Jet Airways' lenders, Etihad approach Hindujas to buy stake in airline: report
BusinessToday.In May 15, 2019
Days after India-born industrialist brothers, Srichand and GP Hinduja, reclaimed the title of Britain's wealthiest with fortunes of 22 billion pounds to their name, the buzz is that they have been approached to buy a stake in the grounded Jet Airways. Even as its lenders are scrambling to find a suitor, the cash-starved carrier has witnessed a top management exodus in the past two days. CEO Vinay Dube as well as the airline's CFO, company secretary and chief people officer have all put in their papers.
Sources in the know told The Economic Times that the Hinduja Group started showing interest after Etihad representatives approached GP Hinduja, the elder brother, who heads the group. He, in turn, passed the ball on to Ashok Hinduja, the younger brother leading the India business. "The Hinduja Group is non-committal [on Jet], but will keep its options open," a senior executive told the daily, adding that the Group would meet Etihad executives and Jet Airways' lenders in the coming days, though no date had been fixed yet. The talks are still at an exploratory stage and no formal meeting or dialogue has taken place yet.
Jet Airways had grounded operations on April 17 after banks refused an emergency infusion of Rs 400 crore requested by the airline in order to continue services. Back in March, the lenders had taken control of the company's board after founder Naresh Goyal and his wife exited the company. The SBI-led consortium of 26 lenders had then initiated a bidding process to sell stake in the airline to recover some of its Rs 8,500 crore dues.
Of the four entities that had submitted expressions of interest, Etihad, which owns 24 per cent of Jet Airways and is the second largest stakeholder, was reportedly the only one to submit a bid on Friday. "Etihad Airways today confirmed its interest to re-invest in a minority stake in India's Jet Airways, subject to conditions," an Etihad spokesperson said earlier this week, pointing out that India was one of the world's fastest-growing air transport markets and a significant economic partner of the UAE. However, the Gulf carrier reiterated that it couldn't be expected to be the sole investor in Jet. "Amongst other requirements, additional suitable investors would need to provide the majority of Jet Airways' required recapitalisation," the spokesperson added.
According to the daily, Etihad has not only refused to increase its current shareholding but also said it would invest only up to Rs 1,700 crore in the airline. It was also non-committal about taking on Jet Airways' liabilities and had asked banks to take a 70-80% haircut on the airline's debt. As things stand, turning around the now wingless Jet Airways is not for the fainthearted, or the tight-fisted. The lenders have reportedly said they want to rework all lease and engineering contracts of the grounded airline, halve lease rentals and demand a significant reduction in maintenance reserves. However, even if these cuts come through, investors estimate that Jet Airways will need up to Rs 20,000 crore over the next three years to fly again.
The Hindujas certainly have deep enough pockets to pull this off. Srichand and Gopichand Hinduja posted a hike of 1.35 billion pounds in their fortunes over the previous year to grab the top spot on The Sunday Times Rich List 2019. They had secured the number one rank back in 2014 and 2017. The duo along with two other brothers, Prakash and Ashok, control more than 50 companies with a total turnover of nearly 40 billion pounds worldwide in 2018. More importantly, the Group has been interested in the aviation space for a while now.
In 2001, the Hinduja Group had bid for Air India, when the government had put up 40% of the carrier for sale in its maiden attempt at privatisation. It was reportedly the only bidder apart from a consortium of Tata Sons and Singapore Airlines to show interest in the Maharajah. The government had simultaneously put up 26% of Indian Airlines for sale, and the Hindujas had shown interest along with Videocon International. The stakes sales were eventually scrapped but the Group had reportedly been disqualified from the bidding process due to the brothers' alleged involvement in the Bofors scam.
There's another factor that may influence the Hindujas' interest in Jet Airways - the brothers have not only stuck to a majority stake in the companies they own but have also kept away from companies that are embroiled in ownership disputes or hostile takeovers. The existing out-of-job employees of the airline will be keenly watching developments here on.
With PTI inputs