SBI to acquire 15% stake in Jet Airways by converting loan into equity

State Bank of India, the country's largest lender, is likely to own at least 15 per cent in debt laden Jet Airways (India) if Naresh Goyal-owned airline gets approval to convert a part of its loan into equity as part of a restructuring package, say media reports.

As part of the new rescue proposal, cash-strapped Jet Airways plans to convert some debt into equity to help keep ill-fated carrier alive and safeguard about 23,000 jobs. As a result, founder and Chairman Naresh Goyal's stake would fall below 20 per cent from existing 51 per cent, Bloomberg reported.

Jet Airways creditor SBI may end up acquiring as much as 30 per cent if it injects more equity in the carrier, TV channels reported.

According to the report, Abu Dhabi-based Etihad Airways, which currently holds a 24% stake in the airline, is expected to infuse additional funds to take its holding to more than 40%.

In a similar incident in 2010, SBI ended up owning 25 per cent stake in Vijay Mallya-led Kingfisher Airlines, before losing out when it was eventually grounded.

Jet Airways, which had a net debt of about Rs 8,000 crore($1.14 billion) as on September this year, failed to pay money to pilots, lessors, banks and vendors.

Also Read: Debt laden Jet Airways grounds 6 Boeing planes, cancels 15 flights amid rising dues

However, the final decision hasn't been taken as a deal is still being negotiated.

Jet Airways has called an extraordinary general meeting on February 21 to seek shareholders approval to increase its authorised share capital by issuing equity and preferred shares.

Goyal has been making all possible efforts to seek funds to keep the airline afloat, which is facing the pinch of high fuel price and intense global competition in the aviation sector. In its hunt for an investor, the Goyal-led company talked to several international airlines for potential fundraising.

Reacting to the news, shares of the carrier declined as much as 3.17 per cent in early deals to touch an intra-day low of Rs 235.05 apiece on the Bombay Stock Exchange, after making a flat start at Rs 242.55 against previous closing price of Rs 242.75. In a similar trend, stocks of the firm were trading 0.66 per cent lower at Rs 241.50 on the National Stock Exchange.

Edited by Chitranjan Kumar