Description
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial statements prepared
and restated in accordance with Indian GAAP, the Companies Act and SEBI Guidelines included elsewhere in this Draft Red
Herring Prospectus. We have no subsidiaries. Accordingly, financial information relating to us is presented on a nonconsolidated
basis.
Our
fiscal
year
commences
on
April
1 and
ends
on
March
31.
In this
Draft
Red
Herring
Prospectus,
any
discrepancies
in
any
table
between
the
total
and the
sums of the
amounts
listed
are
due to
rounding.
Dated [?] (to be updated upon RoC filing)
DRAFT RED HERRING PROSPECTUS
Please read Section 60B of the Companies Act, 1956
100% Book Built Offer
JET AIRWAYS (INDIA) LIMITED
(The Company was incorporated on April 1, 1992, as a private limited company under the Companies Act, 1956. The Company became a deemed public limited
company on July 1, 1996 and was converted into a private limited company on January 19, 2001. The Company became a public limited company on December
28, 2004.)
Registered Office: SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India
Tel: 91 22 2850 5080; Fax: 91 22 2856 0622; Email: [email protected]
Website: www.jetairways.com
Public offer of 17,266,801 Equity Shares of Rs.10 each for cash at a price of Rs.[?] per Equity Share, aggregating Rs.[?] million, comprising a Fresh
Issue of 14,245,111 Equity Shares by Jet Airways (India) Limited (“Jet Airways” or the “Company” or the “Issuer”) and an Offer for Sale of 3,021,690
Equity Shares by Tail Winds Limited (“Tail Winds” or the “Selling Shareholder”). The Fresh Issue and the Offer for Sale are jointly referred to herein
as the “Offer”. 1,200,000 Equity Shares will be reserved in the Offer for subscription by Employees at the Offer Price (the “Employee Reservation
Portion”, and the Offer of Equity Shares other than the Employee Reservation Portion, the “Net Offer”). The face value of the Equity Shares is Rs.10
and the Offer Price is [?] times of the face value. The Offer will constitute 20% of the fully diluted post Offer paid-up equity capital of the Company.
PRICE BAND: RS.[?] TO RS.[?] PER EQUITY SHARE OF FACE VALUE RS.10 EACH
The Offer Price is [?] times the face value at the lower end of the Price Band and [?] times the face value at the higher end of the Price Band.
In case of revision in the Price Band, the Bidding/Offer Period shall be extended for three additional days after such revision, subject to the Bidding/Offer Period
not exceeding 13 days. Any revision in the Price Band, and the revised Bidding/Offer Period, if applicable, shall be widely disseminated by notification to the
National Stock Exchange of India Limited (“NSE”) and The Stock Exchange, Mumbai (“BSE”), by issuing a press release and by indicating the change on the
websites of the Book Running Lead Managers and the terminals of the Syndicate.
The Offer is being made through the 100% Book Building Process wherein at least 60% of the Net Offer shall be offered on a discretionary basis to Qualified
Institutional Buyers (“QIBs”). If at least 60% of the Net Offer cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further,
up to 15% of the Net Offer shall be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 25% of the Net Offer shall be available
for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Offer Price. Further, 1,200,000 Equity
Shares shall be available for allocation on a proportionate basis to the Employees, subject to valid Bids being received at or above the Offer Price.
RISKS IN RELATION TO FIRST OFFER
This being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the
Equity Shares is Rs.10 per Equity Share and the Offer Price is [?] times of the face value. The Offer Price (as determined by the Company, in consultation
with the Book Running Lead Managers, on the basis of assessment of market demand for the Equity Shares offered by way of book building) should not be
taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or
sustained trading in the Equity Shares of the Company or regarding the price at which the Equity Shares will be traded after listing.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Offer unless they can afford to
take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Offer. For taking an
investment decision, investors must rely on their own examination of the Company and the Offer including the risks involved. The Equity Shares offered in
the Offer have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or
adequacy of the contents of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in Risk
Factors beginning on page xi of this Draft Red Herring Prospectus.
COMPANY’S ABSOLUTE RESPONSIBILITY
Jet Airways, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information
with regard to Jet Airways and the Offer, which is material in the context of the Offer, that the information contained in this Draft Red Herring Prospectus is
true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and
that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any
such opinions or intentions misleading in any material respect.
