The Cabinet Committee on Economic Affairs (CCEA) has given its green signal to Abu Dhabi-based Etihad Airways to buy 24 per cent stake in Jet Airways (India) Ltd through a preferential allotment worth up to Rs 2,057.66 crore.
This clears the regulatory hurdle for the deal as the Foreign Investment Promotion Board (FIPB) has already recommended the proposal. But the international carrier would now have to get the final clearance from competition watchdog to execute the transaction. However, this is not expected to be a hindrance.
In April this year, Naresh Goyal-led Jet Airways inked a deal to sell 24 per cent stake in the country’s second-largest carrier to Etihad Airways through a preferential allotment. As per the terms of the agreement, Etihad will pick up 27.2 million shares at a price of not less than Rs 754.7 a unit, translating to a deal worth Rs 2,057 crore.
Simultaneously, Etihad will also put $150 million to buy a majority stake in Jet Privilege, the frequent flier programme of the airlines. Previously, Jet Airways divested its three parking slots at London’s Heathrow Airport to Etihad Airways for $70 million, in what was seen as a first leg of the larger, impending deal.
Jet Airways’ scrip shot up over 7 per cent in early morning trades but moderated thereafter and last traded at Rs 384.5 a share, down 0.5 per cent on BSE in a flat Mumbai market on Friday. Etihad is to pick the shares at almost 90 per cent premium to the current market price.
This will be the first such stake acquisition by a foreign airline after the Indian government opened up the aviation sector in September last year, allowing foreign carriers to pick up as much as 49 per cent stake in domestic airlines.
In a parallel development, Malaysian budget carrier AirAsia has formed a three-party joint venture, which includes the Tata Group, to enter the domestic aviation business in India. However, that’s a greenfield venture. Tata Group has also proposed to a separate greenfield JV with Singapore Airlines for a full service airlines.
(Edited by Joby Puthuparampil Johnson)