Tatas likely to bail out cash-strapped Jet Airways

Nov 15 (AZINS) On Thursday, several media outlets reported that the Modi govt has sought Tata Sons Ltd’s help to revive floundering Jet Airways India Ltd.

Tata Sons is believed to be in advanced talks with the government about a potential haircut from state-run banks on Jet’s loans while the Airports Authority of India is willing to forgo some of its dues.

One report stated that Jet Airways -  controlled by Naresh Goyal - and the Tata group are inching towards a two-step transaction.

 The first would see the merger of Jet with TATA-SIA (JV between Tatas and Singapore Airlines) that runs Vistara. The second would involve the purchase of the Goyal family's sake in that combined entity by Singapore Airlines.

The Naresh Goyal family, Etihad, Tata Sons and Singapore Airlines will all be partners in this new endeavour and in the latter stage, Singapore Airlines might buy out the shares of the Goyal family, to give them a complete exit.

Etihad might continue as a minority partner but if they seek an exit, that Tata-Singapore Airlines partnership will buy them out.

The deals’ final structure hasn’t been finalised, but the rumours buoyed the price of shares which zoomed up by 26%. 

Shares of Jet Airways Thursday zoomed up to 26 per cent on bourses amid reports that Tata Group was in talks to buy a controlling stake in the cash-strapped airline.

After a positive opening on the BSE, shares of the company soared 24.52 per cent to close at Rs 320.95. During the trading hours, the stock had touched a high of Rs 334.9 and a low of Rs 264.

On the NSE, the shares of airline firm went up by as much as 26.41 per cent to settle at Rs 326.

The stock has risen in the last four trading sessions gaining over 32 per cent on the bourses.

While the shares of struggling carrier ended on a positive note Thursday, shares of SpiceJet and InterGlobe Aviation fell by 0.9 and 0.51 per cent respectively, on the BSE.

A section of media reported that Tata group was conducting due diligence of Jet Airways to buy the full-service carrier from its owner, Naresh Goyal.

Jet Airways, however, termed media reports of Tata group carrying out due diligence to acquire the airline as "speculative".

In a response to the clarification sought by the BSE on the news reports, Jet Airways (India) said, "...the subject news is speculative in nature and that there is no discussion or decision in the board which would require a disclosure..."

 The board of Tata Sons is likely to meet Friday to discuss a proposal to take over the Naresh Goyal-controlled Jet Airways, which is looking for investors to tide over liquidity crunch that it has been saddled with, according to people familiar with the development.

Airline's deputy chief executive and chief financial officer Amit Agarwal earlier this week had admitted that the company was in talks with "multiple interested parties" for fund infusion as well as selling six of its Boeing 777 planes and a stake in its loyalty progarmme Jet Privilege.

"Tata Sons board is meeting tomorrow (Friday) to consider the proposal to bid for Jet Airways," people in the know of the development told PTI.

While a spokesperson of Tata Sons, which already runs two airlines-- the full-service carrier Vistara in a JV with Singapore Airlines, and the low-cost carrier AirAsia India in JV with Air Asia of Malaysia, refused to comment on "speculation," Jet did not respond to PTI queries on the same.

"We do not comment on speculation," a Tata Sons, which originally owned the present national carrier Air India, spokesperson said when asked for confirmation.

Besides Goyal, who along with his family owns 51 percent stake in the carrier, Gulf carrier Etihad Airways holds 24 percent stake in the cash-strapped airline which earlier this week reported Rs 1,261 crore loss for the September quarter against a profit of Rs 71 crore y-o-y, making it the third straight quarters of heavy losses.

This had the airline also putting as many as six of its Boeing 777s on sale to part-fund liquidity.

Media reports suggest that the parent company of Vistara, Tata-Singapore Airlines, is looking at all-stock merger with Jet Airways as part of the Tata group's plans to board Goyal's full service carrier.

In an exchange filing, Jet Airways described the media reports as speculative.

"...the subject news is speculative in nature and that there is no discussion or decision in the board which would require a disclosure...," the airline informed BSE.

According to reports, the two sides are inching towards a two-step transaction that would first see Jet Airways merging with Tata-SIA that runs Vistara through a share swap to form a new JV, which will have the Goyal family, Etihad, Tata Sons and Singapore Airlines as its partners.

"We are currently at various stages of discussions with multiple interested parties for both part stake sale in Jet Privilege and fresh equity infusion," Agarwal had told analysts during the post-earnings concall Tuesday.

He had also said the company hired investment bankers and consulting firms to carry out these tasks.

The cash paucity in the country's second largest airline by market share has resulted in delayed payments to some vendors and salaries to a section of its over 16,000 employees.