LISTING
The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the NSE and BSE. We have received in-principle approvals
from these Stock Exchanges for the listing of our Equity Shares pursuant to letters dated [?] and [?], respectively. For purposes of the Offer, the Designated
Stock Exchange is NSE.
BOOK RUNNING LEAD MANAGERS (“BRLMs”)
Deutsche Equities India
Private Limited
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4800
Fax: 91 22 2200 6765
Email: [email protected]
HSBC Securities and
Capital Markets (India)
Private Limited
52/60, Mahatma Gandhi
RoadFort,
Mumbai 400 001
Tel: 91 22 2267 4921
Fax: 91 22 2263 1984
Email: [email protected]
UBS Securities India
Private Limited
2
nd
Floor, Hoechst House
Nariman Point
Mumbai 400 021
Tel: 91 22 2286 2000
Fax: 91 22 2281 4676
Email: [email protected]
Citigroup Global Markets
India Private Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9982
Fax: 91 22 5631 9803
Email: [email protected]
DSP Merrill Lynch
Limited
Mafatlal Centre, 10
th
Floor, Nariman Point
Mumbai 400 021
Tel : 91 22 2265 1702
Fax: 91 22 2262 1187
Email: [email protected]
Kotak Mahindra Capital
Company Limited
3rd Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5634 1100
Fax: 91 22 2282 6632
Email:
[email protected]
REGISTRAR TO THE OFFER OFFER PROGRAM
BID/OFFER OPENS ON [•], 2005
Karvy Computershare Private Limited
Unit: Jet
Karvy House, 46, Avenue 4, Street No.1
Banjara Hills, Hyderabad 500 034
Tel.: 91 402 331 2451
Fax: 91 402 331 1968
Email: [email protected]
BID/OFFER CLOSES ON [•], 2005
TABLE OF CONTENTS
PAGE
DEFINITIONS AND ABBREVIATIONS.................................................................................................................. I
GLOSSARY OF CERTAIN INDUSTRY, TECHNICAL AND FINANCIAL TERMS.................................... VI
CERTAIN CONVENTIONS; FINANCIAL AND MARKET DATA...............................................................VIII
FORWARD-LOOKING STATEMENTS ............................................................................................................... IX
CURRENCY OF PRESENTATION..........................................................................................................................X
RISK FACTORS......................................................................................................................................................... XI
SUMMARY................................................................................................................................................................... 1
THE OFFER.................................................................................................................................................................. 5
SUMMARY FINANCIAL INFORMATION............................................................................................................ 6
GENERAL INFORMATION...................................................................................................................................... 9
CAPITAL STRUCTURE........................................................................................................................................... 22
OBJECTS OF THE OFFER..................................................................................................................................... 28
INDUSTRY.................................................................................................................................................................. 31
BUSINESS ................................................................................................................................................................... 36
HISTORY AND CERTAIN CORPORATE MATTERS....................................................................................... 54
SELECTED FINANCIAL INFORMATION.......................................................................................................... 56
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................................................................................................................ 59
MANAGEMENT........................................................................................................................................................ 87
OUR PROMOTERS AND GROUP COMPANIES ............................................................................................... 96
RELATED PARTY TRANSACTIONS................................................................................................................. 109
REGULATIONS AND POLICIES......................................................................................................................... 110
GOVERNMENT APPROVALS............................................................................................................................. 114
OUTSTANDING LITIGATION............................................................................................................................. 116
MATERIAL DEVELOPMENTS ........................................................................................................................... 136
DIVIDEND POLICY................................................................................................................................................ 137
OTHER REGULATORY DISCLOSURES .......................................................................................................... 138
TERMS OF THE OFFER ....................................................................................................................................... 140
OFFER PROCEDURE ............................................................................................................................................ 144
BASIS FOR OFFER PRICE................................................................................................................................... 162
STATUTORY AND OTHER INFORMATION....................................................................................................... 165
MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF JET AIRWAYS (INDIA) LIMITED........ 171
FINANCIAL INFORMATION............................................................................................................................... 196
STATEMENT OF TAX BENEFITS...................................................................................................................... 244
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP, IFRS AND U.S. GAAP ....... 251
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION........................................................... 257
DECLARATION ...................................................................................................................................................... 259
i
DEFINITIONS AND ABBREVIATIONS
Term Description
Abacus Abacus Distribution System Pte. Ltd., a GDS.
AGM Annual general meeting.
