Jet Airways shares rose by 19.7% in early trade on Friday in hopes that the Foreign Investment Promotion Board (FIPB) on Monday will approve the proposed stake sale to Etihad Airways.
On June 13, the FIPB – which approves foreign direct investment proposals – had deferred a decision on the Jet-Etihad deal, saying it needed more clarity on the ownership structure of Jet Airways as well as the control that Etihad would exercise over the Indian carrier after the deal.
Sources in FIPB said Jet has responded to the concerns raised by the board, and officials confirmed receiving clarifications from the airline.
The FIPB is scheduled to consider the deal at its meeting on Monday, but experts say a decision could be deferred to a later date as more time would be needed to study Jet’s response.
“There are too many complexities with different regulatory bodies flagging off concerns that have put roadblocks in the passage of the deal. It is premature to state the time when approval might take place,” said Mayuresh Joshi, vice-president (institution), Angel Broking.
Abu Dhabi-based Etihad signed a deal with Jet in April to buy 24% in the airline.
The deal is the biggest foreign investment in the Indian aviation sector, but ran into controversy right from the beginning.
As per takeover rules, a purchase of 25% or above in a listed company will trigger an open offer. Critics pointed out that the deal was structured to avoid an open offer to the Indian public from Etihad.
But Jet and Etihad have maintained that the latter does not have any special powers or veto rights and there is no need for an open offer.
Market regulator Securities and Exchange Board of India (Sebi) has also raised concerns that control of Jet could pass into foreign hands following the deal.
Civil aviation minister Ajit Singh has said earlier that Jet and Etihad would have to satisfy all regulatory authorities.
“The agreement will be governed by Indian laws,” Singh had said. “Indian laws and the Aircraft Act clearly mention that effective control, management and substantive place of business have to be in India. So, they have to satisfy these regulatory requirements and I believe they would.”
The deal will go to the Cabinet Committee on Investments only after these concerns have been addressed.