Jet Airways’ EGM Leaves Minority Shareholders Hunting For Answers
Minority shareholders of beleaguered airline Jet Airways Ltd. who were hoping to find clarity on the bank-led resolution plan at its extraordinary general meeting were left with more questions than answers.
The airline, with its debt of over Rs 10,900 crore, had called the EGM to get consent for lenders to appoint company directors and increase share capital—all of which would then enable it to execute the resolution plan of letting lenders swap their debt for shares. While all resolutions were approved by shareholders present at the meeting, the final tally would be available after the electronic voting numbers are factored in. Yet, minority shareholders BloombergQuint spoke to felt the management should’ve provided more details on the plan, the future of the airline and put an end to the uncertainty.
“They evaded all the questions. They just said it is all an enabling resolution to increase equity and restructure the board,” Arvind Gupta, minority shareholder and founding-trustee of the Indian Investors' Protection Council said after the EGM. “They spoke nothing about the present health of the company or the revival plan of the company. It was just an eyewash.”
“It is a very unusual case we are in. The banks are going to the organisation asking for exemptions and concessions which has never been done in the past. And that raises a lot of questions,” said Gupta, who also raised these concerns in a letter to Jet Airways, Reserve Bank of India, State Bank of India and the regulator Securities and Exchange Board of India.
“Why is the government trying to salvage this company? Why is the SBI risking public money trying to revive a company which is a flying NPA with virtually no potential to recover?”
The issue is that the new pattern of equity and management is unknown. But one thing is certain that in any case the interest of small shareholders is at grave risk.Arvind Gupta, Minority Shareholder, Jet Airways
The Mumbai-based carrier is facing a severe cash crunch that has put the airline, that employs over 23,000 people, on the verge of a shutdown. Struggling to maintain profitability and market share in India’s increasingly competitive aviation market, Jet Airways is falling behind on paying loans and salaries.
On Feb. 14, when it reported a fourth straight quarterly loss, the board agreed to allot 11.4 crore shares at an aggregate value of Re 1 to the lenders’ consortium led by SBI. Through the conversion, the lenders will end up owning 50.1 percent in the full-service carrier.
But lack of details around the resolution plan at the EGM made minority shareholders uneasy. “I am not comfortable with the meeting held today. The management team, they suppressed some matters. They are not ready to disclose what are the problems affecting Jet Airways and how to solve them,” said Manohar Karkera, another minority shareholder. “From what I understand is that Jet Airways is now not even worth a paper.”
We don’t know what’s the fate of Jet. Only God can save Jet Airways.Manohar Karkera, Minority Shareholder, Jet Airways
Jet Airways’ Promoter and Chairman Naresh Goyal missing the EGM only added to their doubts. The EGM was presided over by whole-time director Gaurang Shetty.
“It is a cause of worry for me. He should be here. He was supposed to face the minority shareholders. I hope the next time he is here to instill confidence in people,” said minority shareholder Khalid Khan. “His one decision affects many people from shareholders to employees and even passengers. He is accountable for everything. I don’t know why he was not here but he should be.”
It wasn’t clear what was going behind the scenes, who will be the exact owners? If he (Goyal) speaks up, it will be good for people like us. He needs to say something to restore confidence.Khalid Khan, Minority Shareholder, Jet Airways
The shareholders were also not pleased with a bank or government managing an airline. “If banks take over the management, that will be a disaster. It should be run by experts with the backing of the banks,” Khan said. “I don't think banks should interfere in the management of an aviation firm.”
Gupta too echoed that view. “I don't want the government as a promoter or an owner. Enough companies have been owned by the government and they all have been ruined. So why repeat the experiment again?”
Karkera said he was hoping that a credible investor like the Tata Group, which was reportedly in talks with Jet Airways, should come and take over the airline. “I am hoping Tata should take over because they are operating Vistara and they have the background,” Karkera said. “I presume and am hopeful that people like the Tatas—because they have good ethics—I request them to come and rescue Jet Airways.”
Watch shareholders’ react after the Jet Airways EGM: