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Seeking shareholders' approval for sale of 24% stake to Abu Dhabi-based Etihad, Jet Airways Chairman Naresh Goyal today said this strategic alliance would improve the Indian carrier's profitability and lower the costs.
"Etihad investment will help us to deleverage and grow in a sustainable manner," Goyal said here while addressing Jet Airway's shareholders at an Extra Ordinary General Meeting (EGM) convened to seek their approval for the Etihad deal.
At the EGM, shareholders approved the proposed issue of shares on a preferential basis to Etihad. However, these shares would be allotted after completion of all regulatory approvals.
The deal is being looked into by Competition Commission of India (CCI) and Securities and Exchange Board of India (Sebi) among other regulators.
"The commercial agreement with Etihad will help us to expand our network, reduce costs and increase profitability," he added.
The company, however, deferred a proposal to amend its Article of Association, approval for which was also scheduled to be sought at today's EGM.
Goyal said the resolution to amend the Article of Association would be taken up after getting necessary regulatory approvals for the deal.
Shares of the company were trading at Rs 568.75, down 2.65% on the BSE at 1212 hours.
As part of the deal, Etihad would acquire 24% stake in Jet Airways for about Rs 2,058 crore. The deal marks the first investment by a foreign carrier in an Indian airline since the change in the country's FDI policy last September.
Both the companies have said that substantial ownership and effective control will remain with Indian nationals, with Goyal as non-executive Chairman holding 51% stake.
Jet had earlier said it was proposing to modify the existing Articles of Association to reflect the shareholders' agreement between its promoters and Etihad.
"Further, provisions have been added in the Articles of Association to further improve the standards of corporate governance of the company," it had earlier said.
These amendments included Etihad-nominated directors on Jet board not being liable for any default or failure of the company in complying with the provisions of any applicable laws.
"The Investor (Etihad) Board Members shall not be identified as "officer in default" of the company or occupiers of any premises used by the company under laws," Jet had said in its EGM notice.
Pursuant to the deal, Naresh Goyal-led promoter group can nominate four directors (who would be Indian citizens), while Etihad would nominate three directors. Besides, seven would be Independent Directors.
These amendments also barred the promoters from transferring any shares without a prior written consent of Etihad, among other conditions. Besides, Etihad was also said to be getting powers to appoint auditors and these provisions are being seen as Jet giving joint control to the Abu Dhabi carrier, along with the existing promoters.
Clarifications have already been sought by capital markets regulator Sebi and fair trade watchdog CCI on the deal.
Goel said the company has not got anything in writing from Sebi and it is too early to comment on the clarifications sought by them.
