Mumbai, April 24 (IANS) Airline major Jet Airways Wednesday said it would seek the approval of its shareholders through an extraordinary general meeting for issuing the company's 2.73 crore equity shares to the Abu Dhabi-based Etihad Airways.
"The board of directors has approved, subject to compliance with applicable laws and regulations, the issuance, by way of a preferential allotment... of 27,263,372 (2.73 crore) equity shares of the face value of Rs.10 to Etihad Airways at a price of not less than Rs.754.73 (including premium of Rs.744.73 per share) per equity share," the company informed the Bombay Stock Exchange (BSE) Wednesday.
"The board of directors has granted approval for the company and Etihad to enter into, inter alia, the investment agreement in relation to such issuance and allotment and other documents incidental thereto. The said preferential allotment is subject to various conditions precedent, including regulatory approvals," the company said.
The extraordinary general meeting of shareholders will be held later.
The deal is expected to garner around Rs.2,000 crore ($370.37 million) for Jet Airways, which reported a net profit of Rs.85 crore in the third quarter of 2012-13, after a net loss of Rs.101.22 crore in the similar period of the previous year.
The company's total income in the quarter under review had increased by 6.6 percent to Rs.4,205.77 crore, from Rs.3,939.16 crore in the corresponding quarter of last fiscal.
The two airlines were negotiating a Jet Airways' stake sale agreement since last year. However, the deal was delayed due to investment protection and management control issues.
Etihad Airways already has invested in Air Berlin, Air Seychelles and Aer Lingus, Ireland's national carrier.
The Jet Airways' scrip at the BSE had risen by 4.43 percent or 24.35 points up at Rs.573.85 per share from its previous close of Rs.549.50. Talk of a possible stake sale has been doing the rounds for quite some time, ever since the government allowed foreign airlines to pick up a maximum of 49 percent shares in domestic carriers last year.
According to sectoral experts, the deal will bring in fresh funding opportunity for Jet Airways, which has an estimated debt of around Rs.12,000 crore, whereas passengers will get better connectivity options through the Jet-Etihad network.
"It is a very positive move. There were negotiations going on for a long time. It will provide Jet with much needed financing options and a major international partner. Passengers can look forward to using the networks of both the companies for international and domestic travel," Sharan Lillaney, aviation analyst at broking firm Angel Broking, told IANS.
Lillaney added that the company's scrip at the BSE might touch its circuit limit of Rs.659.40, when the markets open up for trade Thursday.
Earlier, Jet-Etihad Airways concluded a deal Feb 27 to acquire three Jet Airways slots at London airport for $70 million.
In February, Etihad chief executive James Hogan and Jet Airways' chairman Naresh Goyal led a joint delegation of both the airlines and separately met Finance Minister P. Chidambaram, Civil Aviation Minister Ajit Singh and Commerce Minister Anand Sharma to apprise them about a possible stake sale deal.
Last year, the government allowed foreign airlines to invest up to 49 percent in private domestic carriers.
Foreign carriers were not allowed to directly invest in Indian carriers for security reasons although 49 percent FDI by non-airline players was allowed.
The Indian civil aviation sector has been going through a tough operating environment as high fuel and interest costs have hurt it.
The government expects that the decision will help bring in more funds to the airlines that have been cold-shouldered by banks.
