Saharas numbers stump Jet

New Delhi, March 24 | Updated: Mar 25 2006, 05:30am hrs
Contrary to widespread belief, the actual stumbling block in the Jet-Sahara deal was valuation. As reported by FE, it was not for want of necessary clearances by the Director General of Civil Aviation that the deal was not finalised. Rather, the issue was the price to be paid by Jet after adjusting for various liabilities that surfaced during the due diligence by Jet.

It appears Jet pressed for re negotiation of the price after it spotted undisclosed liabilities to the tune of Rs 75 crore in Air Saharas balance sheet. Hectic parleys between the two focused on two more counts: Air Saharas internal liabilities to the tune of Rs 300 crore and banking liabilities of the order of Rs 122 crore.

The sources said Air Sahara balance sheet was still to be finalised, but the references to the due diligence process and undisclosed liabilities revealed that Jet $500 million price tag may have been higher.

Banking liabilities of Air Sahara relate to some of the loans taken by the company from banks, but still to be fully repaid. These liabilities Rs 122 crore actually reduce the enterprise value of the company to that extent. Internal liabilities relate to a loan of Rs 300 crore extended by Sahara India Commercial Corporation to fund the operations of Air Sahara. The sources said there was a broad agreement now that Jet would pay it back to the Sahara group.


The price renegotiation surfaced after Jet spotted undisclosed liabilities of
Rs 75 crore in Air Saharas balance sheet
Banking liabilities of Air Sahara relate to some of
the loans taken by the company from banks, but still to be fully repaid

According to the sources, the DGCA aircraft acquisition committee has already cleared acquisition of Air Saharas aircraft by Jet Airways. And since the rights to use of parking bays and other infrastructure are allotted to aircrafts and not airlines, transfer of these to Jet post the deal may not be a problem. The two actually discussed the infrastructure issues only late Thursday night while all through the week the discussions hovered around the price of the deal. Jet, the sources said, was initially pushing to cut the deal size by as much as Rs 500 crore. Subsequent negotiations may lead to Jet taking over Air Sahara's internal liabilities of Rs 300 crore. Jet, is however, firm on not taking over the undisclosed liabilities and banking liabilities.

Sources close to the deal also admitted the alleged difference of opinion within the top management of Jet Airways on whether the deal made business sense for Jet. They, however, said Jet Airways chairman himself had a strong desire to acquire the rival airline.