Airbus AIRBUS S.A.S.
Air Deccan A unit of Deccan Aviation Private Limited.
Air India Air India Limited.
Air Sahara Sahara Airlines Limited.
Allocation Amount The amount payable by a Bidder on or prior to the Pay-in Date after
deducting any Bid Amounts that may already have been paid by such Bidder.
Allotment Issue or transfer, as the context requires, of the Equity Shares pursuant to the
Offer to the successful Bidders.
Allottee The successful Bidder to whom the Equity Shares are/have been issued or
transferred.
Amadeus Amadeus Global Travel Distribution, a GDS and technology provider,
serving travel and tourism industries.
Articles/ Articles of Association The Articles of Association of the Company.
AS Accounting Standards as issued by the Institute of Chartered Accountants of
India.
ASEAN Assocation of Southeast Asian Nations.
ATR Avions de Transport Régional.
Auditors Deloitte Haskins & Sells, Chartered Accountants, and Chaturvedi & Shah,
Chartered Accountants (member of Nexia International), the joint statutory
auditors of the Company under Indian GAAP.
Banker(s) to the Offer Citibank, N.A., Deutsche Bank AG, The Hong Kong and Shanghai Banking
Corporation Limited, Kotak Mahindra Bank Limited, [?] and [?].
Bid An offer made during the Bidding Period by a prospective investor to
subscribe to the Equity Shares of the Company at a price within the Price
Band, including all revisions and modifications thereto.
Bid Amount The highest value of the optional Bids indicated in the Bid cum Application
Form and payable by the Bidder on submission of the Bid in the Offer.
Bid/Offer Closing Date The date after which the Syndicate will not accept any Bids for the Offer,
which shall be notified in a widely circulated English national newspaper, a
Hindi national newspaper and a Marathi newspaper.
Bid cum Application Form The form in terms of which the Bidder shall make an offer to subscribe
to/purchase Equity Shares and which will be considered as the application for
allotment/transfer of the Equity Shares in terms of this Draft Red Herring
Prospectus.
Bid/Offer Opening Date The date on which the Syndicate shall start accepting Bids for the Offer,
which shall be the date notified in a widely circulated English national
newspaper, a Hindi national newspaper and a Marathi newspaper.
Bidder Any prospective investor who makes a Bid pursuant to the terms of this Draft
Red Herring Prospectus.
Bidding/Offer Period The period between the Bid/ Offer Opening Date and the Bid/ Offer Closing
Date inclusive of both days and during which prospective Bidders can submit
their Bids.
Board of Directors/ Board The Board of Directors of the Company or a committee thereof.
Boeing The Boeing Company.
Book Building Process/Method Book building route as provided in Chapter XI of the SEBI Guidelines, in
terms of which this Offer is being made.
BPCL Bharat Petroleum Corporation Limited.
BRLMs Book Running Lead Managers to the Offer, comprising Deutsche Equities
India Private Limited, HSBC Securities and Capital Markets (India) Private
Limited, UBS Securities India Private Limited, Citigroup Global Markets
India Private Limited, DSP Merrill Lynch Limited and Kotak Mahindra
Capital Company Limited.
BSE The Stock Exchange, Mumbai.
CAGR Compounded annual growth rate.
ii
CAN/Confirmation of Allocation
Note
The note or advice or intimation of allocation of Equity Shares sent to the
Bidders who have been allocated Equity Shares after discovery of the Offer
Price in accordance with the Book Building Process.
CBDT Central Board of Direct Taxes.
CDSL Central Depository Services (India) Limited.
CEGAT Central Excise and Gold Appellate Tribunal, a tax appellate authority in
India, now known as the Customs, Excise and Service Tax Appellate
Tribunal or CESTAT.
CIAL Cochin International Airport Limited.
Citigroup Citigroup Global Markets India Private Limited.
CMIE Centre for Monitoring Indian Economy.
Common Law Agreement The Common Law Trade Marks User Agreement dated dated October 15,
2000 between the Company and Jet Enterprises, as amended.
Company or Jet Airways Jet Airways (India) Limited, a public limited company incorporated under the
Companies Act.
Companies Act The Companies Act, 1956, as amended from time to time.
Cut-off Price Any price within the Price Band finalized by the Company in consultation
with the BRLMs. A Bid submitted at the Cut-off Price by a Retail Individual
Bidder is a valid Bid at all price levels within the Price Band.
