India's Jet shares plunge on Etihad deal delay

  • Share via facebook
  • Tweet this
  • Bookmark and Share

Shares in Jet Airways fell as much as 6.8 percent on Monday, a day after the chairman of Etihad Airways said the Abu Dhabi-based carrier needed to revise the terms of a pending deal to buy a stake in the Indian airline.

Etihad Chairman Sheikh Hamed bin Zayed al-Nahayan told Reuters on Sunday it was too soon to say when a final agreement between the two carriers would be struck.

The deal would be the first since India relaxed ownership rules in September and allowed foreign carriers to buy up to 49 percent in local carriers, which are battling stiff competition and high operating costs.

Jet shares have more than doubled in value in the past 10 months to reach a high of 647.80 rupees on Jan. 28. But in the past three weeks they have slumped as much as 11 percent as the companies struggled to seal an agreement.

At 0546 GMT, Jet shares were down 5.35 percent at INR584.9 in a Mumbai market that rose 0.25 percent.

Finding a way around Jet's complicated shareholding pattern and having a significant say in Jet's board decisions could be Etihad's concerns, said Rajan Mehra, an industry expert and the India head of U.S.-based private jet operator Universal Aviation.

The founder of Jet is likely to convert shares owned by its holding company into his personal stake to comply with foreign investment regulations, an Indian government source has said.

Tail Winds Ltd, the Isle of Man-based investment vehicle of Jet founder Naresh Goyal, currently holds 79.99 percent of Jet Airways. According to Indian rules, foreign companies can hold a maximum 49 percent stake in local carriers, but so-called non-resident Indians like Goyal are exempted.

As a foreign company, Tail Winds cannot engage in share trades with another foreign company but Goyal can sell his personal stake.

Indian media reports have said Etihad is seeking half the seats on Jet's board and a say in appointing the chief executive, potentially running foul of foreign investment rules that require a majority of airline board members to be Indians.

The terms of the potential deal have not been disclosed, but the government source said last month that Etihad was in talks to pick up a 24 percent stake in Jet for up to US$330m.

A Jet spokeswoman did not immediately respond to a request for comment.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Crowded skies in the Middle East

Crowded skies in the Middle East

Aviation experts give their suggestions on how to solve the Middle...

Cracking the code

Cracking the code

Strategic codeshare agreements are a win-win situation for gulf...

Stronger together? Reviewing Emirates' historic partnership with Qantas

Stronger together? Reviewing Emirates' historic partnership with Qantas

One year after the “historic” Emirates-Qantas partnership deal...

1
Most Discussed
  • 14
    Baby NOT on board?

    The people commenting here were all 20 years old when they were born, never cried, never screamed and never ran etc etc.
    more

    Thursday, 21 August 2014 8:30 AM - Amer
  • 7
    CEO of Just Falafel to step down

    Just Falafel was a disaster waiting to happen. The food isn't even that good and the focus wasn't on building the brand and operations. Instead they focused... more

    Thursday, 21 August 2014 8:37 PM - milad
  • 6
    Belgium diplomat arrested for pulling veil from Qatari princess

    If its illegal to dress in a certain way why didnt the police do something about it.

    Whereever the Europeans go, they demand that society conforms... more

    Thursday, 21 August 2014 8:37 PM - Ghazi