Jet Airways has submitted a fresh proposal to the civil aviation ministry, which would bring down effective foreign shareholding in the company to around 80% from the current 90%. With this, the airline hopes to get government approval to its plan to raise $400 million abroad, which would be used to retire high-cost domestic debts and finance expansion.
However, the civil aviation ministry is still not willing to give its nod since it feels the proposal still breaches the overall foreign investment cap of 49% for the sector.
According to sources, the revised proposal seeks to raise the amount in such a manner that the holding of Tail Winds, an erstwhile overseas corporate body (OCB) incorporated in Isle of Man, would come down to 60% from the current 79.9%. With this, the overall effective foreign shareholding in the company would come down by about 10%. Currently, foreign shareholding in Jet is around 90%.
?Since policy remains the same, the scope for change in our earlier stand is not expected. We are, however, yet to take a final view on the proposal,? a ministry official told FE.
?Foreign holding in the company would come down from the present level after the qualified institutional placement (QIP), but it would still be around 80%, thus exceeding the limit,? the official said.
On October 7, the Cabinet Committee on Economic Affairs (CCEA) had deferred Jet’s proposal to raise $400 million through the QIP route. Under QIP, companies place shares, fully or partly convertible debentures or securities with institutions to raise funds.
If the QIP goes through, Tail Winds would hold around 60% in Jet while another 25% would be held by foreign institutional investors and the rest 15% by Individuals and others.
The 79.9% stake held by Tail Winds is treated as foreign investment, following a Reserve Bank of India (RBI) decision in 2003 which de-recognised such entities as domestic.
Sources in government said that Jet Airways has requested the government to treat it as an exception, since the OCB investment in it was made prior to 2003 when it was treated as domestic. Thus, it has urged that its proposal is cleared.
A Jet Airways spokesperson did not respond to repeated calls and text messages by FE. An e-mail query remained unanswered till the time of going to the press.
Responding to its original application last December, the civil aviation ministry had asked Jet Airways to bring the foreign holding in the company within the sectoral limit of 49% in the coming three years for raising any funds. It also asked the company to ensure that management control remained in Indian hands.
With Jet Airways planning to start new routes such as Milan and Nairobi, it is planning to mount frequency on existing overseas destinations from several Indian cities. This has necessitated raising fresh capital for expansion by adding to its fleet size.
The airline currently operates a fleet of 90 aircraft and serves nearly 65 destinations in the domestic and international markets. It operates services to overseas points like New York, Toronto, London, Brussels and Hong Kong.