cyrilroy21
29th Jul 2013, 13:54
The Foreign Investment Promotion Board today cleared the proposed 24 percent equity investment by Etihad Airways into Jet Airways with some conditions.
The conditions include Jet seeking prior government of India approval for any changes in the Share Holders Agreement (SHA) with Etihad. Also, any arbitration would have to be under Indian law and not English law as proposed in the revised SHA submitted by Jet-Etihad to FIPB.
The proposal will now need clearance from the Cabinet Committee on Economic Affairs (CCEA) which may happen as early as this week itself.
So now, Etihad gets only two board seats instead of the earlier three, Naresh Goyal gets veto power which was denied to him earlier and Etihad has agreed to let the Jet Airways’ board take a final call on all matters instead of vesting this authority with several boards which were being set up in Abu Dhabi. This means commercial and other operational decisions, on paper at least, will not be taken in Abu Dhabi and that Etihad has agreed to not shift the “place of business” after equity investment to Abu Dhabi.
But a senior Government official present in today’s meeting said the airline will need some approvals under the Aircraft Rules in India even though FIPB has given its approval to the deal between Etihad and Jet. He did not elaborate on what exactly these fresh approvals were. This official also dismissed reports in the media today about any approval to the Jet-Etihad proposal being conditional, saying the FIPB approval was given without anyone present objecting to it and was subject to no further conditions.
The agreement between the two airlines envisages Rs 2,058 crore investment by Abu Dhabi’s Etihad for 24% stake in Jet Airways. The two partners had to rework the shareholder agreement substantially following doubts over “effective control and ownership” of Jet passing over to Etihad raised by FIPB and market regulator Sebi earlier.
Once the deal goes through, Goyal will have 51 percent stake in Jet; Etihad 24% and the rest will held by others. But there is no clarity on whether the Government has taken a view on how to treat the investment of Goyal, a non resident Indian, in the airline. His 51% stake and Etihad’s 24% together breach the 49% FDI limit approved by the government in airlines.
Jet has crossed the most important regulatory hurdle today. Now it needs CCEA nod for the equity deal and lots of goodwill among Cabinet ministers so that the bilateral air services agreement between India and Abu Dhabi also gets cleared by the Cabinet soon.
FIPB clears Jet?s 24% stake sale to Etihad with few strings attached - Firstpost (http://www.firstpost.com/business/fipb-clears-jets-24-stake-sale-to-etihad-with-few-strings-attached-994191.html)
The conditions include Jet seeking prior government of India approval for any changes in the Share Holders Agreement (SHA) with Etihad. Also, any arbitration would have to be under Indian law and not English law as proposed in the revised SHA submitted by Jet-Etihad to FIPB.
The proposal will now need clearance from the Cabinet Committee on Economic Affairs (CCEA) which may happen as early as this week itself.
So now, Etihad gets only two board seats instead of the earlier three, Naresh Goyal gets veto power which was denied to him earlier and Etihad has agreed to let the Jet Airways’ board take a final call on all matters instead of vesting this authority with several boards which were being set up in Abu Dhabi. This means commercial and other operational decisions, on paper at least, will not be taken in Abu Dhabi and that Etihad has agreed to not shift the “place of business” after equity investment to Abu Dhabi.
But a senior Government official present in today’s meeting said the airline will need some approvals under the Aircraft Rules in India even though FIPB has given its approval to the deal between Etihad and Jet. He did not elaborate on what exactly these fresh approvals were. This official also dismissed reports in the media today about any approval to the Jet-Etihad proposal being conditional, saying the FIPB approval was given without anyone present objecting to it and was subject to no further conditions.
The agreement between the two airlines envisages Rs 2,058 crore investment by Abu Dhabi’s Etihad for 24% stake in Jet Airways. The two partners had to rework the shareholder agreement substantially following doubts over “effective control and ownership” of Jet passing over to Etihad raised by FIPB and market regulator Sebi earlier.
Once the deal goes through, Goyal will have 51 percent stake in Jet; Etihad 24% and the rest will held by others. But there is no clarity on whether the Government has taken a view on how to treat the investment of Goyal, a non resident Indian, in the airline. His 51% stake and Etihad’s 24% together breach the 49% FDI limit approved by the government in airlines.
Jet has crossed the most important regulatory hurdle today. Now it needs CCEA nod for the equity deal and lots of goodwill among Cabinet ministers so that the bilateral air services agreement between India and Abu Dhabi also gets cleared by the Cabinet soon.
FIPB clears Jet?s 24% stake sale to Etihad with few strings attached - Firstpost (http://www.firstpost.com/business/fipb-clears-jets-24-stake-sale-to-etihad-with-few-strings-attached-994191.html)