Rajnish Kumar, chairman, State Bank of India, on Monday said that promoter Naresh Goyal has the option to buy back his stake in Jet Airways in the future.
Kumar also said they expect to get a new investor for debt-laden airways by May 31.
"June is too late. My expectation is 31st May. There will be an expression of interest which will be given by April 9 and binding bid by April 30," Kumar told CNBC-TV18.
The lenders of Jet Airways has agreed to put in Rs 1,500 crore immediate funding by acquiring 51 percent stake in the company through issue of Rs 11.4 crore fresh shares.
As a result, the stake of promoter Naresh Goyal will come down to 25 percent from 50 percent, while Etihad Airways, which had a 24 percent stake in the carrier, came down to 12 percent.
Jet Airways founder and chairman
Naresh Goyal and his wife Anita Goyal will step down from the board of the ailing airline following the reduction in their stake to 25 percent as per the resolution plan formulated by SBI-led domestic lenders.
According to Kumar, the new investor could be a financial investor or an existing airline. "Nobody is barred from bidding or taking over the airline as per the rule," he said.
In an exclusive interview, Kumar also spoke about the interest of lenders and the future of Jet Airways employees.
Edited Excerpts: The market has been awaiting clarity on this, we understand that lenders are putting in Rs 1,500 crore but if you could tell us what will be the role of Etihad as of now and we understand of course the Goyals are gone.
No, as a result of the restructuring of equity, the lenders have converted Re 1 of their debt into 50.1 percent. So that is very clear communication to the stock exchange. There is a value in the Jet.
So this 50 percent equity has some value even with today’s market price. There is a value in it but at the same time, the 10-year instrument, which is proposed for Rs 1,500 crore, will be fully secured.
So it is a fully secured funding, it is priority funding, it is interim funding for two months, which we believe is good enough to make the operations of the airline normal very soon. They can repossess their aircraft and can publish their schedule. Their effort is to restore normalcy and then sell Jet Airways.
Etihad holds 12 percent now and Goyal has a stake of 25 percent in the airline. Both of them will not create any roadblocks for the sale and they will abide by the terms given by the new investor.
Will Etihad, Naresh Goyal and partners pledge their securities for Rs 1,500 crore that the bankers are infusing?
It will be secured lending.
Secured with what, what will be the collateral?
I don’t have to share everything with you but it will be a secured lending. It is no undue risk being taken by the lenders in the whole scheme of things. Again I am telling that this Rs 1,500 which the lenders are putting as a priority secured interim funding. In return the lenders are getting 51 percent worth of shares -- today’s market cap is Rs 1,500 crore.
So when you say secured you mean your equity value itself is Rs 1,500 crore, right?
No, that is one, but it is further secured and it will have priority over cash flows, over any other lending.
Who would be on the interim committee that will manage Jet Airways now that the chairman has gone?
We will share those details later. Now they have a CEO and CFO. One of the independent directors on the board is advised and supported by McKinsey to monitor the progress. All those elements are in place and that is well thought of in advance.
This Rs 1,500 crore is pro-rata from all the lenders?
There are different types of lenders. There is a consortium of Indian lenders who will be taking pro-rata share in the equity and the pro-rata share in the funding and pro-rata share in all the securities.
The very heartening aspect in this press release is the fact that the lenders including SBI are saying that a buyer will perhaps be found and the process should be completed by June, where is that conviction coming from?
June is too late. My expectation is May 31.
So are you in a discussion, if you could throw some light, where is this conviction and confidence of finding a buyer coming from?
You have to understand we put this accounts under watch on November 1 and we put this account under the RBI circular on January 1. So we were not sitting ideal throughout these five months.
The lenders have been working on it, even current management, Goyal, Etihad everybody was working on it. The resolution plan was almost ready. It is unfortunate that because of the differences in opinion amongst the joint venture (JV) partners it could not proceed. So it had to be shelved in the sense that now we have to look at that somebody comes in and if they like the plan or they want some tweaking, they want modifications - all that will be a subject matter of negotiation with the new investor.
The bidders are one of the three airlines that are already working - IndiGo Airlines, SpiceJet and Vistara?
