policy last September.
Jet Senior Vice President K G Vishwanath said the cash infusion will help the airline reduce debt from$ 2.1 billion (Rs 11,500 crore) to $1.5 billion (Rs 8,200 crore).
Both the companies have said that substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive Chairman, holding 51 per cent stake.
Jet had earlier said it was proposing to modify the existing AoA to reflect the shareholders' agreement between its promoters and Etihad. “Further, provisions have been added in the Articles of Association to further improve the standards of corporate governance of the company,” it had earlier said.
These amendments included Etihad-nominated directors on Jet board not being liable for any default or failure of the company in complying with the provisions of any applicable laws.”The Investor (Etihad) Board Members shall not beidentified as “officer in default” of the company or occupiers of any premises used by the company under laws,” Jet had said in its EGM notice.
Pursuant to the deal, Naresh Goyal-led promoter group can nominate four directors (who would be Indian citizens), while Etihad would nominate three directors. Besides, seven would be Independent Directors.
These amendments also barred the promoters from transferring any shares without a prior written consent of Etihad, among other conditions.
Jet Airways Q4 net loss widens to Rs 495.53 crore
Country's second largest airline in terms of passengers carried, Jet Airways on Friday posted a net loss of Rs 495.53 crore for the fourth quarter ended March 31, 2013 compared to loss of Rs 298.12 crore in the same period year-ago.
Total income from operations declined to Rs 3,921.92 crore in the March quarter from Rs 4,041.61 crore in the year ago period, Jet Airways said in a filing to the BSE.
For the full year ended March 31, 2013, the airline reported a net loss of Rs 485.50 crore against Rs 1,236.1 crore in the same period last year. Shares of the company ended the day 3.69 per cent lower at Rs 562.70 on the BSE.