State Bank of India (SBI) is understood to have initiated talks with some of the leading private equity firms (PEs) for possible investments in the debt-ridden Indian private airline Jet Airways.
“Some of the Private Equity firms have sounded out SBI on their willingness to look at the possibility for investing in Jet Airways and SBI may have already initiated initial round of discussions with them,” a senior federal government official told Arabian Business.
The ministry official, however, did not disclose the names of the PE funds which have shown interest in possible acquisition of stake in Jet Airways.
The official said the SBI-led banking consortium’s move to effect a management change in Jet Airways, which saw its former chairman Naresh Goyal and his wife to resign from the airline’s board, followed SBI getting feelers from some of the potential investors to come on board of Jet in the event of a management change.
Jet Airways on Monday announced the stepping down of Naresh Goyal, his wife and one of the Etihad Airways nominees, Kevin Knight, from its board.
The airline also announced issuing of 114 million equity shares to the SBI-led creditors’ consortium, leading to them taking over majority stake in the company. The additional equity was to be issued against the lenders converting Rs 1 of their debt into equity.
Etihad Airways’ stake in Jet Airways could come down to 12 percent from its earlier 24 percent, ET Now reported, to allow the bankers hike its equity to 50.5 percent.
Two nominees of the promoter group (Goyal and family) and one nominee of Etihad Airways will continue on the board. Two nominees of the lenders will be inducted to the Jet board soon.
An interim management committee (IMC) has also been constituted on Monday to oversee the overall financial and operational performance of the airline under the overall supervision of the board of directors, with the support of McKinsey & Co.
Government sources told Arabian Business that the SBI-led bankers’ consortium taking majority stake in Jet Airways is only an interim arrangement to facilitate induction of new investor/s in the airline.
“The banks have neither expertise in running an airline nor it is their business to run an airline. The present arrangement is an interim one to protect their money and once they restore normalcy of operations at Jet by inducing additional loans – lenders will immediately extend $217 million loan as part of the new decisions – they can hope to sell their stake at a decent valuation,” the senior government official said.
“SBI has set a timeframe of 2 to 3 months for completion of the stake sale in Jet. If it succeeds in getting PEs to invest in Jet, it could go either for a negotiated deal or for a bidding process. The latter will be a more transparent procedure,” the official added.
Jet Airways officials said the airline will leverage the funding to partly clear pending dues towards lessors, vendors, creditors and employees in a phased manner.
“The move will see Jet Airways re-deploy several of its grounded aircraft back into its network, helping renew many of the routes it had temporarily suspended, which will help restore normalcy of operations,” the officials said.
Aviation industry sources said since most of the grounded planes of Jet are currently in India only, it may not take long for the airline to re-deploy them into its fleet one it settles the rental dues with the leasing companies.
Jet still has strong brand equity and once its normalcy of operations is assured with support of additional loans from SBI and other banks, the banks can hope to get a decent valuation for the stake in the airline, official sources said.
Industry sources, however, said with the airline’s mounting financial liabilities and the uncertain business prospects of airlines due to various external factors including unexpected rise in aviation fuel or fall in rupee value, it may not be so easy to find new investors for Jet.
Poaching of its pilots by other airlines will be another issue facing Jet, even when it tries to get its planes back on operation at the earliest.
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