Lenders want Goyal to quit Jet's board; SBI gets ready to pick up stake

Family member may replace Naresh Goyal on airline's board

As lenders, led by State Bank of India, are firming up a way ahead for ailing private carrier Jet Airways, the future role of promoter Naresh Goyal, his stake in the airline and the composition of the board could steer the direction of talks between the two sides, sources in the banking industry said.

While bankers met top executives of Jet on Tuesday to discuss the financial state of the airline and how loans of over Rs 8,000 crore could be recast, it is learnt that SBI could possibly consider converting its debt to equity in the Goyal-led company. Also, lenders are clear that Goyal must step down from the Jet board, though there could be an arrangement by which he may continue his association with the airline in a non-executive capacity. ‘’The conversation is around reducing Goyal’s say in operating the airline,’’ a banker pointed out. 

There’s speculation that one of his family members could replace Goyal, 69, on the Jet board. But that person is unlikely to chair the airline board, a person in the know said. His wife Anita Goyal, who’s actively involved in running the company, is already on the Jet board, and may have to step down as well. His son Nivaan Goyal, in his 20s and being groomed for a bigger role, could perhaps be a possible choice for a board position. Naresh Goyal and Anita Goyal also have a daughter Namrata Goyal, who’s into film production. There will be a rejig of the current board, a source said. 

Goyal, holding about 51 per cent in Jet, is believed to be working on a dilution of stake, bringing it down to around half. According to discussions, SBI would hold more than 20 per cent stake in the airline, which turned 25 last year. Jet’s foreign partner Etihad, with 24 per cent in the airline, was in discussions to raise its stake, but that scenario may have changed with lenders, especially SBI, taking the driver’s seat in the deal. 

Recently, Jet held talks with other potential investors, including the Tata group and some leading private equity firms. However, the talks failed to fructify because of various reasons, mainly as the investors insisted on Naresh Goyal’s complete exit from the airline as a condition for picking up a stake. 

Ahead of Lok Sabha elections, the government does not want another Indian airline going bust and is keen that Jet is bailed out, sources indicated. However, ministers have made statements saying that the government does not want to intervene in the business of private airlines. 

Analysts have compared the decline of Jet with that of Vijay Mallya-founded Kingfisher Airlines, which owed more than Rs 9,000 crore to some 17 lenders including SBI. The loans had become NPAs on the banks’ books in 2012.

In 2011, Kingfisher Airlines lenders had converted a debt of around Rs 1,600 crore at a premium of 60 per cent, giving the airline a lifeline and the consortium of banks a 23 per cent stake.

It is learnt that lenders to Jet will finalise their decision on providing fresh financial support by end of January. When asked to confirm, a source in the company said it’s an evolving matter and can be described as ‘’work in progress’’. Lenders believe that there’s still room for planning and reducing losses. 

Along with debt restructuring and conversion of loans to equity, Jet is also seeking fresh loans of around Rs 1,500 crore which would help in repaying debt. The airline has around Rs 1,700 crore loan repayment between December-March, according to rating agency ICRA. 

The parties concerned are meanwhile awaiting the report of Jet's forensic audit. Lenders also have to assess provisioning burden for the stressed account. Jet is a standard account as of now but from a sector which is showing signs of stress. Hence, prudential provisions would be more than what is done for normal account, a senior executive with a public sector bank said.

Following the recent default, Jet’s lenders would have to initiate resolution process within 180 days, according to the Reserve Bank norms. Last week, Jet informed the stock exchange that payment of interest and principal amount due to the consortium of banks on December 31 was delayed due to temporary cash flow mismatch. It said the company had engaged with banks on the same. The default prompted Icra to downgrade Jet’s rating to ‘D’. This was the seventh rating downgrade for Jet since March 2017. Loan instruments, which are in default or those expected to touch that mark soon, are assigned 'D' rating, according to the rating agency.

As of September end, the airline had a debt of Rs 8,200 crore. Around Rs 165 crore of principal amount was due for repayment by December end, it is learnt.

Recast plan

• Naresh Goyal may halve his stake from 51% now

• SBI likely to hold more than 20% in the airline

• Etihad unlikely to raise stake from the current 24%

• Tatas, PE firms drop plans to invest in Jet