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Etihad close to buying minority stake in Jet

Source : BUSINESS_STANDARD
Last Updated: Mon, Nov 26, 2012 19:42 hrs
Ground staff guide a Jet Airways aircraft towards a gate on the tarmac at Bengaluru International Airport in Bangalore

Naresh Goyal-promoted Jet Airways, the country's second-largest domestic carrier, is close to striking a deal with Abu Dhabi's Etihad Airways, which will pick up a minority stake in the company.

Confirming the development, a top civil aviation ministry functionary said: "Etihad's deal to buy a minority equity stake in Jet Airways should be concluded within 45 days. The two parties have been in talks for a month and a half. There will be more than just stake sale if the deal goes through." However, it is not clear whether Etihad is looking to buy a 24 per cent stake in Jet or more. Based on Monday's stock price, the Indian carrier has a market capitalisation of Rs 4,838 crore.

The possibility of a deal got a thumbs-up from the stock market, with the Jet Airways scrip surging as much as 10.81 per cent to close at Rs 560.40 on Monday.

The move comes just two months after the government liberalised its policy on foreign direct investment in civil aviation, despite tough resistance from the Trinamool Congress, by permitting foreign airlines to buy up to 49 per cent in domestic carriers.

Responding to a query, a Jet spokesperson said: "The queries are both speculative and premature. No decision has been taken by either the entities or their managements. If Jet and/or its promoters take any decision, it will be in compliance with the FDI policy, applicable laws and based on the advice of their respective boards, their legal and financial advisors and merchant bankers."

According to analysts, the airline has been aiming to reduce its debt by $400 million and raising money through fresh sale of shares could help it in that.

An Etihad spokesperson said: "Etihad Airways has identified equity investments in other airlines as an important evolution of its successful partnership strategy. Such investments will be made where Etihad believes the commercial prospects are strong, where there are like-minded business philosophies, and where such commitment will be welcomed."

Amber Dubey, partner and head (aviation), KPMG, said about the possible deal: "The Indian carrier would get access to the much-needed funds, global network, latest technology and management best practices. The global airline, on the other hand, would get access to the traffic originating from India's interiors. The Indian passenger would gain from increased competition, which is expected to lead to better offerings, seamless travel through code shares and cheaper airfares."

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