Mumbai: Etihad Airways PJSC and the Naresh Goyal-led promoter group of Jet Airways (India) Ltd are nearing an agreement that will see a total fund infusion of at least ₹4,200 crore, including an unidentified white knight investing in the cash-strapped airline and Goyal and his wife giving up executive powers and board duties.
The draft agreement envisages a “new investor" injecting between ₹1,600 crore and ₹1,900 crore for a stake of around 20% in the airline and the Goyal group’s stake in Jet Airways falling to 17.1%, with a caveat that seeks to cap it at 22%. The consortium of lenders—led by the State Bank of India that has converted its dues into equity—will pump in an additional ₹1,000 crore to take its eventual equity holding to 29.5%. Etihad will also infuse between ₹1,600 crore and ₹1,900 crore to raise its shareholding to 24.9%.
The exact details will be known once the Jet-Etihad deal is finalized.
Finally, Jet Airways will sell shares to existing shareholders, which can be subscribed by the “new investor". However, Goyal and the banks will renounce their portion of the rights issue entitlement.
Goyal will also immediately step down as chairman and director of the company once he ceases to be the majority shareholder and hold the position of chairman emeritus—an honorary position—till 1 January 2025, according to the draft agreement. The position will have no executive powers and Goyal can attend board meetings only by invitation.
Mint has reviewed a copy of the memorandum of understanding (MoU), which is subject to approval by Etihad’s board that was scheduled to meet on Monday. According to the MoU, and contrary to media reports, Goyal’s son, Nivaan Goyal, will be considered only for an executive position in the company, “subject to evaluation and recommendation by a professional third-party executive assessment agency".
Goyal and other promoters will also have to sign a non-compete pact, which prohibits them from undertaking any activity that competes with the business of Jet Airways, says the draft agreement. They cannot offer their services in any capacity to the aviation industry in India as long as they continue to hold 10% or more in Jet Airways or if they hold any honorary position in the company. This is valid for three years.
The new board of Jet Airways will comprise two nominees from the Goyal family, other than Naresh Goyal and his wife Anita. This will, of course, be valid as long as the Goyal-led promoter group’s shareholding stays at or above 10%.
Etihad and the new investor will also get to have two nominee directors each on the board. Lenders will get one seat on the board. There will be four independent directors, of whom one shall be a woman and one elected as the chairman of the firm. Alongwith one executive director, who can either be the chief executive or the chief financial officer, there will be 12 directors on the reconstituted board.
Abu Dhabi-based Etihad and the Goyal-led promoter group will also have the right to appoint one nominee to each of the committees in Jet Airways.
The draft MoU also proposes to cap the Goyal-led promoter group’s shareholding to 22%, which is to be documented in the shareholders’ agreement and in the articles of association of Jet Airways. Naresh Goyal has tried to renegotiate this clause in an 8 March letter to Tony Douglas, group chief executive officer of Etihad Aviation Group. In the letter, he asked that the perpetuity requirement of capping promoter shareholding to 22% be dropped.
In the letter, Goyal also urged Etihad to immediately provide interim funding support of ₹750 crore so that a matching contribution from the banks was also disbursed.
“It must be reiterated that non-receipt of interim funding will be severely deleterious to the future of the airline, leading to its grounding, which is something all of us, including the banks and other stakeholders, have worked assiduously to avoid over the last few months," Goyal wrote. “The MoU... has been executed in good faith by me and I would earnestly request you to execute the same on behalf of Etihad Airways..."
On Monday, Jet Airways shares rose 2.04% to ₹248.05 apiece on the BSE while the benchmark Sensex gained 1.04% to end the day at 37,054.10 points.