There’s hope for the revival of crippled Jet Airways with Etihad Airways submitting a conditional bid to acquire the airline as the deadline for the submission of bids ended on Friday.
The lenders also received three unsolicited bids including one from its employees, banking sources said. “Lenders are expected to meet next week to consider the bids submitted by the suitors. Details of the bids are not known,” said an official.
Taking the airline to bankruptcy court remains an option
Despite “disproportionate” efforts being made by SBI to keep Jet Airways flying, the airline going belly up will not have a significant impact on the books of country’s largest lender. The bank’s Chairman Rajnish Kumar said on Friday that in the loan book of Rs 23 lakh crore, Jet’s account adds only 7 basis points to the gross non-performing assets. Even as the lenders have received bids, including one from Jet’s existing investor Etihad, taking the airline to bankruptcy court remains an option if the stake sale process does not work out.
“Two unsolicited bidders have submitted EoI (expression of interest) for Jet and we are expecting one more bid by the end of the day,” State Bank of India (SBI) Chairman Rajnish Kumar had said at a press conference earlier in the day. Lenders are expected to take legal opinion on the unsolicited bids as they had not submitted the initial EoIs earlier, Kumar said.
However, Etihad’s bid to SBICAPs — which is acting on behalf of the lenders — is subject to certain conditions.
“Etihad re-emphasises that it cannot be expected to be the sole investor, and that, amongst other requirements, additional suitable investors would need to provide the majority of Jet Airways’ required recapitalisation,” the airline said. In April, Etihad which already owns 24 per cent stake in Jet Airways, had refused to bail out the airline and instead offered its stake to the lenders.
On April 17, Jet Airways, India’s largest private airline at one point of time, decided to shut down its operations as the consortium of lenders, led by SBI, refused to consider extending Rs 400 crore emergency funding to keep the airline flying.
However, none of the four bidders, including IndiGo Partners, TPG, sovereign wealth fund NIIF, who submitted the
initial EoIs, submitted the financial bids on Friday. Jet Airways founder Naresh Goyal, who was forced to step down
from the airline on March 25 as part of a deal with lenders, had earlier partnered with Future Trend Capital to submit a bid for investing in the airline. But later he reportedly withdrew the offer, as others threatened to walk away.
The lenders are offering over 31 per cent stake in the company on a fully diluted basis with management control.
The lenders, led by State Bank which now owns 51 per cent in the airline, had invited EoIs between April 8 and 12 and had received four preliminary bids. Friday was the last day to submit financial bids. Currently, the airline owes over Rs 8,000 crore to its lenders. As leader of the consortium, SBI has made disproportionate effort to keep the airline flying in the larger interest of the aviation sector and economy, Kumar said. “When we put any money, commitments are on the basis of prevailing situation. If conditions are not met, money cannot be lent,” he said.
If a deal fails to materialise, the airline is likely to be dragged into the bankruptcy court by creditors, putting at stake the jobs of nearly 20,000 employees. However, experts said it will be a tough task to revive the airline’s operations as most of the aircraft have been taken away by lessors and its flying rights have been distributed among other airlines.
The airline also owes money to suppliers, vendors and salaries to pilots and employees have not been paid for several months. On March 25, as part of the bailout plan worked out by the lenders, Goyal and his wife Anita stepped down from the board.
However, banks were dilly-dallying on releasing Rs 1,500 crore as promised in the resolution plan.
Meanwhile, The Indian Express reported on Friday that the Registrar of Companies (RoC), in its inspection into affairs of Jet Airways, is learnt to have found various violations of the Companies Act and instances of complex fund trail, indicating diversion of money. Following the submission of a preliminary inspection report by RoC to the Ministry of Corporate Affairs (MCA), the government could direct the Serious Fraud Investigation Office (SFIO) to probe the suspected siphoning off of funds by the airline’s promoters. The Western Regional Director of the MCA started inspection of Jet Airways and its subsidiaries’ books of accounts around eight months ago.
Its report showed instances of irregularities and alleged fund diversion. There have also been instances where Jet Airways had written off investments in its subsidiary companies without assigning an probable reason, the RoC’s report noted.