After refusing to extend any emergency funding to Jet Airways, lenders on Thursday said they will focus on the bidding process to get an investor to run the crippled airline.
However, with the share price of the airline crashing by 32.23 per cent to Rs 163.90 on the stock exchanges a day after the airline decided to shut down operations, the bidding process and the valuation of the airline is likely to run into hurdles, market sources said.
The lenders, after due deliberations, decided that the best way forward for the survival of Jet Airways is to get the binding bids from potential investors who have expressed EoI (expression of interest) and have been issued bid documents on April 16, according to a spokesperson for the lenders. "Lenders are reasonably hopeful that the bid process is likely to be successful in determining fair value of the enterprise in a transparent manner," said a spokesperson for lenders.
If the bidding process fails, banks will have to take the airline to the bankruptcy court - the National Company Law Tribunal (NCLT) - for a suitable resolution plan or liquidation. If the airline goes for liquidation, banks are unlikely to get much as there are not much tangible assets for loan recovery.
Jet shares faced intense selling as worried investors dumped the shares as the revival of the airline has become bleak after the banks refused to provide emergency funding. "We don't think it's easy to revive an airline after it closes down. At least half a dozen airlines closed down operations in the last 20 years, but none of them were revived. Even if a new investor comes in, he will have to pump in huge funds," said veteran BSE broker Pawan Dharnidharka.
Herculean task ahead for revival of Jet Airways
It's going to be a Herculean task to revive Jet Airways which closed down operations on Wednesday. With no tangible assets and share prices on a free fall, it remains to be seen how many bidders will seriously bid for the airline. Lenders which have sink Rs 8000 crore in the airline haven't many choices. Many observers expect the airline to land up in the bankruptcy court for liquidation.
Banks, led by State Bank of India (SBI), which have an exposure of over Rs 8000 crore informed Jet Airways late in the night on Tuesday that they are unable to consider its request for critical interim funding. Bankers in the consortium were pided on the issue of funding Jet Airways. "The airline will come to banks for more funds once the Rs 400 crore is exhausted in a few days. The bidding process to bring in a new promoter/ investor will take at least two months. It was going to be a tough task to bail out the airline on a daily basis. Nearly half of the banks were against providing emergency funding," said an official.
Banks which have an exposure of over Rs 8,000 crore in the crippled airline was dilly-dallying on releasing Rs 1,500 crore as promised in the resolution plan. State Bank of India had this week said the bid process for "orderly sale" of equity in the airline is currently being run by SBI Caps and is being vetted by the legal team. "The prospective bidders will be shortlisted by SBI Caps shortly," an SBI spokesperson said. "The proposed equity conversion by banks, if any, will be undertaken as a transitory mechanism to facilitate the bidding cum sale process. "SBI is acting on behalf of the group of lenders as part of the Bank Led Resolution Process," he said.