Jet Airways tanks over 12% after Etihad approval deferred

NEW DELHI: Jet Airways Ltd plunged over 12 per cent in morning trade on Monday, after India's foreign investment regulator, FIPB, deferred a decision on Etihad Airways' planned 24 percent stake buy in the airline.

At 09:35 a.m.; Jet Airways recouped some of the morning loses and was trading 8.6 per cent lower at Rs 428.30. It hit a low of Rs 411.60 and a high of Rs 432.05 in trade today.

The government on Friday deferred clearance of the Middle-Eastern carrier Etihad's proposal saying it needs clarity on the ownership structure and the level of control to be exercised by the UAE giant.

The shareholders agreement between Abu Dhabi-based Etihad Airways and Jet Airways has been structured in such a way as to create a substantial role for the Middle-Eastern carrier in decision-making at the Mumbai-based airline, an ET study of the shareholders documents shows.

In April this year, Etihad clinched the largest foreign investment deal in the aviation industry by agreeing to buy a 24 per cent stake in Naresh Goyal's Jet Airways for about $370 million.

However, the agreement ran into controversy right from the start with some critics pointing out that the deal was structured to avoid an open offer to the Indian public from Etihad.

Indian laws governing foreign direct investment in civil aviation allow only 49% foreign investment in listed airline companies.

“The limit is to prevent Indian companies from losing management control to foreign investors,” ET reported.

“But a scrutiny of the clauses in the agreements signed between Jet and Etihad shows that Etihad has some measure of control over management and operational matters,” said the ET report.