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Tata confirms interest in Jet Airways deal

Four-hour board meeting ends with no proposal, citing 'preliminary' talks

A Jet Airways employee waits to guide passengers. The troubled Indian airline seeks to reduce costs and right its plunging stock price.

MUMBAI -- Tata Sons ended weeks of speculation on Friday by acknowledging that it is considering an acquisition of beleaguered Indian carrier Jet Airways, but the holding company of the $103 billion Tata Group said it has made no offer to the airline yet.

"We would like to clarify that any such discussions have been preliminary and no proposal has been made," Tata Sons said after a board meeting that lasted over four hours at Tata Group headquarters in Mumbai.

Jet Airways stock has enjoyed a lift for the past four days over the possibility of a deal with Tata Sons. The carrier's shares climbed 8% to 346.85 rupees Friday on the Bombay Stock Exchange.

Tata Group's reference to "preliminary" talks suggests any deal may take a few months to finalize. Yet market watchers see urgency from Jet Airways, whose debts ballooned in the past quarter and sparked fears of a loan default.

The carrier has suffered three straight quarterly losses while battling high fuel prices, a weakening rupee and intense competition that has slashed fares. Jet Airways reported a net loss of 12.97 billion rupees ($180 million) for the July-September quarter, swinging from a profit of 496.3 million rupees a year earlier.

One crucial consideration for Tata involves Jet Airways' founding family's stake in the airline, media reports say. Naresh Goyal and his family hold a 51% share, while Etihad Airways of the United Arab Emirates owns 24%. Reports suggest the Tata Group may want a controlling stake in the carrier, and also involve Singapore Airlines in the purchase.

Tata and Singapore Airlines are joint venture partners in Indian carrier Vistara. Reports suggest the partners would merge Vistara and Jet Airways soon after the acquisition.

Whether a Tata acquisition of Jet Airways pays off in the medium term would depend on the purchase price, analysts say.

The deal likely will "involve a notable control premium," Edelweiss Securities analyst Jal Irani said. Jet Airways' financial difficulty is "unlikely to dissuade a well-capitalized group like Tata, which has a track record of mega acquisitions," he added.

Tata re-entered the airline industry in 2013 -- 60 years after the family-owned conglomerate's Air India unit was nationalized by the government -- by forming two joint ventures. A venture with AirAsia of Malaysia led to the debut of budget airline AirAsia India in 2014, while full-service carrier Vistara launched in 2015.

AirAsia India now ranks sixth with a 4.8% share of domestic passengers during the nine months through September, according to the country's Directorate General of Civil Aviation, while Vistara stood seventh with 3.8%.

"For Tata it will be a significant windfall because they are looking at an 8% market share currently, and this would take them to approximately 25%, if it goes through," said Ashish Naina, research analyst at Care Ratings.

Jet Airways may need to accept the conditions offered by any prospective buyer, Naina said, because fellow Indian airline GoAir is also rumored to be available for sale.

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