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Plan to buy beleaguered Jet Airways flies into rough winds with Tata bosses

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New Delhi : Top representatives of the Tata group — the salt-to-software conglomerate — have red-flagged “reputational issues” of Naresh Goyal-led Jet Airways, from the time of inception of the airline, including sources of its funding. This could adversely affect the progress of a deal between the two.

While Tata Sons, after a board meeting on Friday, said it was in preliminary talks with Jet and that there was no proposal yet, an internal panel has been constituted within the Tata group to carry out due diligence on the financial aspects and funding of Jet. The findings of the committee will determine the direction of the talks for a possible acquisition of Jet Airways by the Tatas, sources indicated.

As things stand now, apart from a clean chit from the internal committee, the Tatas would need some more conditions to be fulfilled for the transaction with Jet to fructify.

 

The group is likely to insist on Goyal selling his entire 51 per cent stake in the airline and relinquishing the board positions held by him and his family. More than anything else, any decision on Jet is likely to hinge on what Tata Trusts Chairman Ratan Tata has to say on the matter, said a source.

Plan to buy beleaguered Jet Airways flies into rough winds with Tata bosses The recent board meeting of Tata Sons discussed whether the proposed acquisition would fit into the group’s overall strategy, especially in relation to aviation. The Tatas and Singapore Airlines have already invested Rs 20 billion in Vistara (the largest single equity infusion ever) to support its expansion plan. Scaling up business is a priority but a few board members are believed to have expressed doubts over the proposed acquisition of Jet. In pursuit of scaling up, when the Tatas did not go for Air India, what is the need to buy Jet.

A source said Jet’s high debt and regulatory issues such as inquiries by several ministries and government agencies over the years also weighed in.

Jet had a debt of Rs 84 billion as of end-September, including Rs 18 billion of aircraft-related debt. The airline was trying to sell and lease back its Boeing 777 and Airbus A330 planes to pare down debt, but large repayment is an area of concern.

In addition, there could be operational concerns as well.

For instance, Tata’s joint venture (JV) partner in Vistara, Singapore Airlines, would like to tread cautiously on the deal. If the deal were to mature, the Tatas would want to merge Jet with Vistara. Tatas run two joint airlines in India — Vistara in partnership with Singapore Airlines and AirAsia India with Malaysia’s AirAsia Berhad. Fleet alignment could come in the way too. Vistara operates an all-Airbus A320 fleet, while Boeing 737 is the mainstay of Jet’s fleet.

Vistara is a 51:49 per cent JV between the Tatas and Singapore Airlines. According to the civil aviation ministry, Tata Singapore Airlines (Vistara) is an Indian controlled entity. However, the Federation of Indian Airlines, or FIA (of which Jet Airways is a part) has challenged the grant of permit to Vistara in the Delhi High Court. Among other things, the FIA has alleged that Vistara is controlled by Singapore Airlines and that litigation is still pending.

Simone Reis, co-head M&A practice at Nishith Desai Associates, said, “Foreign airlines investing in an Indian company cannot hold more than 49 per cent (under the government route) and control of such company must be with Indian residents. In the absence of specific restrictions, any downstream investment by such an Indian company (including in another airline company) should be considered Indian. Should the original government approval permitting the airline to invest have conditionalities (including how the Indian JV company will invest going further), those will have to be taken into consideration.”

Analysts believe the Tatas will not rush into an acquisition and will drive down the purchase price by prolonging the transaction.


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Business

RBI asks banks to grout ATMs to wall, floor for security by September-end

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Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.

In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.

Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.

 

As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.

Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.

Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.

The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.

The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.

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SBI refuses to disclose communication from RBI, govt on electoral bonds

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New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.

Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.

The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.

 

“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.

The bank also refused to give any details of action taken by it on such communications from the RBI and the government.

The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.

The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.

The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.

A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.

ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.

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Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting

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New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.

GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.

In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.

 

Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.

The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.

Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.

GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.

In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.

The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.

“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.

With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.

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