Now, Hinduja and Etihad are mulling a U-turn on Jet under IBC

New Delhi: A consortium of diversified conglomerate Hinduja Group and Etihad Airways are preparing to bid for debt-ridden Jet Airways under the Insolvency and Bankruptcy Code (IBC), sources were quoted as saying. According to a report by Moneycontrol.com, apart from Hinduja and Etihad, Tata Group is also currently exploring the possibility of bidding for the airline.

Qatar Airways is interested in taking over the airline and may join the fray if it finds a suitable domestic partner, sources were quoted as saying.

The prospects

"The Hinduja Group & Etihad Airways are extremely keen to participate in the IBC process and have reached out to the interim resolution professional in this regard," one of the sources cited above said. Etihad already holds a 24 percent stake in the airline. And as regulatory filings show, it is not classified as part of the promoter group of Jet but falls in the public shareholder category.

"The Tata group is evaluating its options currently and is working internally on a fresh business plan for the IBC process but nothing has been firmed up as yet and this may not necessarily fructify into an eventual bid. Plus, these are early days and the details of the EoI( expressions of interest) are not known.  But if Vistara, the joint venture airline of the Tata group and Singapore Airlines opts for the inorganic route as compared to the organic route, there will be a big difference in its growth prospects," another source said.

"Qatar Airways, the Middle East carrier is keen on the international slots of Jet Airways and may participate if it finalizes a domestic partner and once the EoIs or expressions of interest are invited by the resolution professional," another source said.

Why are investors choosing to bid under IBC?

Talks had been on between Jet's consortium of lenders and Etihad and Hinduja Group to invest in the beleaguered airline before the domestic airline was taken to the NCLT. However, at the time investors had dragged their feet on the matter. So, what has changed now? Bidders keen on investing in stressed assets under the IBC have several advantages as compared to an M&A situation outside the code.

"An IBC process offers several advantages to a bidder. First, you do not need to individually negotiate with each stakeholder. An approved resolution plan is binding on all stakeholders. Second, you can whitewash all unknown past liabilities through the plan. Third, you can restructure the existing equity faster. And finally, de-listing a company under IBC is a much easier process," says Sudip Mahapatra, Partner at law firm S&R Associates.

The backdrop

The news comes just a day after a consortium of Jet's employee unions joined hands with London-based AdiAgro Aviation to bid for 75 percent in the airline through the IBC process.