The proposed tie-up between Jet Airways and Abu Dhabi-based airline Etihad has to go through several hoops before the deal goes through.
"The DIPP (the Department of Industrial Policy and Promotion) has also put a question mark on how equity investments made by Naresh Goyal, an NRI, will be treated in the entire calculation of foreign investment... with Etihad's 24% stake, the FDI limit of 49% will be easily breached," says Deepak Ladha, executive director, Ladderup Corporate Advisory. Goyal, who is the chairman of Jet, has a 66% equity stake in the airline.
Under the foreign direct investment (FDI) norms, voting and nomination rights should stay with Jet, which is not in the current agreement.
In addition, the Securities and Exchange Board of India (Sebi) permission as well as a nod from the Competition Commission of India and the FIPB (Foreign Investment Promotions Board) are also needed.
After the deal, besides Etihad's 24% stake, Goyal would have 51% and the remainder 25% would be with public shareholders.
Sebi too has objections to the deal. "The Sebi view is that the operational control of India's largest private carrier, Jet Airways, is likely to get transferred to a foreign player after the stake sale to Etihad Airways," says Ladha.
Concerns have also been raised that the deal could amount to Etihad getting ‘control' of the company with even 24% stake without complying with Sebi's takeover regulation.