Abu Dhabi carrier Etihad’s Rs 2,058-crore stake purchase in Jet Airways has hit a regulatory air pocket, as regulators are seeking more clarity on the deal to ensure overall competition in the aviation market is not affected and interests of public shareholders and consumers are protected.

Separate clarifications have been sought on the deal, which involves a 24 per cent stake purchase in Jet by Etihad and is the first investment by a foreign carrier in an Indian airline, by capital markets regulator SEBI (Securities and Exchange Board of India) and fair trade watchdog CCI (Competition Commission of India).

While the queries raised by the two regulators are different, both of them are concerned about certain contours of the transaction that indicate a larger control of Etihad in Naresh Goyal-led Indian carrier despite the purchase of only 24 per cent stake, sources said.

The two regulators are seeking further clarity on the transaction and might suggest certain changes, or at least an additional disclaimer by the two parties, to ensure that Etihad’s ownership powers in Jet remains in line with its 24 per cent stake in the company’s equity capital, they added.

Queries sent to Jet Airways remained unanswered on the clarifications raised by the two regulators including whether the company would be open to making changes in the deal to address the issues raised by SEBI and CCI.

There have been concerns that the stake sale was restricted to 24 per cent only to avoid a mandatory open offer for the minority shareholders of Jet Airways.

SEBI is also looking into a sharp surge in the share price of the company in the run-up to the deal, which was in making for several months, and expectations of an open offer was said to be the main reason behind the stock rally.

As per SEBI regulations, any share sale of 25 per cent or a higher stake in a listed company requires that the acquirer makes a mandatory open offer for purchase of further 26 per cent stake from the public shareholders.

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.

The deal also involves a $600 million commitment from Etihad Airways to further strengthen Jet’s financial position.

Besides, Etihad would also inject $220 million to create and strengthen a wide-ranging partnership between the two carriers, including a strong codeshare arrangement.

Etihad also paid $70 million in February to purchase Jet’s three pairs of Heathrow slots through a sale and lease back agreement. Jet continues to operate flights to London utilising these slots.

Etihad would also invest $150 million “by way of a majority equity investment in Jet Airways’ frequent flyer programme ‘Jet Privilege’.

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