This I cannot share. The market is open to everyone. Expression of interest for bids will be floated by April 9 and the deadline for binding bids is April 30. It could be XYZ, ABCD anyone. It could be a financial investor, it could be an airline. There is no legal bar on anyone with a funding and revival plan in place. The option is open for anyone including Naresh Goyal and Etihad to bid for the stake. Nobody is barred from bidding or taking over the airline as per the rules of the ministry of civil aviation.
As you said, you have been working for the last five months, surely you can guide us as to whether it is a financial investor or whether it is one of the airlines that are already operating?
It can be a combination of both.
Does the National Investment and Infrastructure Fund (NIIF) still remain in talks to pick up about 20 percent stake?
They are a financial investor, they will take their call at the appropriate time.
Has Etihad conveyed to you? Definitely, they would be looking at selling their stake or would they remain invested?
You have to ask Etihad. I can only say that the field is open to everyone. Doors have not been closed. There is no legal bar on anyone with a funding and revival plan in place. The lenders are just trustees.
Why is it that the Etihad nominee has stepped down from the board if it wants to continue to remain as an investor?
Because their equity is coming down from 25 percent to 12 percent. For 12 percent they are entitled to hold only one. Naresh Goyal and Anita Goyal, both have resigned, their shares have come down from 50 percent to 25 percent. So it is a fair deal I would say.
Earlier we were given to understand that Etihad was to bring in equity if certain conditions were met.
Now they have to take that call whether those conditions have been met or not.
Has the perpetuity clause been removed from Naresh Goyal’s shareholding in Jet Airways?
All that is irrelevant now.
That was one of the conditions for Etihad.
That was when Naresh Goyal and Etihad were negotiating. It was at that stage, all that has gone.
What is the most likely scenario on May 31?
May 31 - the best case scenario is that the airline is running at full capacity, the fare between Delhi and Mumbai is not Rs 1 lakh for business class, the job of 23,000 employees has been protected and the lenders have not lost much money and their sacrifice is not higher than the equity holders sacrifice. This is the ideal scenario for May 31 and this is my wish that it turns out to be true. However, I cannot guarantee.
At the moment, will the international services of Jet Airways be restored or will you concentrate on more restoring the domestic services?
Our effort is to do things quickly as possible and to the extent as possible, with this Rs 1,500 crore.
Will you pay salaries and dues. The pilots have not been paid over three months, would that also be taken care of?
They will definitely be paid, they are important stakeholders and I must tell you the second line of management at Jet Airways including the pilots that despite such difficult time they have been very patient but their commitment to the organisation in my view if I was to decide everything then they should not go away.
We have taken the risk, the lenders have taken the risk but ultimately in the end, if the story is successful the risk was worth taking but this is a high-risk high reward game.
The question of valuation is going to come up increasingly from here on and one number did the rounds over the last several months - Rs 150 per share. As a lender you would want to maximise value, what is the thought process, internal thinking within the community?
That we will have to leave it to the new investor.
But you will hope that it will be more than Rs 150 per share for sure?
I don’t know because it is a combination, somebody will have to say that against your debt of Rs 5,000 crore, this is what we are paying and this is the stake of 50.1 percent and this is what we are paying and it is a listed company.
There is a process, all the listing regulations of Securities and Exchange Board of India (Sebi) and guidelines leading to pen offer. Everything will have to be complied with. There are a lot of regulatory and compliance issues and everybody will have to take care of that whether it is the Reserve Bank of India (RBI), Sebi or ministry of civil aviation.
What is your hunch when the final plan on May 31 is ready, will Etihad and Goyal be shareholders at all?
That is for the new investor to decide. If they want their equity to be bought in completely, he will buy and they will sell.
On that another very important clarification you mentioned open offer, now if this new investor is going to come in and let us say he is looking to buy 25 percent equity.
They have to make an open offer.
So though this is a special resolution plan, there will be no exemption from the takeover code, that means open offer will be triggered?
It will trigger and I think Sebi has made it very clear that unless it is National Company Law Tribunal (NCLT) process, open offer exemption will not be available.
Does Naresh Goyal still have the option to buy back his stake at some point or is that going to be capped at the current level?
The way is open for him. Nobody is ineligible under 29A of insolvency and bankruptcy code (IBC) to make a bid.
You are very inquisitive. Wait for some time. By April 30, we will know.
You would have done some initial groundwork already as you said in the last five months, can you tell us who is ready with the cash, should we expect one bid, two bids, and three bids?