Cabinet clears Rs2,058 cr Jet Airways-Etihad deal

The union cabinet on Thursday cleared the way for the Rs2,058-crore deal for Abu Dhabi's Etihad Airways to buy 24-per cent equity in Indian carrier Jet Airways, making it the biggest foreign investment in the Indian aviation sector.

Jet Airways-Etihad"Yes, it has been cleared," civil aviation minister Ajit Singh told reports after a meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh.

The deal between the two airlines was struck in April, the first such deal since the government relaxed rules in September 2012 to allow foreign airlines to own up to 49 per cent in Indian carriers.

The deal had been delayed due to scrutiny by regulators and also due to opposition from some politicians, before the Foreign Investment Promotion Board (FIPB) cleared it with conditions in late July.

The cabinet decision came after stock market regulator Securities & Exchange Board of India said Etihad will not be required to make an open offer to Jet shareholders, as the two airlines will not be treated as persons acting in concert.

However, SEBI has asked the Jet promoters led by Naresh Goyal to divest 6 per cent of their stake before allotting the shares to Etihad "in the interest of corporate governance and to ensure well dispersed public shareholding".

Goyal would eventually have a 51-per cent stake in the company, Etihad 24 per cent and the public the remaining 25 per cent.

Etihad Airways had on 24 April 2013 announced that it has agreed to subscribe to 2.72 crore new shares of Jet Airways at Rs754.74 per share (See: Etihad Airways to buy 24% in Jet Airways for Rs2,061 crore).

Jet Airways (India) reported a net loss of Rs355.38 crore in June 2013, compared with a net profit of Rs24.70 crore in in the first quarter of 2012. Net sales declined 13 per cent to Rs3,778.78 crore.

The Foreign Investment Promotion Board had approved the deal in July with some conditions after both parties assured it that 'effective control' would remain with local promoters (See: FIPB gives conditional nod for Jet-Etihad deal).

The Competition Commission of India (CCI) had also sought changes in the original deal.

The two parties had informed the fair trade regulator about the changes in the deal and approval from the CCI is expected soon.