Mumbai: At the height of the IL&FS crisis, Life Insurance Corporation of India (LIC) swore that it could not possibly see its baby go down the chute. LIC, along with a few other public sector financial companies, was the promoter of IL&FS and therefore one could understand its emotional ties with it; but for State Bank of India (SBI) to say that it has to infuse equity into the nosediving Jet Airways in the interest of consumers and competition amounts to the worst kind of mixing up of roles.
For a lender, the first priority should be to nurse its loan portfolio and ensure there is no default. Already the airline has run a huge loan of Rs 8,500 crore and it has to pay to various creditors Rs 1,700 crore by the end of this month. Hence, the frenetic activity to find a knight in shining armor. It should be the lot of the major promoters-Naresh Goyal, the original promoter with 51 percent stake and Etihad, the foreign strategic investor with 24 percent stake-to don this role. But they have never seen eye to eye with each other.
In fact, Etihad wants Goyal to bring down his shareholding to 22 percent and exit from the helm before it can think in terms of upping its stakes to 49 percent as permitted by the extant FDI norms for the civil aviation sector. And Goyal in turn deeply resents Etihad’s intrusive role. Goyal should realise that one cannot have the cake and eat it too— he cannot expect Etihad to pour in money, but keep quiet on the managerial front. He thus is gaming the system and the SBI-led consortium is falling a prey yet again in the murky saga of Indian public sector banks succumbing to political and other pressures.
Let the Competition Commission of India (CCI) worry about competition. It is none of its business to agonise over competition or lack of it on the aviation front should Jet Airways fade away from the scene. Just as it is none of its business to take up cudgels for fliers. The Consumer Protect Act would take care of their concerns. SBI should focus on recovering its loans. Period.
On conversion of debt into equity, SBI was to become a 15 percent stake holder in the sinking airline. And on top of this to commit a fresh Rs 1,700 crore for an undisclosed further equity stakes is sheer madness. The fig leaf of competition and consumer interest cannot cover this monumental folly.
The SBI says its rescue act would last just three months during which it hopes to find a new suitor to whom it would unload all the shares. Does it have a magic wand to do this? Or does it expect a new suitor or Etihad Airways not only to acquire its stakes but also to pay off its dues? The grim bottom line: is SBI by throwing good money after bad condemned to hold dud shares in eternity in the vain hope of someday recovering its dues by selling off the shares for a huge profit?
