Paving the way for the biggest ever foreign investment in India's aviation sector, the Union Cabinet on Thursday cleared Jet Airways' proposed sale of 24 per cent equity to Abu Dhabi-based Etihad, days after the Rs 2,058 crore deal got regulatory clearances.
"Yes, it has been cleared," said Civil Aviation Minister Ajit Singh after a meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh.
Replying to questions, he said the deal has "gone through all the regulatory processes" and would be "good for civil aviation and good for the passengers". The proposal was of Etihad to subscribe 27,263,372 Jet shares of Rs 10 each, amounting to 24 per cent of post-issue paid-up equity share capital for Rs 2,057.66 crore.
CCEA gave its nod on the conditions that, among other things, Jet and Etihad would adhere to RBI policy guidelines and SEBI regulations, comply with all Indian laws and take prior FIPB approvals for any further changes in the shareholders agreement, commercial cooperation agreement, articles of association, investment agreement and shareholding patterns, the sources said.
The deal has already been cleared by the Securities and Exchange Board of India (SEBI) and the Foreign Investment Promotion Board (FIPB), with the minister saying that approval to the deal was delayed as it had to go through all regulatory processes, including twice to FIPB.
Asked about the ongoing vetting of the deal by the Competition Commission, Singh said, "It is a continuing thing. Any time competition related issues come up, they have to look into it." Once the deal is clinched after CCEA approval, Jet promoter Naresh Goyal would hold 51 per cent stake and Etihad 24, with 25 per cent remaining with the public.
The Jet-Etihad deal is so far the single-largest FDI in Indian aviation sector with Malaysian carrier AirAsia announcing that it would initially invest USD 30 million (over Rs 185 crore) in AirAsia India, its joint venture with Tata Sons and Telstra Tradeplace.
There is no clarity yet on the quantum of investment by Tata and Singapore Airlines on their plans to launch an Indian carrier. The Central Vigilance Commission is also understood to be considering closing the complaints of alleged irregularities in the Jet-Etihad deal lodged by BJP MP Nishikant Dubey, after examining clarifications sent on them by the Civil Aviation Ministry.
The stake sale deal was announced in April but had remained stuck due to objections from regulators, as it was felt that Etihad would yield effective control of Jet Airways. The terms of the deal have been amended since then, leading to regulatory approvals. Some politicians, including Dubey and Subramanian Swamy, had also questioned the timing of the stake sale deal which had come soon after the signing of a new bilateral air services agreement between India and Abu Dhabi.
The Union Cabinet had in September cleared the bilateral accord, allowing the countries to fly 50,000 additional seats between India and Abu Dhabi each week over the next three years, up from 13,700 earlier.
The air services agreement was signed on April 24. The FIPB had cleared the deal on July 29 with some major riders to maintain effective Indian control over the airline after the stake sale to Etihad.
Under the conditions set by FIPB, Jet would have to seek prior government approval to make any changes in the Share Holders Agreement (SHA) with Etihad or any change in share-holding of the company. The conditions also include that all shareholder disputes and disputes under SHA would have to be adjudicated under Indian law, as opposed to English law as was proposed in the SHA earlier.
Jet and Etihad were also asked to submit revised Articles of Association and finalise the composition of Jet Board by carrying out the recommended changes.
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