Indian Government approves Jet Airways’ stake sale to Eithad

The Indian Cabinet has approved the nation’s airline Jet Airways’ proposed stake sale to UAE-based Eithad Airways in a Rs20.57bn ($335m) deal, paving the way for the biggest foreign investment in India’s aviation industry.

Announced five months ago, the deal marks the first foreign investment in the aviation sector after ownership restrictions were relaxed in 2012 allowing foreign companies to own up to 49% of local airlines.

The two airlines recently secured approvals from India’s markets regulator and are awaiting clearance from the industry’s competitive practices regulatory authority.

Under the terms of the proposed deal, Eithad Airways will subscribe around 2.7 million Jet Airways shares of Rs10 ($0.16), each amounting to 24% of the post issue paid up equity share capital for Rs20.57bn.

The latest approval from the Cabinet Committee on Economic Affairs (CCEA) was secured conditionally, on the basis that the two airlines adhere to Reserve Bank of India (RBI) policy guidelines and Securities and Exchange Board of India (SEBI) regulations, the Press Trust of India reported citing undisclosed sources.

Jet and Eithad must comply with all Indian laws and seek prior approvals from the Foreign Investment Promotion Board (FIPB) to make any changes in the shareholders agreement, commercial cooperation agreement, articles of association, investment agreement and shareholding patterns.

The deal has already received clearances from the SEBI and FIPB.

In June, Jet Airways made three important changes to the agreement, including a proposal to cut Etihad’s nominees on Jet’s board to two from the previous three.

The Indian airline has made further changes to the proposal recently following suggestions from the FIPB.

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Image: Jet Airways’ proposed stake sale to Eithad deal has already received clearances from the SEBI and FIPB. Photo: courtesy of Anilbharadwaj125.