Did Swamy's allegations compel minister Sharma to admit open offer waiver for SpiceJet deal?by Sindhu Bhattacharya Apr 27, 2015 21:47 IST |
New Delhi - It took a public challenge by BJP MP Subramanian Swamy for the Civil Aviation Ministry to come out with the truth. Minister of State for Civil Aviation Mahesh Sharma told CNBC-TV18 that market regulator Sebi wrote a letter to the ministry, waiving an open offer after acquisition of SpiceJet by Ajay Singh.
Let me refresh your collective memory: till date, there has been no information on the price at which the shares of SpiceJet changed hands between erstwhile promoters (the Marans) and Singh. And until today, there was none on why was there no open offer when Singh acquired over 58% equity in the ailing airline.
So why did Sharma finally acknowledge that Sebi and his ministry communicated over the need to waive an open offer today, almost three months after Singh's acquisition? There can possibly be no other reason than the public challenge by Swamy, who has raised doubts over the SpiceJet deal and asked the Prime Minister's Office to launch a high-level probe into it.
Swamy has written a letter to prime minister Narendra Modi, making several allegations against this transaction. SpiceJet had to briefly ground operations in December last year for lack of cash to pay oil companies. Singh bought out the promoters and has also additionally committed to invest Rs 1,500 crore in tranches into the airline to revive its fortunes.
Swamy made three broad allegations:
1) That the share sale transaction was done at "arbitrarily low and dud prices". It is not clear at what price shares changed hands since the price has never been disclosed publicly. In an interview to The Hindu BusinessLine, the Sun Group CFO S L Narayanan had said in January that the promoters (Marans) "will be incurring a substantial capital loss on the transfer of these shares. However, since the Group will continue to hold about 18 crore shares at a strike price of Rs 16.30 per share that underlie the warrants, there is a reasonable chance that we will make some gains if the stock price moves up in the near future with improving prospects for the sector."
1) That the share sale transaction was done at "arbitrarily low and dud prices". It is not clear at what price shares changed hands since the price has never been disclosed publicly. In an interview to The Hindu BusinessLine, the Sun Group CFO S L Narayanan had said in January that the promoters (Marans) "will be incurring a substantial capital loss on the transfer of these shares. However, since the Group will continue to hold about 18 crore shares at a strike price of Rs 16.30 per share that underlie the warrants, there is a reasonable chance that we will make some gains if the stock price moves up in the near future with improving prospects for the sector."
2) The absence of an open offer by the new promoter after acquiring the shares and market regulator Sebi's silence over this. On his part, Singh has been quoted as saying that an open offer would be launched if Sebi were to tell him to do so.
3) Swamy has sought an ED probe into the entire share transfer deal of Spicejet saying "if the idea was to protect the assets of bankrupt airlines, SpiceJet could have been take over by Air India rather than allow a bankrupt private party to trade in share with impunity". At the end of his letter, Swamy suggests that a committee be constituted by the PMO with officials of RAW and IB as members to probe the SpiceJet deal.
Now that the minister has been compelled to admit that Sebi did waive an open offer, perhaps Swamy's continued threats may also compel him to reveal the price at which the Marans sold out.
Yet another startling revelation came from Sharma in the interview with the TV channel. That the ministry may seek the Cabinet nod for any proposal to regulate airline fares. Remember, answering a question in the Lok Sabha today, Sharma said airlines are free to fix "reasonable" tariff under the provision of Sub rule (1) of Rule 135, Aircraft Rules 1937. What comes under the ambit of "reasonable" fares is open to interpretation at this time.
Yet another strange way being proposed to regulate air fares came from Minister of Civil Aviation A Gajapathi Raju who proposed a mechanism whereby airlines keep two or three seats free, very close to the flight's departure time, for anyone wanting to fly in an emergency.
Raju has proposed this "emergency quota" after multiple complaints from flyers, Members of Parliament and others about exorbitant fares being charged by airlines for last minute bookings. There is no clarity yet on whether airlines have been asked about the feasibility of this quota and whether it will at all be implemented. But a beginning to check fares has been made.
Earlier, senior officials in the ministry of civil aviation have discussed capping lowest and highest fares on each sector. One suggestion was to cap the maximum fare on any sector at Rs 20,000. So what minister Sharma said today is rather interesting as he has alluded to airlines having freedom to fix "reasonable" fares.
In its bid to keep a check on exorbitant fares, aviation regulator DGCA has already set up a fare monitoring cell which monitors airfares on certain routes selected on random basis to ensure that the airlines do not charge airfares outside the range declared by them. There is no clarity on what action is taken, if any, by the DGCA in case it finds an airline violating the upper and lower price bands.
Airlines the world over follow what is known as "dynamic" pricing where fares rise as flight departure nears - the highest fares are typically charged on last few seats on a flight. Airlines say this kind of pricing helps them generate additional revenue from these last few seats and offer those booking early discounted fares.http://m.firstpost.com/business/swamys-allegations-compel-minister-sharma-admit-open-offer-waiver-spicejet-deal-2215416.html