Wednesday, February 13, 2019

ICICI-Videocon case whistleblower warns about SBI-led Jet Airways' revival plan

Shareholder activist Arvind Gupta, who made headlines as the whistleblower in the ICICI Bank's alleged quid pro quo loans to the Videocon Group under former CEO Chanda Kochhar, is now raising questions over the country's largest lender SBI's efforts to bail out Jet Airways. According to him, the "questionable" Memorandum of Understanding effecting a debt to equity swap in "the flying NPA" is a "self-defeating exercise" that will rob State Bank of India (SBI) stakeholders of their hard-earned savings.

Saddled with a debt of about $1.14 billion, Jet Airways has been scrambling to raise fresh capital as well as restructure its debt. In a regulatory filing last month, the airline said that it was working on a resolution plan with a consortium of banks led by SBI that "contemplated various options on the debt-equity mix, proportion of equity infusion by various stakeholders and the consequent change in the composition of the company's board of directors".

The buzz is that SBI may end up with a 15% stake in the Naresh Goyal-owned airline should the latter get approval for the debt-equity swap. Though the proposal reportedly hinges on the outcome of a forensic audit of the airline currently being undertaken by consultancy firm EY, Jet Airways will be seeking shareholders' nod for the same on February 21.

As the Trustee of Indian Investors' Protection Council (IIPC), Gupta, who is also a shareholder in both SBI and Jet Airways, wrote to SBI chairman Rajnish Kumar on Monday red-flagging the move on the understanding that it entails the bank taking a "substantial haircut".

According to Gupta, "upon conversion of outstanding debt into equity share holding of around 15% equity in Jet, SBI's financial adventurism will expose public funds to a serious NPA risk" and, hence, calls for "serious" reconsideration. He also pointed out that the upcoming extraordinary general meeting (EGM) called by Jet Airways "suggests that SBI has consented for some financial restructuring for revival of the airline by converting outstanding loans of different maturity and for appointing SBI nominees" on the board of Jet Airways. "This also implies that apart from being a banker to small investors, SBI will assume a role of equity investor in a private airline," added the letter.
13/02/19 Business Today
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