Depositories Act The Depositories Act, 1996, as amended from time to time.
Depository A depository registered with SEBI under the SEBI (Depositories and
Participants) Regulations, 1996, as amended from time to time.
Depository Participant A depository participant as defined under the Depositories Act.
Designated Date The date on which funds are transferred from the Escrow Account to the
Public Offer Account after the Prospectus is filed with the RoC, following
which the Board of Directors shall allot and/or transfer Equity Shares to
successful Bidders.
Designated Stock Exchange NSE.
Deutsche Equities Deutsche Equities India Private Limited.
Directors The directors of the Company from time to time.
Draft Red Herring Prospectus This Draft Red Herring Prospectus issued in accordance with Section 60B of
the Companies Act, which does not contain complete particulars on the price
at which the Equity Shares are offered and the size (in terms of value) of the
Offer. It will be filed with the RoC at least three days before the Bid/Offer
Opening Date. After the Pricing Date, it will become a Prospectus upon filing
with the RoC.
DSPML DSP Merrill Lynch Limited.
EGM Extraordinary general meeting.
Employee Reservation Portion The portion of the Offer being 1,200,000 Equity Shares available for
allocation to Employees who are Indian Nationals, are based in India and are
physically present in India on the date of submission of the Bid cum
Application Form.
Employee A permanent employee or a director of the Company or Tail Winds who are
Indian Nationals, are based in India and are physically present in India on the
date of submission of the Bid cum Application Form.
Equity Shares Equity shares of the Company of face value of Rs.10 each, unless otherwise
specified in the context thereof.
Escrow Account Account opened with Escrow Collection Bank(s) and in whose favour the
Bidder will issue cheques or drafts in respect of the Bid Amount when
submitting a Bid.
Escrow Agreement Agreement entered into by the Company, the Registrar, the BRLMs, the
Syndicate Members, the Company, the Selling Shareholder (acting through
the Company, its duly constituted attorney) and the Escrow Collection
Banks, for collection of the Bid Amounts and, where applicable, refunds of
the amounts collected to the Bidders.
Escrow Collection Bank(s) The banks which are clearing members and registered with SEBI as Bankers
to the Issue at which the Escrow Account for the Offer will be opened.
ESOP Employee stock option plan.
ESPS Employee stock purchase scheme.
FCNR Account Foreign Currency Non Resident Account.
FDI Foreign direct investment in India.
FEMA Foreign Exchange Management Act, 1999, as amended from time to time,
and the regulations framed thereunder.
FERA Foreign Exchange Regulation Act, 1973, now repealed.
FII/Foreign Institutional Investor Foreign Institutional Investor (as defined under SEBI (Foreign Institutional
iii
Investors) Regulations, 1995), registered with SEBI under applicable laws in
India.
Financial Year/fiscal/Fiscal/FY The 12 months ended March 31 of a particular year.
FIPB Foreign Investment Promotion Board, Ministry of Finance and Company
Affairs, Government of India.
First Bidder The Bidder whose name appears first in the Bid cum Application Form or
Revision Form.
Fresh Issue Issue of 14,245,111 Equity Shares at the Offer Price by the Company under
this Draft Red Herring Prospectus.
FVCI Foreign Venture Capital Investor, as defined and registered with SEBI under
the SEBI (Foreign Venture Capital Investor) Regulations, 2000, as amended.
Galileo Galileo International, Inc., a GDS.
GDP Gross Domestic Product.
GIR Number General Index Registry Number.
HAL Hindustan Aeronautics Limited.
HPCL Hindustan Petroleum Corporation Limited.
HSBC HSBC Securities and Capital Markets (India) Private Limited.
HUF Hindu Undivided Family.
IDBI Industrial Development Bank of India Limited.
IDFC Infrastructure Development Finance Company Limited.
IFC International Finance Corporation.
IFRS International Financial Reporting Standards.
Indian Airlines Indian Airlines Limited.
Indian National As used in the context of the Employee Reservation Portion, a citizen of
India as defined under the Indian Citizenship Act, 1955, as amended, who is
not an NRI.
Indian GAAP Generally accepted accounting principles in India.
Industrial Policy The industrial policy and guidelines issued thereunder by the Ministry of
Industry, Government of India from time to time.
I.T. Act Income Tax Act, 1961, as amended.
IOC Indian Oil Corporation.
