Jet Airways, which reported its third consecutive quarterly losses for the quarter ending September, appears to not have scared away its suitor, the Tata Group. Last Monday, shares of the cash-strapped airline had soared 9.5% on reports of initiation of a second round of talks with the salt to software conglomerate for a deal.
The latest buzz is that the Tata Group has started its due diligence process in order to pick up a controlling stake in the airline. "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," a source directly aware of the development told Mint, adding that the conglomerate is also keen to acquire Jet's stake in its loyalty programme, Jet Privilege. Saurabh Agarwal, chief financial officer of Tata Sons Ltd, is leading the discussions while Jet Airways is represented by its chairman Naresh Goyal.
The daily had previously reported that Goyal had approached potential investors, including the Tata Group, Reliance Industries' chairman Mukesh Ambani and international airlines, late last month for a stake sale. The Tata Group had shown interest, but the deal was contingent on Goyal relinquishing operational control.
"Things have moved at a fast pace since then and Goyal has in principle agreed to cede control to Tatas, subject to fulfilment of certain conditions," said another source. "Such a condition includes how much premium the Tata Group is willing to pay for Goyal to give up control and whether he [Goyal] will continue in some capacity if the talks are successful."
The stake purchase, if it goes through, is expected to make Tata Group the second biggest airline operator in the country after IndiGo in terms of market share, and third-largest in terms of fleet size. The Group already owns substantial stake in two carriers - 51% in Vistara and 49% in AirAsia India. With Jet under its fold, the Tata Group-owned airlines would have a combined market share of 23.6%, up from 8.2% as of September, as compared to 43.2% for IndiGo.
However, last week, when asked to clarify news reports of a second round of talks with the Tatas, Jet Airways had informed the exchanges that the news was "speculative in nature". It had added that "there was no discussion or decision in the Board which would require a disclosure" under SEBI norms. The exchange has sought a clarification on the latest buzz about the ongoing due diligence, too, but a response is still awaited.