Sebi to have final say in Jet-Etihad deal: Arvind Mayaram

NEW DELHI: The Foreign Investment Promotion Board (FIPB) will go by market regulator Sebi's verdict on whether effective control and management was being passed on to Etihad post its buyout of 24% in Jet airways. This will ensure that there is no further debate on the issue once Sebi takes a stand. "We would be writing to Sebi in a day or two. We are asking them to clarify if they are seized of the matter concerning effective control and management. Rather than asking the investor to justify its point to two agencies, it's better that only one agency takes the call," said Arvind Mayaram, secretary, department of economic affairs, who also chairs the inter-ministerial body that clears foreign investment proposals

Mayaram said Sebi's response on the issue would then be put up before the FIPB which will meet after four weeks. The FIPB had on June 14 deferred a decision on the Jet-Etihad proposal due to lack of clarity over the level of control exercised by the Gulf investor and the ownership structure of the company post the transaction. The decision was based on a specific provision laid down in the FDI policy. The FDI policy, specified in Press Note 6, says that a scheduled operator's permit can be granted only to a company that is registered and has its principal place of business within India and whose chairman and at least two-thirds of directors are citizens of India. Further substantial ownership and effective control vested in Indian nationals. As per the shareholders agreement, Etihad can appoint three nominees to the seven member Jet board and no decision can be taken sans three-fourths majority. It will also enjoy powers to appoint the vice chairman and a right of first refusal on further sale of shares.

Market regulator Sebi has already raised similar issues with regard to control and ownership and has asked the investor to explain the deal in detail.

Etihad had, in April this year, bought 24% for $370 million in Naresh Goyal promoted Jet airways in the largest deal in the Indian civil aviation industry. India had allowed foreign investment of upto 49% in airlines in September, 2012.