The Cabinet Committee on Economic Affairs on Thursday approved the Rs 2,058-crore deal by Abu Dhabi-based Etihad Airways to buy a stake in Jet Airways.
The deal constitutes the largest foreign direct investment in Indian aviation. Etihad is to pick up 24 per cent equity in Jet Airways.
The Government will give an approval letter within a week from the date the official minutes of Thursday’s CCEA meeting are issued. Jet Airways’ share jumped over 4 per cent to close at Rs 386.60 on Thursday.
With the CCEA approval, almost six months of uncertainty over the deal is now over. Jet and Etihad announced the deal on April 24. The deal provoked strong debate, particularly on the issue of whether the foreign airline will enjoy ‘effective control’ over the Indian carrier. This had forced the Foreign Investment Promotion Board to defer a decision on the issue.
Finally, the FIPB cleared the proposal after Jet-Etihad revised the original proposal and clarified on the control issue. The market regulator Securities and Exchange Board of India had also made it clear that the buying of 24 per cent equity would not trigger any mandatory open offer or preferential allotment of shares.
Post the deal, Naresh Goyal will hold 51 per cent equity, while Etihad will have 24 per cent in Jet Airways. The remaining 25 per cent is with the public, which includes financial institutions and banks. The new board will have 12 members, with four nominated by Jet and two by Etihad, while the remaining six will be independent directors. Naresh Goyal will be the first Chairman of the board.
Now, the only issue left is the clearance from the Competition Commission of India (CCI). The competition watchdog sought some clarifications after FIPB cleared the proposal on July 29 with riders. These included whether Indian, not British, law will prevail in case of any dispute between the two airlines; that Jet and Etihad must amend the Articles of Association to bring it in sync with the revised shareholders’ agreement; and that Jet will have to seek Government approval before making any changes to the shareholders’ agreement with Etihad or any change in the shareholding of the company.
CCI has sought documents from Etihad for these three riders. Once these are submitted, the CCI will examine the competition issue. The deal has already missed two earlier deadlines for completion, the latest one was September 30.
Meanwhile, the Supreme Court may, on Friday, take up a petition filed by BJP leader Subramanian Swamy against the Jet-Etihad deal.