The Hindu Business Line : Who is the real winner of Jet-Air Sahara deal?

New Delhi April 13 Has Jet Airways picked up Air Sahara at a bargain price or is the asking price the same as agreed in January 2006 when the deal was inked initially?

Sources told Business Line that two clauses in the agreement - the adjustment in the net asset value and warranty and representation clauses - could see Jet Airways actually paying more than what was announced on Thursday.

In January last year the adjustment clause on the net asset value estimated the value of Air Sahara at Rs 425 crore. The agreement stipulated that in case the asset value falls below Rs 425 crore Air Sahara would make good the difference to Jet Airways.

Net asset value

"The net value of the assets now handed over to Jet Airways is about Rs 200 crore. This is mainly on account of Rs 400 crore of losses that Air Sahara suffered during June-March this year. However, the agreement reached now states that Air Sahara does not have to pay the balance Rs 225 crore to Jet Airways," sources said, which Jet Airways would have to forego.

State of assets

Besides, the representation and warranty clause present in the agreement and meant to show that assets of Air Sahara are in a good condition could put additional financial burden on Jet Airways.

In the final agreement exchanged between the two airlines, Air Sahara has made no comments on the state of the assets.

"The agreement merely states that Jet Airways will acquire Air Sahara on an as-is-where-is basis. Given the current condition of the assets this clause could also put an additional financial burden of Rs 100 crore on Jet Airways," sources said.

The total financial burden on account of these two heads could put an additional burden of more than Rs 300 crore pushing the current enterprise value of Rs 1,950 crore to Rs 2,250 crore. In January last year, Jet Airways agreed to acquire Air Sahara for Rs 2,217 crore. On Thursday, Jet Airways informed the BSE that it had agreed to acquire all the shares of Sahara Airlines Ltd for a lump sum price of Rs 1,450 crore.