Nearly three months after Jet Airways missed scheduled payments to its lenders (banks), founder and chairman Naresh Goyal has stepped down from the board of the debt-laden airline. His wife, Anita Goyal, also resigned as a consortium of banks led by the State Bank of India (SBI) converted their debt to equity and became majority shareholders in the beleaguered airline. In a weak market on Monday, Jet’s shares gained 12.4% as the uncertainty over its future seemed postponed for now.

In the days leading up to giving up his role, Goyal, known for his shrewd and cunning, executed several manoeuvres to retain control of his company. It was earlier thought that his overseas shareholder Etihad Airways would come to Jet’s rescue, as they hold nearly a quarter of the airline’s equity. But, Etihad laid down some serious conditions and in particular, wanted Goyal at best to have a passive role in the airline. Etihad, in fact, wanted Goyal’s stake capped at 22%, so that he will not be able to ever come back to manage the company. According to industry observers and his former employees, Goyal’s penchant for control was becoming the biggest deal breaker for banks trying to negotiate a deal to save the airline.

Most of those schemes failed and potential investors like the Tatas and Qatar Airways backed out for various reasons. It is understood that the Tata’s backed out as Goyal had played spoilsport to their joint venture with Singapore Airlines in the late-90s, when Jet Airways was the leader in Indian aviation. The then Tata Group chairman Ratan Tata vowed to never start an airline business as he felt that his group had been dealt a unfair hand by the government, at the behest of competition. That left the banks to eventually look for a solution, for the interim, to keep Jet planes flying.

A senior executive who earlier worked with Jet in the initial days after Etihad’s investment says, “The banks were not writing Goyal off from their equation completely and that kept potential investors away, given his reputation to hang in there. Even in the current scheme of things, Goyal is not too far way from gaining a foothold back into the company.”

As per the scheme of arrangement, conversion of debt to equity will give the bank collective a 50.5% stake in the company and make them the single largest shareholder. Goyal’s 51% stake will shrink to 25.45%, while Etihad’s stake will be cut from the current 24% to 11.98%. Going by the current market value of Jet shares,  Goyal needs just ₹31.9 crore raise his stake to 26%. In an interview to Bloomberg Quint, State Bank of India's chairman Rajnish Kumar said that as per the current rules, both Goyal and Etihad can invest in Jet if they can bring the required capital.

Goyal has two advantages over any new investor. With his 26% stake and ability to block important board resolutions as per Indian Company Law rules, his presence may still be a deterrent to potential investors. Secondly, it will be advantageous for a new investor to tie-up with Goyal as he doesn’t have to spend additional money for an open offer as his stake is already above 25%. According to rules for takeover of companies, investors buys over a quarter of a company’s equity will have to make an open offer to other investors to buys their shares as well. In his interview, Kumar reiterated that Goyal or even Etihad is eligible to invest in Jet and run the company provided they bring the capital. Says Kumar, “I think there is a going to be a competition to run Jet Airways.”

We haven’t seen the last of Goyal. Yet.

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