Jetair Jetair Private Limited.
Jet Enterprises Jet Enterprises Private Limited.
KMCC Kotak Mahindra Capital Company Limited.
Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid,
which is between 0% to 100% of the Bid Amount.
MAT Minimum Alternate Tax.
Memorandum/Memorandum of
Association
The Memorandum of Association of the Company.
MoF Ministry of Finance and Company Affairs, Government of India.
NAV Net Asset Value.
Net Offer The Offer of Equity Shares other than Equity Shares included in the
Employee Reservation Portion.
NG Group Mr. Naresh Goyal, Tail Winds Limited and their respective affiliates, as
defined in our Articles.
N.I. Act Negotiable Instruments Act, 1881, as amended.
Non Institutional Bidders All Bidders that are not eligible Qualified Institutional Buyers or Retail
Individual Bidders and who have bid for Equity Shares for an amount more
than Rs.50,000.
Non Institutional Portion The portion of the Net Offer being up to 2,410,020 Equity Shares available
for allocation to Non Institutional Bidders.
Non Residents All Bidders who are not NRIs or FIIs and are not persons resident in India.
NRE Account Non Resident External Account.
NRI/ Non Resident Indian A person resident outside India, as defined in FEMA and who is a citizen of
India or a Person of Indian Origin, each term as defined under the Foreign
Exchange Management (Transfer or Offer of Security by a Person Resident
Outside India) Regulations, 2000.
NRO Account Non-Resident Ordinary Account.
NSDL National Securities Depository Limited.
NSE National Stock Exchange of India Limited.
OCB/Overseas Corporate Body A company, partnership, society or other corporate body owned directly or
indirectly to the extent of at least 60% by NRIs, including overseas trust(s) in
which not less than 60% of beneficial interest is irrevocably held by NRIs
directly or indirectly as defined under Foreign Exchange Management
(Deposit) Regulations, 2000, as amended. OCBs are not allowed to invest in
iv
this Offer.
OCB Regulations Foreign Exchange Management (Withdrawal of General Permission to
Overseas Corporate Bodies (OCBs)) Regulations, 2003.
Offer for Sale The offer for sale by the Selling Shareholder of 3,021,690 Equity Shares of
Rs.10 each at the Offer Price.
Offer Collectively, the Fresh Issue and the Offer for Sale.
Offer Price The final price at which Equity Shares will be issued and allotted in this
Offer. The Offer Price will be decided by the Company in consultation with
the BRLMs on the Pricing Date.
PAN Permanent Account Number.
Pay-in Date Bid Closing Date or the last date specified in the CAN sent to Bidders, as
applicable.
Pay-in-Period This term means (i) with respect to Bidders whose payment has not been
waived by the Syndicate and are therefore required to pay the maximum Bid
Amount into the Escrow Account, the period commencing on the Bid/Offer
Opening Date and extending until the Bid/Offer Closing Date, and (ii) with
respect to Bidders whose payment has been initially waived by the Syndicate
and are therefore not required to pay the Bid Amount into the Escrow
Account on or prior to the Bid/Offer Closing Date, the period commencing
on the Bid/Offer Opening Date and extending until the Pay-in Date.
Price Band Price band of a minimum price (floor of the price band) of Rs.[•] and the
maximum price (cap of the price band) of Rs.[•] (both inclusive), including
revisions thereof.
Pricing Date The date on which Company in consultation with the BRLMs finalizes the
Offer Price.
Promoters Tail Winds Limited and Mr. Naresh Goyal.
Prospectus The Prospectus to be filed with the RoC containing, inter alia, the Offer Price
that is determined at the end of the Book Building Process, the size of the
Offer and certain other information.
Public Offer Account Account opened with the Bankers to the Offer to receive monies from the
Escrow Account for the Offer on the Designated Date.
Qualified Institutional Buyers or
QIBs
Public financial institutions as defined in Section 4A of the Companies Act,
FIIs registered with SEBI, scheduled commercial banks, mutual funds
registered with SEBI, venture capital funds registered with SEBI, foreign
venture capital investors registered with SEBI, state industrial development
corporations, insurance companies registered with Insurance Regulatory and
Development Authority, provident funds with minimum corpus of Rs.250
million and pension funds with minimum corpus of Rs.250 million. QIBs as
defined herein for this Offer specifically exclude multilateral and
bilateral development financial institutions.
