Wednesday , February 24 2021

Staring at default, delaying the Tata-Jet deal can hit Goyal



Tata Sons chairman N Chandrasekaran, who is not interested in acquiring Air India – mainly due to several conditions for divestiture – has spearheaded the talks with Jet in the belief that the acquisition will help scale Tatas build in the aviation business, and change it from becoming a dominant player.

As reported by TOI on November 15, the agreement will give the group a combined market share of 24% in the country. Jet, with a fleet of 124 aircraft, has a domestic market share of 16% and around 14% on international routes. Air Asia India and 22 Vistara fleets have a market share of around 4% each in the country; not operating internationally. This transaction will also provide Tatas with a large network and slots at airports that are busy throughout the world.

Jet Airways, where Naresh Goyal is with 51% and Abu Dhabi's Etihad with 24% are significant shareholders, are looking at financial defaults in the coming days. Jet Airways shares ended Rs 347 at BSE, closing at four months high before Tata Sons issued a statement.

While Friday's board meeting may have a serious effect on deal makers at Bombay House, it brings greater concern to Goyal and his airline. Jet has postponed salaries and failed to pay the vendor payments and some of the aircraft that were hired may be threatened with expropriation.

According to the Tata Sons Articles of Association, important acquisition proposals such as Jet or investments involving more than 500 crore, require majority support from the director of the Tata Trust nomination. At the moment, there is only one prospective Trust on the board of Tata Sons-Amit Chandra, MD from Bain Capital-after Vijay Singh and Nitin Nohria resigned. Besides Chandra and Chandrasekaran, the council has five external members – including two industrialists, Ajay Piramal and Venu Srinivasan – and three Tata executives.

Jet Airways, where Goyal is with 51% and Abu Dhabi's Etihad with 24% are significant shareholders, are looking at financial defaults in the coming days. Jet Airways shares ended Rs 347 at BSE, closing at four months high before Tata Sons issued a statement.

While Friday's board meeting may have a serious effect on deal makers at Bombay House, it brings greater concern to Goyal and his airline. Jet has postponed salaries and failed to pay the vendor payments and some of the aircraft that were hired may be threatened with expropriation.

American purchasing investor TPG has remained in turmoil but has concerns about control issues since Indian regulations limit foreign ownership to 49%. Delta Airlines has been exploring investments in a combination of Jet and Air India earlier this year, but quickly abandoned the idea, said bankers familiar with the developments.


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