By BS Reporter
Etihad Airways is expected to conclude a deal with Jet Airways next month to pick up 24 per cent stake in India's second largest carrier by market share.
Sources said there was a broad agreement between both sides on various issues, and a preliminary agreement was expected next month. Negotiations between the two airlines have been on over several months.
Sources said Abu Dhabi-based Etihad would pick up 24 per cent stake in a deal valued at Rs 1,600-1,700 crore. Jet's share closed four per cent higher at Rs 611.85 on the BSE on Friday.
The deal will be the first in the aviation sector after the government relaxed rules last year, allowing foreign airlines to buy up to 49 per cent stake in Indian carriers.
Equity infusion from Etihad will allow Jet to improve its debt to equity ratio and cut debt. Jet's attempts to raise funds through equity investors in India and qualified institutional placements have failed.
Jet posted a loss of Rs 1,236 crore in FY12. The first half of FY13 saw a mixed result. The airline has been trying to trim its loss by reducing capacity and pulling out of loss-making domestic and international routes.
Another possible outcome of the agreement could be the shifting of Jet's international hub to Abu Dhabi. Its main hubs for global routes in India are Mumbai and Delhi. Brussels is its only hub outside the country.
Naresh Goyal owns 80 per cent of Jet Airways through his Isle of Man-registered Tail Winds Ltd. Goyal is likely to convert the shares owned by the holding company into his personal stake to comply with foreign investment regulations, a government source had said earlier.
Etihad, which has posted profit for a second year in a row, has been on an acquisition spree. It picked up stakes in Air Berlin, Air Seychelles, Aer Lingus and Virgin Australia over the last two years. It has tied up with Air France-KLM and operates code share flights on European flights.
Jet had informed the stock exchange earlier this month: "Various structures are being explored by the legal and commercial teams. As no agreement has been reached with Etihad as yet, no regulatory approvals have been sought at present."