Jet Airways eyes help from Ratan Tata, Mukesh Ambani3 min read . Updated: 30 Oct 2018, 07:28 PM IST
Naresh Goyal, who owns a controlling stake of 51% in Jet Airways, has spoken to Ratan Tata in the past fortnight and also Mukesh Ambani for a potential stake sale
Mumbai: Jet Airways (India) Ltd’s struggle to raise capital has led its founder Naresh Goyal to the doorsteps of some of Asia’s leading business groups. Among various names that are doing the rounds, two that stand out are Reliance Industries Ltd (RIL) and Tata Group, three people familiar with the matter said.
Goyal, who owns a controlling stake of 51% in Jet Airways, has spoken to Tata officials in the past fortnight, the people cited earlier said on condition of anonymity. Overseas airlines also figure on Goyal’s list of potential fundraising sources, they said.
“In the past, Reliance Industries has ruled out any investment in the aviation sector and turned down various offers, including bailing out defunct Kingfisher Airlines, but this time, Goyal has approached Mukesh Ambani in his personal capacity," said one of the three people cited earlier. “Ambani is yet to respond to Goyal’s offer."
The person said that Tata Group was interested in taking a stake in Jet Airways but this was contingent on Goyal relinquishing operational control.
The conglomerate already has a presence in aviation through budget airline AirAsia India Pvt. Ltd and full-service carrier Vistara—a joint venture with Singapore Airlines Ltd.
A Tata Group spokesperson declined to comment.
A spokesperson for Jet Airways said that “in line with its policy Jet Airways does not comment on speculation".
Reliance Industries and Tata Group did not respond to requests for comment through emails and phone calls.
The airline’s woes have been compounded by a continuing fare war among domestic carriers, despite sharply higher jet fuel prices and increase in other expenses.
“While Goyal has in principle agreed to pare his stake, but giving up control remains a contentious issue," said the second person.
This is not the first time Ambani has been approached by cash-strapped promoters for a rescue act.
In 2010, he came to the aid of Prithvi Raj Singh Oberoi, chairman of EIH Ltd, which runs India’s second-biggest hotel chain, by agreeing to take a 14.12% stake in the company to potentially ward off a hostile takeover bid.
In 2012, Reliance through a complex structure extended promoter financing to Network18 founder Raghav Bahl in the form of optionally convertible debentures (OCD), who then used the proceeds to fund an acquisition and retire part of its debt.
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“A lot depends on what Naresh Goyal decides to do in the next few weeks," the third person said. “The situation continues to remain grim for the airline, as it continues to remain behind schedule on lease rentals of aircraft as well as staff salaries."
Mint reported on 10 October that private equity (PE) giants Blackstone Group LP and TPG Capital, which are eyeing a stake in Jet Privilege Pvt. Ltd (the loyalty programme of Jet Airways), are having second thoughts due to worries over the airline’s financial health.
Mint reported that while both PE firms had already offered indicative term sheets valuing Jet Privilege at close to $900 million, they decided to wait to see how well Jet manages to run its overall operations in the months ahead. Mint reported on 28 September that Jet Airways had informed lenders it would raise about ₹ 3,500 crore over the next six months through a stake sale in its loyalty programme and infusion of fresh funds.
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The airline also told lenders that it would shave off costs by ₹ 2,000 crore over the next two years.
This would, however, be subject to strengthening of the rupee against the dollar and a fall in crude oil prices, which, analysts said, were unlikely in the near term.
Editor’s note: This story has been updated to incorporate Tata Group’s clarification