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Abu Dhabi-based Etihad Airlines has agreed to halve the number of
directors on the Jet Airways board to two posts under the Rs 2,058 crore
deal, giving the Indian promoters ‘effective control’ of the
carrier. This, alongwith other details of an amended shareholding
agreement (SHA), has been forwarded to Finance Ministry ahead of the FIPB meeting on July 29 to consider the proposal.
As per the revised shareholding agreement, Etihad would have two
directors on the board after the deal, as against the earlier proposal
of four directors in the 10-member board.

This seeks to address the concerns of Foreign Investment Promotion
Board (FIPB) and market regulator Sebi with regard to effective control
after the foreign direct investment, which is the largest FDI in the aviation space so far. The agreement says that major decisions,
including appointment of independent directors and the chairman and
vice-chairman will now be taken on the basis of majority of
votes. However, there will be no change in the shareholding pattern with
Etihad picking up 24 per cent, key promoter Naresh Goyal holding 51 per
cent and the remaining 25 per cent with others,including institutions
and individuals.

Besides Finance Ministry, the Department of Industrial Policy and
Promotion ( DIPP)would be scrutinising the revised proposal over the
weekend so that a firm view could be taken at the meeting.

Shares of Jet Airways jumped 19.36 per cent to Rs 402 in afternoon trade on the BSE. An NRI can hold up to 100 per cent equity in aviation companies
sources said adding the FIPB would have to satisfy itself about the NRI
status of Goyal before giving its nod to the deal. The FIPB last month
deferred a decision on Jet’s proposal to sell a 24 per cent stake to
Etihad. “Jet have given revised shareholding agreement to the Finance
Ministry and we are examining it. The matter will come before FIPB on
July 29.

The FIPB has also received comments of market regulator Sebi last
week with regard to effective control of the airline following the
deal. Sebi had earlier objected to the proposed presence of four
directors of Etihad on Jet board observing that the agreement would have
allowed Eithad to have a say in all major decision, including
appointment of independent directors. Besides, the Revenue Department
was looking deeper into the proposed deal to identify the beneficial
owners and check whether it is structured in a way to evade taxes.


This article has been shared by student of ICAI vinanti zatakiya. You can reached her at [email protected]

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