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TURBULENT TIMES

Will probe against Naresh Goyal hurt Jet Airways’ revival hopes?

By Niharika Sharma

The prospect of finding an investor who can revive India’s grounded private carrier Jet Airways is fading fast.

Besides the airline’s mounting debt and truncated fleet, a new buyer may now have to deal with accusations of financial irregularities at the airline.

On May 27, reports emerged that India’s serious fraud investigation office (SFIO) and the enforcement directorate (ED), have initiated separate probes against Jet’s former promoters, including ex-chairman Naresh Goyal.

The SFIO, part of India’s ministry of corporate affairs (MCA), is inquiring if the promoters had siphoned off funds from the airline, according to media reports.

The ED, part of the finance ministry, meanwhile, is looking into allegations that foreign investment rules were violated when Abu Dhabi’s Etihad Airways invested $150 million (Rs1,050 crore), in 2012, for a 50.1% stake in Jet Privilege—the firm that manages the airline’s loyalty and rewards programme.

“No ECIR (Enforcement Case Information Report, the equivalent of an FIR in a criminal case) has been registered yet in this matter, only a preliminary inquiry has been started,” a senior ED official told the news channel NDTV. Another report claimed that the ED is waiting for Jet’s lenders, who currently control the airline, to officially register a complaint against Goyal and other promoters before taking any action under anti-money laundering laws.

Amid the inquiries, Goyal and his wife, Anita, were deplaned from a Dubai-bound Emirates flight on May 26, following a look-out-circular issued by the MCA. A look-out-circular is issued to ensure that a person being probed in a case does not leave the country.

Meanwhile, the centre has reportedly sought a copy of the airline’s forensic audit from the lenders. Banks led by the State Bank of India (SBI) had appointed Ernst & Young to examine Jet’s financial accounts between financial years 2014 and 2018.

Impact on sale

The developments may not augur well for the lenders’ efforts to find a suitor for the airline.

“The lenders’ failure to retain Jet’s staff is constantly decreasing its asset value. In this situation, it’s expected that the airline should remain free from bad press but if reports of these probes are true then there isn’t much hope left for the airline,” an aviation expert with a leading rating agency told Quartz on condition of anonymity.

However, some analysts say the lenders’ sale plans will not be hurt.

“The new buyer will remain unaffected with the on-going probes. It’s Naresh Goyal who’s under the radar, hence, whoever buys Jet only needs to be taking care of the debt and other legalities,” said Harsh Vardhan, chairman of aviation consulting firm Starair Consulting.

On May 21, the diversified Hinduja Group, in an official statement, had said that it’s evaluating the possibilities of investing in Jet Airways. The plans, however, took a hit after a Dutch court declared Jet bankrupt over Rs150 crore it owes to overseas lessors. The ruling came on the day Jet’s lenders were to meet the representatives of the Hindujas and Etihad officials in Dubai last week.