Jet Airways Ltd.'s shares spiked after the National Company Law Appellate Tribunal approved the resolution filed by the Jalan Fritsch Consortium. Investors looking to make quick gains should be cautious.
While only delivery-based trades are allowed in the stock, public shareholders should be beware that 99% of their holding will be extinguished.
The final resolution plan of the Jalan-Fritsch consortium, submitted on Oct. 2, 2020, was approved by the committee of creditors with a 99.22% majority. According to it:
Jet Airways will continue to list on the stock exchanges but only after reconstitution of its share capital.
Public shareholders will be entitled to only 1 share in Jet 2.0 (New Jet Airways company) for every 100 they hold currently.
The resolution plan has proposed extinguishing 8,51,98,037 shares of Rs 10 face value each, representing 75% of the current shareholding, held by promoters, Etihad and financial institutions. All preference shares owned by the promoters and Etihad will also be extinguished within 170 days of the resolution plan becoming effective.
Share capital reconstitution will happen in three stages:
The face value of 2,83,99,346 shares held by public investors, accounting for 25% equity capital, shall stand reduced from Rs 10 to Rs 1 apiece.
These shares will be consolidated into equity shares with face value of Rs 10 per share. Which means, the total number of shared held by the public will reduce to 28,39,935. Any fractional entitlements of shall be rounded off to the nearest whole integer.
The Jalan Fritsch Consortium has proposed to invest a maximum of Rs 600 crore as equity in Jet 2.0 at Rs 50 per share, including a premium of Rs 40 per share. Jet 2.0 will also convert the debt held by the creditors, and dues of workmen and employees into shares at the same price as Rs 50 per share.
The equity from the new promoters will be locked in for one year from the date of share issuance. The new promoters will ensure that the public shareholding in the new company will be restored to 10% within 18-months and 25% within three years through a fresh issuance at market price.
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