The Securities and Exchange Board of India (Sebi), which is looking closely at the deal between Jet Airways and Etihad Airways, is expected to give its go-ahead only after the clauses giving veto powers to the foreign partner are diluted.
According to sources, the capital market regulator is not comfortable with the clause that requires promoters to get a written consent from Etihad before selling or transferring their shares. Further, the fact that Etihad?s representative will be getting preferential treatment over other board members while constituting the quorum has also not gone down well with Sebi as it violates the Companies Act.
Sources further add that Sebi has already indicated its stance to other government agencies, including the aviation ministry, and representatives of the two airline entities.
While it could not be immediately ascertained if the entities have submitted a fresh application to the regulator with the revised shareholder agreement, it is believed that Etihad is against removal of the clause that requires its consent before promoters can sell their shares. Apart from Sebi, the deal needs to be cleared by the Competition Commission of India (CCI) and the Foreign Investment Promotion Board (FIPB). Incidentally, the FIPB is expected to take up the matter on July 29 for further consideration.
The deal has been in limbo for nearly three months now as various agencies have been deliberating on whether the proposed agreement between Jet and Etihad is in compliance with all the required guidelines. Sebi has maintained that the deal has been structured in a manner that gives enough ?control? to the foreign airline and, hence, it should make an open offer.
In April, Jet approved a decision to allot 2.73 crore shares on a preferential basis to Etihad for around R2,060 crore. After the allotment, Etihad will hold a 24% stake in Jet, which is below the threshold limit of 25%, which triggers an open offer according to Sebi?s takeover guidelines.
Sebi, however, is of the view that certain clauses of the transaction are giving the foreign airline voting rights and other powers in excess of their shareholding. ?… even if the acquirer has got less than the threshold, but he has got the control over the company, then also he has to make an open offer. So, Sebi will be looking into any case where there is a suspicion or belief that control has been acquired,? said Sebi chairman UK Sinha at an investor meet on Wednesday.