Why is Subramanian Swamy silent on SpiceJet?

Minority investors of SpiceJet might be feeling cold-shouldered by the ever active Swamy, feels N Sundaresha Subramanian.

Bharatiya Janata Party leader Subramanian Swamy has been many things to many people over the years. He has been a politician, a minister, a professor, an anti-corruption crusader and a scam buster. Less than two years ago, he also played the role of an investor activist by voicing the concerns on behalf of the minority investors of Jet Airways.

But, minority investors of SpiceJet might be feeling cold-shouldered by the ever active Swamy. His sharp eye, that has penchant for minutest of regulatory and legal details, seems to have little interest in taking a look at the recent takeover by Ajay Singh.

When Etihad Airways, the Abu Dhabi-based carrier picked a stake and inked a shareholder agreement with Jet’s promoters led by Naresh Goyal in 2013, he wrote to the market regulator seeking an open offer. The Abu Dhabi-based airline in April that year agreed to purchase a 24 per cent stake in Jet for $379 million.

While this was less than the 25 per cent threshold mandated for open offers under the takeover law, Swamy told the Securities and Exchange Board of India (Sebi) in a letter that the regulator needs to consider the foreign airline and the promoters as persons acting in concert.

He also filed a petition in the Supreme Court seeking to block the bilateral air services agreement between India and the United Arab Emirates that was seen as a sweetener for Etihad Airways. India had agreed to approve an unprecedented 36,670 seats on weekly flights between India and the United Arab Emirates.

The ministry of civil aviation, finance ministry, Jet Airways and Etihad were respondents to this petition. “The recent events, including unprecedented haste, lack of transparency, arbitrariness and bias in the consideration of the Jet-Etihad foreign investment clearly evidences the apparent collusion and abuse of position by public servants, to subserve the illegal grant of largesse (Bilateral) and unjust enrichment of foreign airline..,” the petition alleged.

Eventually, Sebi permitted Etihad to go ahead without an open offer but not before several changes were made to the shareholder agreements and other key elements of the deal that affected ‘control.’

Compare this with the SpiceJet transaction. Unlike Etihad, which bought less than the open offer threshold, Ajay Singh now owns over 59 per cent of SpiceJet. In principle, this will amount to a straight forward transfer of control that should have resulted in an open offer announcement, wherein minority investors get an exit opportunity.

However, the acquirers seem to be taking refuge in a clause in the takeover code that exempts 'schemes approved by competent authority' from the open offer requirement.

What is the scheme here? Who is the competent authority?

The scheme is one through which Singh, who according to a Business Standard article had defaulted on a few loans, ‘rescued’ the airline by buying out the country’s highest paid corporate executive Kalanathi Maran. The competent authority is supposed to be the union civil aviation ministry.

I can’t quite understand how a person with net worth built over the years by earning multi-crore salaries could be rescued by someone who has made next to nothing from his enterprises in the past several years.

What I also don’t understand is who needed the revival scheme? Was the airline actually in such big trouble which needed a ‘revival scheme’ or the ‘revival scheme’ was born out of the necessity to skip the open offer?

Was the airline deliberately pushed into trouble by some of the elements alleged by Swamy in the Jet case such as ‘arbitrariness’, ‘undue haste’ and ‘bias’ by people in power?

I am sure the shrewd brain of Swamy came across these questions. Or, I can at least hope that it surely will when and if he goes through this.

I am sure he would write to Sebi asking for an open offer saying the ‘scheme’ looks like an eye wash. May be he will also use his other favourite weapon of public interest litigation like he did against Jet- Etihad, if he finds a fit case of “illegal grant of largesse and unjust enrichment’ of a private person in the process unfairly depriving the 132,714 small SpiceJet investors of their legitimate rights.

Swamy might give these issues a miss it if he has other pressing issues before him. But, what about Sebi?