Will Tatas make a bid for the beleaguered Naresh-Goyal airline, Jet Airways? Media reports suggest a meeting will be held today (16 November) between the board of Tata Sons to vet a proposal to buy out the cash-strapped Jet Airways, which sent its share prices soaring over 26 percent, according to people familiar with the development.
The deal may fructify only on the condition that Jet Airways' founder-chairman Naresh Goyal gives up control, according to a report in the Business Standard. Jet Airways Chairman Naresh Goyal and his wife currently own 51 percent of the stake in the airline, while Etihad owns 24 percent stake in the company.
The Tata Group wants to buy the entire company or its aircraft and infrastructure, the Economic Times had reported earlier. "The Tatas are interested in buying out the entire airline and significantly scaling up the existing business," a top official was quoted as saying by the newspaper.
According to some news reports, Goyal has agreed to give up control in the airline depending on the premium Tatas will pay the founder and chairman of the beleaguered airline.
The two sides are inching towards a two-step transaction that would first see Jet merging with Tata-SIA that runs Vistara through a share swap to form a new JV, which will have the Goyal family, Etihad, Tata Sons and Singapore Airlines as partners.
The $103-billion Tata Sons is already in the airline industry through joint ventures with Singapore Airlines which operates Vistara, and budget airline Air Asia. Tatas has 51 percent stake each in full-service airline Vistara and budget carrier AirAsia India -- where 49 percent is with Malaysia's AirAsia Berhad.
The proposal for snapping up stake in Jet Airways also comes at a time when Vistara is looking to fly overseas. Sources said that Vistara could be looking at having a stake in Jet Airways, which operates on a significant number of foreign routes.
There could also be a possibility of the Jet brand being phased out if the Tatas decide to extend the reach of Vistara, the BS report said.
Saurabh Agarwal, chief financial officer of Tata Sons, is leading the discussions while Jet Airways is represented by its chairman Naresh Goyal, the Mint newspaper reported earlier, citing the sources who it said asked not to be identified as the talks are private. "An in-house team of Tata Sons is currently conducting due diligence on Jet Airways, which is expected to continue for the next few weeks," the newspaper quoted one of the two people as saying.
The airline's deputy chief executive and chief financial officer Amit Agarwal earlier this week diffused the news report by admitting that the company was in talks with "multiple interested parties" for fund infusion as well as selling six of its Boeing 777 planes along with a stake in its loyalty progarmme Jet Privilege. However, people in the know of the development told PTI that "Tata Sons board is meeting tomorrow (Friday) to consider the proposal to bid for Jet Airways."
Both -- Tata Sons and Jet Airways -- refused to comment on news reports. "We do not comment on speculation," a spokesperson at Tata Sons, which originally owned the present national carrier Air India, said when asked for confirmation.
However, the news made it big on the market with the Jet Airways counter soaring. The rumour of the rescue deal by the Tatas sent Jet shares zooming 26.41 percent on the NSE to settle at Rs 326. In the past four trading sessions, the stock gained over 32 percent.
Meanwhile, there have been talks about government nudging the Tatas to bail out the struggling airline in the social media. But an aviation ministry official denied that government is brokering a deal which may include the lenders and other stakeholders of the Naresh Goyal-run airline taking a haircut.
Stating that the ministry is not "involved" in any such process at this stage, aviation secretary RN Choubey said that "the aviation ministry is not involved in this process so far. Hence any question of haircut (by banks and other stakeholders) etc does not arise."
Jet Airways on Monday reported a whopping Rs 1,261 crore in consolidated net losses for the three months to September against a profit of Rs 71 crore in the same period year ago, impacted by higher fuel cost and the ongoing plunge in the rupee. On a standalone basis, the Naresh Goyal-promoted airline, which has been facing cash crunch for some time leading to delayed payments, reported a net loss of Rs 1,297.46 crore against a profit of Rs 49.63 crore a year ago.
Jet, which has about 16,000 employees, including 2,000 pilots, has been facing a cash crunch due to which it has been delaying salaries of its employees. The airline has been delaying salary disbursement to its senior management, pilots and engineers since August. While it has paid 25 percent amount of the September salaries to these categories of staff on 25 October, the remaining 75 percent of the amount is yet to be paid. Besides, there are salaries for the month of October.
-- With inputs from agencies