Mumbai/New Delhi, Feb. 18: Shares of Jet Airways tanked more than 7 per cent on the bourses today, eroding Rs 412 crore from its market capitalisation, amid reports that Etihad may revisit its plan to buy a stake in the Indian carrier.
According to the reports, Etihad Airways chairman Sheikh Hamed bin Zayed al-Nahayan had said the Abu Dhabi-based carrier needed to review the proposal to buy a stake in the Indian carrier and it was too soon to say when a final agreement between the two carriers would be struck.
Sheikh Hamed said airline officials would meet commerce minister Anand Sharma to discuss the plan.
Reacting to the news, Jet shares opened at Rs 615 and touched an intra-day low of Rs 563.20 on the NSE before closing at Rs 570.70, down 7.64 per cent from its last close.
On the BSE, Jet shares opened on a weak note and lost further ground to touch an intra-day low of Rs 563.30. At the end of trade, the scrip, however, gained some lost ground and finished at Rs 570.75, down 7.70 per cent from its previous close.
Though the reasons for the rethink on the proposal have not been spelt out, aviation sources said Etihad was pushing for a lion’s share of seats on Jet’s board, which is against India’s foreign investment rules that require a majority of airline board members to be Indians.
“Etihad wants crucial posts such as chief financial officer to be of its choice. The Abu-Dhabi based airline is also looking for more people on the Jet board,” said a senior civil aviation ministry official.
Aviation analysts felt the delay was due to unclear rules governing the number of board seats on an Indian airline that a foreign company could hold.
According to sources, Etihad also feels that the current rules governing global airline alliances seem more in favour of state-run Air India.
Etihad will also be seeking clarity on how its share purchase effected through tax havens will be treated by the Indian tax authorities.
The case of Vodafone and the tax demands on it are still fresh on investors minds, analysts said.
“Possibly they may wait for clarity to be spelt out in this year’s budget before embarking on the complex sale purchase,” they said.
However, most experts agree that these issues are not potential deal-breakers.