State Bank of India (SBI) chairman Rajnish Kumar will push for waiver of open offer and pricing relaxation for Abu Dhabi-based Etihad Airways that’s willing to invest in the near-bankrupt Jet Airways.
Kumar will meet the market regular Securities Board of India (Sebi) chief Ajay Tyagi at the earliest to secure the waiver under the regulator’s Substantial Acquisition of Shares and Takeover Code.
Banking sources divulged that Etihad was unwilling to pay beyond Rs 150 per share for the cash-strapped Jet Airways. This has been set as a pre-condition for further infusion of funds in Jet Airways. Jet Airways shares closed at Rs 271 on the BSE on Wednesday.
The SBI chief’s effort to get the waivers for Etihad Airways comes in the back of its move to take up to 49 per cent stake in the Naresh Goel-controlled airline. Goel was willing to step aside from Jet Airways’s board and chairmanship only if Etihad enhanced its quote for Jet shares.
Etihad group chief executive Tony Douglas had written to Rajnish Kumar saying that the airline would not go beyond Rs 150 per share besides seeking an exemption from Sebi on preferential pricing and open offer guidelines in order to invest as well as bailout Jet Airways.
Market sources said that Etihad might have to revise its offer to up to Rs 250-Rs 260 per share, i.e. the Jet counter’s six-month average. Etihad told SBI of pledging 50 per cent of Jet Airways' shares against infusion of $35 million.
The Abu Dhabi-based airline owns a 24 per cent stake in Jet Airways and would most likely bring in more funds. The Etihad offer of Rs 150 a share is a marked climbdown from the Rs 754.74 a share it had paid to Jet Airways in 2013 to secure the 24 percent stake.
SBI is the lead banker of the consortium that provided debt to Jet. When contacted a SBI spokesperson told FC, "It is a policy of the bank not to comment upon the individual accounts and its treatments".
Early this month, State Bank of India had said lenders were considering a resolution plan for Jet Airways to ensure its long-term viability.
Etihad and the banks have been discussing an emergency funding mechanism that the foreign carrier is expected infuse into Jet. Etihad, along with banks, plans to approach the Sebi on the pricing for fresh equity and the relaxation.
Etihad wants an exemption from giving an open offer, which will be triggered if it invests beyond 25 per cent in Jet Airways. As per regulations, any investment that goes beyond 25 per cent of the total shareholding by any single shareholder triggers an open offer.
The banks want both the sides to finalise a deal as soon possible, as Jet Airways has defaulted on debt repayments. The airline needs to make another payment of Rs 1,700 crore by March this year.
In December 2018, Jet Airways was in discussions with the SBI for raising Rs 1,500 crore short-term loan to meet its working capital requirement and some payment obligations, a source said. Jet's stock is now hovering around Rs 270 a share, and that doesn't give much space for Goyal to bargain. The airline at present has a market cap of Rs 3,112 crore. On the other hand, it has debts of over Rs 8,000 crore.
Etihad is likely to provide a guarantee for the loan, he said.
Jet Airways, which has posted three consecutive quarterly losses of over Rs 1,000 crore each since March, already has as much as Rs 8,052 of debt on its books as on 30 September, 2018.
The airline has been looking for funds for the past few months to keep it afloat amid rising debt and loan defaults besides non-payment of salary to its employees.
On 17 January, Goyal had said he was ready to invest up to Rs 700 crore in Jet Airways on the condition that his stake does not fall below 25 per cent. Goyal’s offer came against the backdrop of strategic partner Etihad reportedly putting forward strict conditions, including that Goyal should give up control, for infusing funds into the crisis-hit carrier.
Etihad CEO had, in a veiled warning, said, “Jet Airways will not be able to continue funding its operation beyond the current week and Etihad is willing to immediately release $ 35 million if their conditions are met.”