7 points why Hinduja-Etihad consortium might not save Jet Airways

The Hinduja-Etihad proposal is a non-starter and here are the reasons why:

1. With the new investment in equity by Hindujas to hold 51%, Etihad’s current stake will get diluted and they have already committed that they will only bring in Rs.1700 crores to maintain their 24%.  This  means that they are already pegging the price per share at Rs.304.

2. So, Hindujas have to invest at that price only of Rs.304.  So, to hold 51%, they need to bring in about Rs. 5373 crores.

3. This still leaves Goyal with 16.7% of the company which Etihad does not want.  Etihad wants Goyal to be less than 10%.  This means that an additional shareholder has to come in to reduce Goyal to below 10%.

4. In all this restructuring, the minority individual shareholders and domestic institutional shareholders are reduced to 8%.  This is against the SEBI listing norms where at least 25% of the shares should be with the public.

5. So, if Hindujas have to invest in Jet, they need to first buyout the public shareholding of 283.75 lakh shares at the same value that Etihad has put for its current offer – Rs.303.57 per share.

6. Once Hindujas buy out the public shareholding for about Rs.861 crores, they still have to bring in about Rs.5,000 crores to have 51%.

7. With all this, the total money that all these investors will bring in is only about Rs.7,000 crores – a trickle of what is needed to revive Jet Airways.

Therefore, reports suggest the Etihad-Hinduja plan will not see the light of day.

Reports reveal Hinduja is set to meet Etihad in Abu Dhabi tomorrow for the discussion. We might have to wait a little longer to obtain some clarity on the future of Jet Airways.

What do you think? Leave your comments below.