Jet board approves 24% stake sale to UAE’s Etihad
25 April 2013 2:41 AM GMT
Eight months after the Union government permitted international airlines to invest in domestic passenger carriers, Jet Airways on Wednesday announced a 24 per cent stake sale to Abu Dhabi-based Etihad Airways to raise Rs 2,056 crore ($370.30 million).
'The board of directors has approved, subject to compliance with applicable laws and regulations, the issuance, by way of a preferential allotment... of 27,263,372 (2.73 crore) equity shares of the face value of Rs 10 to Etihad Airways at a price of not less than Rs 754.73 (including premium of Rs 744.73 per share) per equity share,' the company informed the Bombay Stock Exchange (BSE) on Wednesday.
The move, which has to be ratified at an extraordinary meeting of its shareholders, will enable the company service its debts and provide passengers with better connectivity. 'The board of directors has granted approval for the company and Etihad to enter into, inter alia, the investment agreement in relation to such issuance and allotment and other documents incidental thereto. The said preferential allotment is subject to various conditions precedent, including regulatory approvals,' the company said.
The deal is expected to garner around Rs 2,000 crore ($370.37 million) for Jet Airways, which reported a net profit of Rs 85 crore in the third quarter of 2012-13, after a net loss of Rs 101.22 crore in the similar period of the previous year. The company's total income during the quarter under review had increased by 6.6 percent to Rs 4,205.77 crore, from Rs 3,939.16 crore in the corresponding quarter of last fiscal. On Wednesday the Jet Airways' scrip at the BSE rose by 4.43 percent or 24.35 points to Rs.573.85 per share from its previous close of Rs.549.50. The company's scrip at the BSE might touch its circuit breaker limit of Rs.659.40 when the markets open Thursday.
Interestingly, the announcement comes just a day after India and the UAE began negotiations to enhance bilateral air traffic rights on the India-Abu Dhabi sector. Indian passenger carriers, especially Jet Airways, have sought an exponential increase in seat capacity on the sector. The existing bilateral air service agreement (BASA), entitles India based airlines to offer 13,300 seats per week on the route. According to sectoral experts, the deal will bring in fresh funding opportunities for Jet Airways, which has an estimated debt of around Rs 12,000 crore, whereas passengers will get better connectivity options through the Jet-Etihad network. Jet passengers will also be able to leverage the networks of Air Berlin, Air Seychelles and Aer Lingus, Ireland's national carrier, which Etihad Airways has already invested in.
'It is a very positive move. There were negotiations going on for a long time. It will provide Jet with much needed financing options and a major international partner. Passengers can look forward to using the networks of both airlines for international and domestic travel,' said Sharan Lillaney, aviation analyst at broking firm Angel Broking.
Earlier, Jet-Etihad Airways concluded a deal on February 27 to acquire three Jet Airways slots at London airport for $70 million. In February Etihad chief executive James Hogan and Jet Airways' chairman Naresh Goyal led a joint delegation at separate meetings with Finance Minister P Chidambaram, Civil Aviation Minister Ajit Singh and Commerce Minister Anand Sharma to apprise them about a possible stake sale deal.
The government last year allowed foreign airlines to invest up to 49 per cent in private domestic carriers. This was not permitted earlier for security reasons, although 49 per cent FDI by non-airline players was allowed.
ETIHAD-TAKE-ALL DEAL?
Many experts feel that the Jet-Etihad deal is heavily skewed in favour of the foreign carrier. Jet Airways has asked the government for 41,000 more seats per week from India to Abu Dhabi and Abhu Dhabi has sought 25,000 more seats till 2015-16.
But the market to Abu Dhabi simply cannot grow so fast, point out the experts. Etihad, however, will get access to fly directly to several Indian cities as well as hike its flight frequencies in the existing places from where it operates.
'The board of directors has approved, subject to compliance with applicable laws and regulations, the issuance, by way of a preferential allotment... of 27,263,372 (2.73 crore) equity shares of the face value of Rs 10 to Etihad Airways at a price of not less than Rs 754.73 (including premium of Rs 744.73 per share) per equity share,' the company informed the Bombay Stock Exchange (BSE) on Wednesday.
The move, which has to be ratified at an extraordinary meeting of its shareholders, will enable the company service its debts and provide passengers with better connectivity. 'The board of directors has granted approval for the company and Etihad to enter into, inter alia, the investment agreement in relation to such issuance and allotment and other documents incidental thereto. The said preferential allotment is subject to various conditions precedent, including regulatory approvals,' the company said.
The deal is expected to garner around Rs 2,000 crore ($370.37 million) for Jet Airways, which reported a net profit of Rs 85 crore in the third quarter of 2012-13, after a net loss of Rs 101.22 crore in the similar period of the previous year. The company's total income during the quarter under review had increased by 6.6 percent to Rs 4,205.77 crore, from Rs 3,939.16 crore in the corresponding quarter of last fiscal. On Wednesday the Jet Airways' scrip at the BSE rose by 4.43 percent or 24.35 points to Rs.573.85 per share from its previous close of Rs.549.50. The company's scrip at the BSE might touch its circuit breaker limit of Rs.659.40 when the markets open Thursday.
Interestingly, the announcement comes just a day after India and the UAE began negotiations to enhance bilateral air traffic rights on the India-Abu Dhabi sector. Indian passenger carriers, especially Jet Airways, have sought an exponential increase in seat capacity on the sector. The existing bilateral air service agreement (BASA), entitles India based airlines to offer 13,300 seats per week on the route. According to sectoral experts, the deal will bring in fresh funding opportunities for Jet Airways, which has an estimated debt of around Rs 12,000 crore, whereas passengers will get better connectivity options through the Jet-Etihad network. Jet passengers will also be able to leverage the networks of Air Berlin, Air Seychelles and Aer Lingus, Ireland's national carrier, which Etihad Airways has already invested in.
'It is a very positive move. There were negotiations going on for a long time. It will provide Jet with much needed financing options and a major international partner. Passengers can look forward to using the networks of both airlines for international and domestic travel,' said Sharan Lillaney, aviation analyst at broking firm Angel Broking.
Earlier, Jet-Etihad Airways concluded a deal on February 27 to acquire three Jet Airways slots at London airport for $70 million. In February Etihad chief executive James Hogan and Jet Airways' chairman Naresh Goyal led a joint delegation at separate meetings with Finance Minister P Chidambaram, Civil Aviation Minister Ajit Singh and Commerce Minister Anand Sharma to apprise them about a possible stake sale deal.
The government last year allowed foreign airlines to invest up to 49 per cent in private domestic carriers. This was not permitted earlier for security reasons, although 49 per cent FDI by non-airline players was allowed.
ETIHAD-TAKE-ALL DEAL?
Many experts feel that the Jet-Etihad deal is heavily skewed in favour of the foreign carrier. Jet Airways has asked the government for 41,000 more seats per week from India to Abu Dhabi and Abhu Dhabi has sought 25,000 more seats till 2015-16.
But the market to Abu Dhabi simply cannot grow so fast, point out the experts. Etihad, however, will get access to fly directly to several Indian cities as well as hike its flight frequencies in the existing places from where it operates.
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