QIB Portion The portion of the Offer being at least 9,640,081 Equity Shares of Rs.10 each
available for allocation to QIBs.
RBI The Reserve Bank of India.
Red Herring Prospectus The Red Herring Prospectus dated [•] issued in accordance with Section 60B
of the Companies Act, which does not have complete particulars on the price
at which the Equity Shares are offered and size of the Offer. The Red Herring
Prospectus will be filed with the RoC at least three days before the opening
of the Offer and will become a Prospectus after filing with RoC after the
pricing and allocation.
Registered Office of our Company SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India.
Registered User Agreement The Trade Marks Registered User Agreement dated October 15, 2000
between us and Jet Enterprises, as amended.
Registrar to the Offer Registrar to the Offer, in this case being Karvy Computershare Private
Limited.
Retail Individual Bidder(s) Individual Bidders (including HUFs and NRIs) who Bid for Equity Shares
for an amount not more than Rs.50,000, in any of the bidding options in the
Offer.
Retail Portion The portion of the Offer being up to 4,016,700 Equity Shares of Rs.10 each
available for allocation to Retail Bidder(s).
Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the
Bid Price in any of their Bid cum Application Forms or any previous
Revision Form(s).
RoC Registrar of Companies at Mumbai, Maharashtra.
SAARC South Asian Association for Regional Cooperation.
SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time.
v
SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time.
SEBI The Securities and Exchange Board of India, constituted under the SEBI Act.
SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to
time.
SEBI Guidelines SEBI (Disclosure and Investor Protection) Guidelines 2000, issued by SEBI
effective from January 27, 2000, as amended from time to time, including
instructions and clarifications issued by SEBI from time to time.
Selling Shareholder Tail Winds Limited.
Stock Exchanges NSE and BSE.
Syndicate The BRLMs and the Syndicate Members.
Syndicate Agreement Agreement to be entered into among the BRLMs, Syndicate Member(s), the
Selling Shareholder (acting through the Company, its duly constituted
attorney) and the Company in relation to the collection of Bids in the Offer.
Syndicate Member(s) Kotak Securities Limited
Tail Winds Tail Winds Limited, a company incorporated in the Isle of Man.
TRS/ Transaction Registration Slip The slip or document issued by the Syndicate to the Bidder as proof of
registration of the Bid.
UBS UBS Securities India Private Limited.
Underwriters The BRLMs and the Syndicate Member(s).
Underwriting Agreement The agreement to be entered into among the BRLMs, the Syndicate
Member(s), the Company and the Selling Shareholder (acting through the
Company, its duly constituted attorney), on or after the Pricing Date.
U.S. Exim Export Import Bank of the United States.
U.S. GAAP Generally accepted accounting principles in the United States.
VCF Venture Capital Fund as defined and registered with SEBI under the SEBI
(Venture Capital Fund) Regulations, 1996, as amended.
vi
GLOSSARY OF CERTAIN INDUSTRY, TECHNICAL AND FINANCIAL TERMS
Term Description
AAI Airports Authority of India.
AIC Represents any or all aeronautical information circular(s) issued by the
DGCA from time to time.
AIC No.4 Aeronautical Information Circular No.4/2004 dated March 1, 2004, issued
by the DGCA, as amended, modified, replaced or supplemented from time
to time.
AME Aircraft maintenance engineer.
Aircraft utilization Represents the average number of block hours operated per day per aircraft
for the total aircraft fleet.
Air Taxi Operator A domestic airline, permitted by DGCA to operate non-scheduled flights
APEX Advance Purchase Excursion Fare, a scheme offering lower fares than our
normal published fares.
APU Auxilliary power unit that is used to provide power to the aircraft on the
ground.
ASA Air services agreement between countries.
ATC Air Traffic Control.
ATF Aviation Turbine Fuel.
Available Seat Kilometers, or ASKM Represents the aircraft seating capacity multiplied by the number of
kilometres the seats are flown.
Average stage length Represents the average number of kilometres flown per flight.
BCAS Bureau of Civil Aviation Security of India.
Block hours Refers to the elapsed time between an aircraft leaving an airport gate and
arriving at an airport gate.
Boeing 737 A series of aircraft manufactured by Boeing and comprising the Boeing 737
Classic and Boeing 737 NG variants.
