The Hindu Business Line : Jet-Sahara deal: It all started in July last

THE final signing of the largest deal in Indian aviation between Air Sahara and Jet Airways on January 18 brought to an end a process that had started around July last year.

It was then that the Sahara group got in touch with management consultants to chalk out a road map for the airline component of its business.

Sources said that there was a clear feeling amongst the management that the airline could not remain at the existing size and it either needed to grow or consolidate.

In the beginning the option of bringing in private equity was examined. "The private equity funds spoke to a number of low cost airlines. They were convinced that this model would not work here due to infrastructure bottlenecks. Therefore, investing in a legacy carrier like Air Sahara made sense," sources said.

Besides, there was a feeling that even if Ernst &Young, the consultants to Air Sahara on the deal, was able to raise funds, there would be a problem as aircraft manufacturers were said to be "acting up" with global demand for aircraft increasing.

"While money could have been raised through an IPO, the utilisation of monies would not have been that fast," an airline official connected with the deal said. It was then that the option of a strategic tie-up was considered.

Sahara was neutral to the idea. Eventually, however, the top management of the Sahara Group veered around to the view that it would be best to exit the airline business and instead focus more on areas such as para banking and real estate development, which the Group had taken up rather aggressively.

While refusing to divulge details of the transactions, Mr Jayesh Desai, Head Transactions, Ernst & Young said, "Air Sahara was healthier than many other companies. It was sitting on more than Rs 500 crore of promoter funding including equity of Rs 236 crore, preferential shares of Rs 50 crore and group loans of Rs 250 crore. Most other promoters put in about Rs 40-50 crore."

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