Jet-Etihad deal: Naresh Goyal rejigs promoter stake

 The structuring will also see Goyal and Etihad jointly hold 75% in the listed carrier, complying with Sebi's new public shareholding norms.


MUMBAI: NRI entrepreneur Naresh Goyal is putting in place a multi-phase, structured deal that will allow Abu Dhabi's Etihad Airways to buy a substantial stake in Goyal's Jet AirwaysBSE 1.94 % valued at $1.2 billion. The structuring will also see Goyal and Etihad jointly hold 75% in the listed carrier, complying with Sebi's new public shareholding norms. 

Jet is 80% held by Tail Winds, an overseas corporate body (OCB) incorporated in the Isle of Man, a tax haven, while Goyal and his wife directly own just about 11,000 shares or 0.01%. An OCB is an entity in which at least 60% is owned by a non-resident Indian (NRI). Though OCBs are currently not clubbed as part of FDI, the government had granted a special dispensation to Goyal in the nineties. 

The Jet boss, sources said, is considering transferring either a part or the entire Tail Winds stake to another company, which will be the new holding company of Jet Airways. Indian laws allow NRIs to 
invest 100% in scheduled passenger airlines through the automatic route. This transfer will be done through a block deal on the bourses as early as next week. Since Jet Airways-Etihad talks became public, the former's share has been soaring and is currently trading at Rs 570 level. Since September the stock has gained 68%. 

In the second phase, sources said, Goyal will sell 11% of Jet Airways through an offer for sale (OFS) to comply with Sebi's new norms that cap promoter holding at 75%. After the OFS, Etihad, through a fresh issue of shares, will acquire a significant stake in the Mumbai-based carrier. Sources said Goyal will hold at least 51% in the company he founded 21 years ago. Jet Airways started as an air taxi operator with four leased
Boeing 737 aircraft and currently it operates a fleet of 99 aircraft, flying to 73 destinations in India and at least 20 overseas. 

Jet Airways officials were unavailable for a comment. The fresh issue of shares to Etihad will bring money into Jet that will be used to reduce its debt. Sources said Etihad is also expected to help the Indian carrier refinance up to $400 million loan at cheaper interest rate. This leg of the transaction is likely to be clinched by last week of this month. 

Jet-Etihad deal will be the second FDI transaction in the aviation sector after India in September 2012 relaxed ownership rules allowing foreign carriers to buy up to 49% in domestic carriers. Last month Malaysia'sAir Asia, along with Tata Group, announced plans to start a lowfare carrier in India. Bank of America Merrill Lynch and UBS are advising Jet-Etihad on the deal, sources said. 

This will be the second time Jet is attracting FDI. In early 1990s, 
Kuwait Airways and Gulf Air had acquired 20% stake each in Tail Winds. But in April 1997, Goyal had to buy back the West Asian airlines' 40% stake following government's instruction that foreign carriers can't hold stake in a domestic airline.