Mumbai: Jet Airways shareholders on Wednesday approved the sale of 24 percent stake to Abu Dhabi-based Etihad, with the Indian carrier's Chairman Naresh Goyal saying that the deal will improve profitability, reduce costs and lower the debts.
At the airline's Extra Ordinary General Meeting (EGM) convened here today, shareholders approved the proposed issue of shares on a preferential basis to Etihad. The shares will be allotted after the completion of all regulatory approvals.
The resolution to amend the Article of Association was deferred, apparently, following the market regulator Sebi and competition watchdog Competition Commission of India seeking more clarity on the deal.
Goyal said, however, that the airline has not yet received anything in writing from Sebi on the issue of AoA amendment.
The deal is being looked into by Competition Commission of India (CCI) and Securities and Exchange Board of India (Sebi) besides other regulators.
Goyal said his strategic alliance with the Gulf carrier would improve Jet's profitability and bring down the costs.
"Etihad investment will help us to deleverage and grow in a sustainable manner," Goyal said, adding that "the commercial agreement with Etihad will help us to expand network, reduce costs and increase profitability".
As part of the deal, Etihad will acquire 24 percent stake in Jet Airways for about Rs 2,058 crore. The deal marks the first investment by a foreign carrier in an Indian airline since the change in the country's FDI policy last September.
Jet Senior Vice President K G Vishwanath said the cash infusion will help the airline reduce debt from USD 2.1 billion (Rs 11,500 crore) to USD 1.5 billion (Rs 8,200 crore).
Both the companies have said that substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive Chairman, holding 51 percent stake.
Jet had earlier said it was proposing to modify the existing AoA to reflect the shareholders' agreement between its promoters and Etihad.
"Further, provisions have been added in the Articles of Association to further improve the standards of corporate governance of the company," it had earlier said.
These amendments included Etihad-nominated directors on Jet board not being liable for any default or failure of the company in complying with the provisions of any applicable laws.
"The Investor (Etihad) Board Members shall not be identified as "officer in default" of the company or occupiers of any premises used by the company under laws," Jet had said in its EGM notice.
Pursuant to the deal, Naresh Goyal-led promoter group can nominate four directors (who would be Indian citizens), while Etihad would nominate three directors. Besides, seven would be Independent Directors.
These amendments also barred the promoters from transferring any shares without a prior written consent of Etihad, among other conditions.
Besides, Etihad was also said to be getting powers to appoint auditors and these provisions are being seen as Jet giving joint control to the Abu Dhabi carrier, along with the existing promoters. PTI
First Published: Friday, May 24, 2013, 19:28