Hinduja and Etihad Airways decides not to invest in Jet Airways

Introduction:

Jet Airways is a Mumbai-based debt-laden ailing airline that has been grounded since April 2019. Of late, London-based Hinduja Group decided not to purchase a stake in the Jet Airways. Also, Abu Dhabi-based Etihad Airways quit investing funds into Jet Airways. Following these steps, the shares of the debt-laden Jet Airways slipped further on Tuesday. The share prices of Jet Airways were down during the early hours of the trading market. The closing of the stock market was lowered by 10.58%.

Jet Airways in Share Market:

Reports of backing out of Hinduja Group and Etihad Airways reflected on share prices of Jet Airways. According to the Reuters report, shares of Jet Airways diminished to 14.8% to an all-time low of Rs.106.3. As of Monday’s closing, Jet Airways sold almost 69% in one year. The stock of Jet Airways at 12:05 pm traded down 10% at Rs. 112.60 on BSE. Meanwhile, on NSE stock of Jet Airways was down 9.82% at Rs.112.55. The stock of Jet Airways hit a 52-week low during the morning trade. The share price of Jet Airways lowered up to 12.66%. This was 109.35 compared to the previous close of 125.20 on BSE. The share price of Jet Airways opened at a loss of 9.98% at 112.70. This fell again to a fresh 52 week low of 109.35 on BSE.

In the News:

The two operational creditors of Jet Airways include Shaman Wheels Pvt. Ltd and Gaggar Enterprises Pvt. Ltd. Both Companies separately filed an insolvency plea against Jet Airways on Monday, 11th June 2019. Those Companies wish to recover their finances proving bankruptcy of Jet Airways. This is as per the National Company Law Tribunal (NCLT).

The NCLT issued notices to Jet Airways and banks owning the present Jet Airways. The hearing date was scheduled on 13th June 2019 when it would be confirmed if Jet Airways bankruptcy is admitted or rejected.

Jet Airways Financial Challenges:

The banks are focusing on how to resolve the issue of Jet Airway’s debts outside the insolvency process.  At the moment, Jet Airways owes over Rs 8,000 Crore to a group of banks. These are led by the State Bank of India that runs Jet Airways. There is a larger debt pile accumulating losses of Rs 13,000 Crore. There are vendor dues of over Rs 10,000 Crore. Also, there are salary dues of over Rs 3,000 crore. The associated banks have appointed SBI Capital Markets as the investment bankers. These bankers have to find an investor who would investigate the most suitable investor for Jet Airways.  

All the teams at Companies involved in debt-laden Jet Airways know the Company cannot repay. Even State Bank of India has responded to the queries of all types of investigations. The lenders of Jet Airways were led by State Bank of India. The Bank has tried to resolve the bankruptcy crises of Jet Airways even outside NCLT. However, SBI know that there can be no recovery.  

In late March, the bankers took over the ailing Jet Airways. They invited bids on 8th April 2019 for selling up to 75% stake in Jet Airways. Initially, Jet Airways received bids from Etihad Airways, and two Private Equity Companies (TPG Capital and Indigo Partners). Also, the sovereign wealth fund NIIF agreed to help. However, none of these parties opted to pay the full final bid amount. As of 17th April 2019, all operations of Jet Airways have stopped.  

The Probe of Income Tax Department:

The Income Tax Department of India is probing into possible tax violations caused by Jet Airways. The Minister of Corporate Affairs has ordered an investigation into the books of Jet Airways. This is especially after the Registrar of Companies had submitted a report to the Ministry. Investigations are in the process to find exceptions of instances. These should be the highlights in connection with violations of the Companies Act in the airline.

Relationship of Jet Airways with Etihad Airways:

Earlier, Etihad Airways showed interest in reinvesting in Jet Airways as follows. Etihad Airways had obtained 24% stake in Jet Airways in 2013 for about Rs2060 Crores. Thereafter, Etihad Airways acquired a 50.1% stake in JPPL in 2014 for more than Rs 900 crore. Since there were business deals with Etihad Airways, separate investigations have been carried out. If there is any violation of Enforcement Directorate, then that would be brought to light. Jet Airways offered Jet Privilege programme to frequent fliers around 2014.