BQ Exclusive: Hinduja Group Sets Tough Conditions For Deal With Jet Airways

The Hinduja Group is seeking an 80 percent haircut on the outstanding debt of the airline, said two people familiar with the discussions, who spoke on condition of anonymity. Jet Airways owes its lenders close to Rs 10,000 crore.

Also, the group is only interested in a minority stake in Jet Airways and does not intend to be a majority partner, these people said.

The Hinduja Group is currently in dialogue with banks and Etihad Airways PJSC, which holds 24 percent stake in the airline. The discussions are at a preliminary stage and an approval is unlikely, the people quoted above said.

Emails were sent to the Hinduja Group and lead lender State Bank of India on Friday morning. The story will be updated with any response.

A bidding process for Jet Airways closed earlier this month, with no serious bidders emerging. Partner Etihad Airways offered to retain its 24 percent equity stake in Jet Airways but stopped short of offering any comprehensive resolution plan. This prompted SBI to restart the process to find a majority investor for Jet Airways.

The Hinduja Group, which owns businesses ranging from automobiles to financial services in India, emerged as one possible option.

However, banks, led by SBI, are not enthused by the early discussions with the Hinduja Group.

An 80 percent haircut on the near Rs 10,000 crore in debt owed the airline would mean a significant hit for banks, the first person quoted above said. SBI and Punjab National Bank have the highest exposure to the airline at about Rs 2,000 crore each. Besides, if the Hinduja Group picks up a minority share, banks would still have to deal with the headache of finding another investor, the person quoted above added.

To be sure, discussions have not been abandoned. Bankers are likely to have a clearer idea on the Hinduja Group's interest in Jet Airways by next week, the first person added.

Weighing The Options

If discussions with the Hinduja Group fail, banks will be forced to take Jet Airways to the National Company Law Tribunal for liquidation proceedings under the Insolvency and Bankruptcy Code, said both the people quoted above.

The airline also received three unsolicited bids from London-based entrepreneur Jason Unsworth, an investment firm Adi Group and the Jet Airways employees association. Lenders do not find either of these bids to be serious at the current juncture, the two people quoted above said.

On April 17, Jet Airways announced that it is stopping all flight services till further notice. This prompted the government to reallocate slots allotted to Jet Airways to other airlines on a temporary basis. Experts had said without flight operations or slots, new investors might find little value in Jet Airways.