Are all doors closed for Jet Airways’ Naresh Goyal?

Forum Gandhi Mumbai | Updated on January 07, 2019 Published on January 07, 2019

A file photo of Jet Airways Chairman Naresh Goyal   -  AP

With bank loans out of its ambit, analysts feel the best option is stake dilution to Etihad or to a new investor like Tata Group

Jet Airways’ promoter Naresh Goyal is running out of options as lenders seek to find a way to recover the money lent to the airlines.

The best option for Goyal, according to analysts, would be to dilute stake to its existing foreign partner Etihad Airways or to a new strategic investor like the Tata Group.

However, these discussions have not yielded any results so far.

Options galore

“The airline officials have been claiming that there are active discussions with multiple investors, however, nothing is materialising at the pace it should. The delay is much longer than what it should have been,” said an expert who has closely tracked Jet Airways.

The other option for Jet Airways would be to get fresh loans to pay off at least some part of the debt. But given that the company has defaulted on payments, not many banks would extend a fresh loan.

Here again, the best bet would be for Etihad to come to the rescue with a soft loan to keep the airline afloat.

When Robin Kamark, who is responsible for Etihad Aviation Group’s minority equity investment strategy joined the Jet Airways board on December 1, everyone thought that this was a precursor to Etihad’s deeper play in India.

A Reuters report said that the company is close to reaching a deal with State Bank of India for a fresh loan of ₹1,500 crore to meet its working capital needs. But, ICRA, in its report, has stated that there had been delays in the implementation of the proposed liquidity initiatives by the management, which had aggravated the funding availability.

Analysts sceptical

The airline missed payment of part of its dues on December 31 due to “temporary cash-flow mismatch.” While sources close to the company assured that efforts are being made to repay the debt in a few days, analysts are sceptical.

The downgrading by rating agency, according to an industry expert, will impact the investors’ sentiments and the valuation of any deal. “The investors would be sceptical to invest in the company because it has been in debt for so long and even if they invest in the airline, they would want to just make sure the airline is flying smooth. The investors would want a profit, which at the moment looks unlikely,” said the source.

The analyst added that the airline had indicated that cash inflow and liquidity would improve by the sale of stake in Jet Privilege Programme Limited (JPPL). The company had also appointed merchant bankers and investment bankers for valuations and investment, however, there has been no deal yet.

Jet Airways CEO Vinay Dube, in November, had said that the airline is in talks with several investors for equity infusion. According to sources, there were proposals made to Tata Sons as well as Jet Airways’ investment partner Etihad Airways, which owns 24 per cent of stake in the airline.

Mounting debts, dues

The company has already been delaying its employee salary payments and lease rental payments to aircraft lessors. Furthermore, the company has large debt repayments due over December 2018 to March 2019 (₹1,700 crore), FY 2020 (₹2,444.5 crore) and FY 2021 (₹2,167.9 crore),” ICRA said in its report.

The last option for the bankers will be to drag the company to the NCLT for insolvency proceedings. But given the delays in some of the ongoing insolvency cases, the lenders would wait to explore other options.

“The airline is in debt, revenues are lesser than ever, salary payments to pilots are being released in phases. So, Goyal needs to do something quickly to keep the banks away from his stake,” said another analyst on conditions of anonymity.

Published on January 07, 2019
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