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Naresh Goyal-promoted Jet Airways’ Rs 2,058-crore deal to sell 24 per cent stake to Etihad Airways has hit an air pocket, with the ministry of civil aviation raising objections to the proposal of the West Asian carrier to relocate a few business departments to Abu Dhabi, after the allotment of shares.
A senior ministry official said, “We have raised concern on two grounds. In the proposal submitted last week, Etihad Airways indicated some departments of business would be relocated to Abu Dhabi on completion of the stake sale. Also, while in the earlier agreement, Etihad had mentioned two-thirds of the directors would be Indian citizens, this hasn’t been mentioned in the latest filing.”
The ministry of corporate affairs has raised questions on Etihad’s rights to nominate three directors on the board and, despite being a minority shareholder in the company, decide on the vice-chairman. The two ministries had raised these objections at the Foreign Investment Promotion Board meeting last week, and this led to a decision on the deal being deferred.
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An emailed query to Jet Airways on the issue remained unanswered.
According to Press Note 6 of the 2012 series, foreign direct investment (FDI) in Indian airlines is permitted on the grounds that the company be registered in India and have its principal place of business here. It stipulates the chairman and at least two-thirds of the directors on the board should be Indian citizens and substantial ownership and effective control be vested with Indian nationals. Etihad Airways has nominated three directors on the board of the company — Chief Executive Officer James Hogan, Chief Financial Officer James Rigney and Harsh Mohan, vice-president (internal audit and risk management).
Jet can nominate four directors. The company would also have seven independent directors. In April, Jet had announced it would sell 24 per cent equity to the Abu Dhabi-based carrier for $370 million (Rs 2,058 crore). The deal accounts for the highest foreign investment committed in the Indian aviation sector since the government relaxed foreign direct investment norms in September 2012.
