Six months after Jet Airways agreed to purchase Air Sahara, it is still not clear exactly how much money changed hands.
On 10 April, when Jet Airways revived the deal to buy out Air Sahara, newspapers widely reported that deal would cost about Rs2,000 crore and would include Rs450 crore of Sahara’s accumulated debt.
The stock market punished Jet shares, driving them down 5.57%, wiping almost Rs316 crore off the market capitalization of what was then India’s biggest domestic airline.
Two days later, when the deal was announced, Naresh Goyal, Jet’s promoter and majority shareholder, stood in front of a bank of television cameras and said the deal cost Rs1,450 crore.
“It is a good deal which will help us,” he said. Then, referring to a price that the two airlines had previously agreed upon in early 2006, he said “the deal is 40% cheaper than the the one signed last year.”
The stock market loved the new price, pushing Jet’s stock up by Rs19.75 to Rs628.85, a gain of 3.2%.
But hours later, at Air Sahara’s offices at Gopaldas Bhavan, Alok Sharma, the president of the airline, told reporters that Jet had actually paid Rs1,950 crore. “Sorry, I can’t go into details,” he said then. “We are bound by some confidentiality clause.”
In an interview on 20 August, Sharma repeated his assertion of April: over and above the cash payments, Jet has absorbed Rs450 crore liabilities from Sahara, including Rs300 crore in outstanding debts.
“This was the best deal in aviation history for Air Sahara,” he said.
Saroj Datta, the executive director of Jet Airways, who was closely involved in the negotiations that resulted in the sale, on Tuesday, called Sharma’s claims “a false and untrue statement”.
“Ask him to prove it,” he said. “The fact of the matter is that anyone can examine the documents and (ask them) to show to us where we have taken up Rs400 crore. He’s just trying to pad up the story for Sahara management.”
So how much exactly did Jet Airways pay? Rs1,450 crore (which was described on Jet’s balance sheets for the quarter ended 30 June, 2007, as Rs1,460 crore)? Or, Rs1,950 crore?
Three analysts in India, who declined to be named for this story, said that they had repeatedly pushed for clarification on this issue with the airline and had not received satisfactory answers.
And Damien Horth, a Singapore-based analyst for UBS Ltd, said he was taking Jet’s assertions at face value.
“What Jet has said to me is that they have taken on a clean balance sheet, with the caveat that they have taken on the operational leases for the aircraft,” he said.
Either way, Horth felt that Jet Airways had overpaid for Air Sahara.
“The way I have approached the deal is that the valuation, I think, is difficult to justify given the risk profile of the industry, and given that, at some point, Sahara would have gone bankrupt,” he said. “I think their hands were probably forced by legal issues.”