FIPB defers nod for Jet Airways,Etihad Airways deal,seeks clarity

FIPB Wants more information on control post the Rs 2,058 crore deal

Seeking more clarity over the control and ownership of Jet Airways post the 24 per cent stake sale to Etihad,the Foreign Investment Promotion Board (FIPB) on Friday put off a decision on clearing the deal between the two carriers. The Jet Airways-Etihad proposal has been deferred. We need more details of effective control and ownership, economic affairs secretary Arvind Mayaram told reporters after a FIPB meeting here.

The issue of effective control of the airline,post the deal,had also been raised by the Securities and Exchange Board of India (Sebi),which had expressed concern over Etihads rights to nominate three directors on the board and also decide senior management positions,including the position of the CEO,with simply a minority stake.

Sources indicated that these issues can be resolved once the two boards – Jet and Etihad – meet and work out a fresh agreement. Only after these issues are sufficiently addressed,the FIPB will take up the proposal for clearance,government sources said. After the FIPB,which clears foreign direct investment proposals,the deal will also need approval from the Cabinet Committee on Economic Affairs (CCEA).

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In April,Jet Airways announced that it was selling 24 per cent of its equity to Abu Dhabi-based carrier for $370 million (Rs 2,058 crore),Etihad. With a minority stake in the airline,Etihad gets to nominate three directors on the board. Jet Airways is to have four directors,while there will be seven independent directors on the board.

The directors nominated by Etihad Airways include James Hogan (CEO,Etihad Airways),James Rigney (CFO,Etihad Airways) and Harsh Mohan (vice-president,internal audit and risk management,Etihad Airways). The concern in the regulatory circles is that Etihad is getting much more say with just a 24 per cent stake. According to market players,the stake offered to Jet was limited to 24 per cent to avoid Etihad making the mandatory open offer,which would have kicked in with Etihad having a stake sale of anything over 25 per cent in Jet Airways. Meanwhile,the civil aviation ministry indicated that it does not see it any major hurdle to the deal. Sebi has raised some concerns over Jet-Etihad deal and have asked them to rectify some parts of the pact. I do not see any major problem for the deal, civil aviation minister Ajit Singh told reporters here.

The Jet-Etihad deal is the largest foreign investment in the Indian aviation sector after the government relaxed foreign direct investment norms in September last year. Shares of Jet Airways closed at Rs 469.20 on the BSE,up 8.47 per cent.

Flight control

* FIPB and Sebi concerned over Etihads rights to nominate three directors on the board and also decide senior management positions,including the position of the CEO,with simply a minority stake

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* Sources indicated that these issues can be resolved once the two boards Jet and Etihad meet and work out a fresh agreement

* After the FIPB,which clears foreign direct investment proposals,the deal will need approval from the Cabinet Committee on Economic Affairs

Telenor gets nod

NEW DELHI: The FIPB on Friday allowed Norwegian telecom firm Telenor to increase stake in its Indian arm from 49 per cent to 74 per cent at an estimated equity infusion of around Rs 934 crore. PTI