Staring at defaults, Tata-Jet deal delay could hit Naresh Goyal

While Tatas held “preliminary” discussions with Naresh Goyal-led Jet Airways for acquiring a stake, as reported by TOI on November 15, the deal would give the group a combined market share of 24% in the country. Jet, with a fleet of 124 aircraft, has a domestic market share of 16% and around 14% on international routes. Air Asia India and the 22-fleet Vistara have market shares of about 4% each in the country; neither operates internationally. The transaction would also give the Tatas a large network as well as slots at busy airports around the world.

According to Tata Sons’ Articles of Association, a crucial acquisition proposal like Jet or investments entailing more than Rs 500 crore, requires the majority support of the nominee directors of Tata Trusts. At the moment, there is only one Trusts nominee on the board of Tata Sons—Amit Chandra, MD of Bain Capital—after Vijay Singh and Nitin Nohria stepped down. Besides Chandra and Tata Sons chairman N Chandrasekaran, the board has five external members—including two industrialists, Ajay Piramal and Venu Srinivasan—and three Tata executives.

Jet Airways, in which Goyal and Abu Dhabi's Etihad are the two largest shareholders with 51% and 24% respectively, is staring at financial defaults in the coming days. The Jet Airways stock closed at a four-month high of Rs 347 just before Tata Sons issued its statement.


While Friday’s board meeting may have a sobering effect on deal-makers at Bombay House, it carries bigger worries for Goyal and his airline. Jet has delayed salaries and defaulted on vendor payments and some of its leased aircraft may be in danger of being repossessed. American buyout investor TPG remains in the fray but it has concerns about control issues since Indian regulations limit foreign ownership to 49%. Delta Airlines had explored investing in a combination of Jet and Air India earlier this year, but quickly abandoned the idea, said bankers familiar with the developments.