Boeing 737 Classic The series of aircraft comprising the Boeing 737-300, Boeing 737-400 and
Boeing 737-500 aircraft
Boeing 737 NG The series of aircraft comprising the Boeing 737-600, Boeing 737-700,
Boeing 737-800 and the Boeing 737-900 aircraft
Breakeven load factor Represents the Passenger Load Factor that will result in Net Passenger
Revenues being equal to Total Expenses less cargo and Non-operating
Revenues.
BSP Billing Settlement Plan provided by IATA as a part of its passenger agency
programme.
CAR The civil aviation requirements issued by the DGCA from time to time.
C Check A block “C” check in accordance with the MPD and includes all
inspections up to and including those required every 4,800 Flight Hours,
4,000 cycles (defined as one take-off and landing) and 18 months.
Cargo tonnage The total cargo carried on an aircraft expressed in metric tons.
Cash EPS Net profit after tax and annualized return on preference capital before
depreciation, provision for obsolesence divided by total number of Equity
Shares.
CFM International CFM International SA.
CFM56 Engines A type of engine manufactured by CFM International which are fitted on
our Boeing 737 aircraft.
Club Premiere/CP The business class section on our Boeing 737 aircraft.
CRS Computerised Reservation System.
CRS costs Cost paid to CRS service provider.
Chicago Convention Convention on Civil Aviation signed in Chicago on December 7, 1944, as
amended from time to time.
D Check The maintenance shop visit which shall include but not be limited to
accomplishment of a block C6/8 year check in accordance with the
applicable appendix of the MPD, all lesser checks, passenger cabin
refurbishment (including lavatories and galleys) and strip and repainting of
the complete fuselage, empennage, wings and pylons.
DGCA Directorate General of Civil Aviation of India.
EBIT Profit before interest and taxation excluding Non-operating Revenues and
excluding any adjustments to profit as required under SEBI Guidelines.
EBITDA Profit before interest, taxation, depreciation and amortization excluding
Non-operating Revenues and excluding any adjustments to profit as
vii
required under SEBI Guidelines.
EBITDAR Profit before interest, taxation, depreciation, amortization and aircraft
rentals (fixed), excluding Non-operating Revenues and excluding any
adjustments to profit as required under SEBI Guidelines.
EPS Earnings per Equity Share.
EBITDAR margin Calculated by dividing EBITDAR for the relevant period by Operating
Revenues for such period.
Flight hours Refers to the time elapsed from the moment the wheels of an aircraft leave
the ground on a take-off until the wheels of an aircraft next touch the
ground.
FAA Federal Aviation Administration of the United States.
FTT Foreign travel tax.
GDS A global distribution system.
General and Administrative
Expenses
Consists of expenses related to inflight and other passenger amenities,
communication costs, travelling and subsistence, rent, rates and taxes,
repairs and maintenance, electricity, provision for bad and doubtful debts,
directors’ sitting fees, loss on scrapping of fixed assets, loss on sale of fixed
assets, loss on exchange rate difference and other miscellaneous expenses.
GSA General sales agent.
IATA International Air Transport Association.
IATT Inland Air Travel Tax.
ICAO International Civil Aviation Organization.
LIBOR The London Interbank Offer Rate, as applicable to the U.S. Dollar.
MoCA Ministry of Civil Aviation, Government of India.
MPD The DGCA approved maintenance planning document.
MTOW Maximum take-off weight as certified by DGCA.
Net Passenger Revenues Represents the Passenger Revenues net of commisions paid to travel agents
and GSAs.
Non-operating Revenue Represents revenue from interest income, profit from sale of assets such as
aircraft and engines and foreign exchange gains.
Operating Revenues Represents Passenger Revenues, revenues from excess baggage and cargo
and Other Income.
Other Income Represents revenue from ticket cancellation and handling charges paid by
the Government of India for PSF (being collected from passengers) and for
IATT (collected from passengers until January 9, 2004).
Other Operating Expenses Represents the aggregate of variable rent, aircraft maintenance, landing and
navigation charges and other airport charges, insurance costs and General
and Adminstrative Expenses.
PSF Passenger service fee, a tax levied by the Government of India on
passengers.
Passenger Load Factor Revenue Passenger Kilometres expressed as a percentage of Available Seat
Kilometres.
Passenger Revenues Represents the revenue recognized when transportation is provided to a
passenger or when no claim for refund has been made by a passenger on an
unused ticket for a period of two years.
Revenue Passenger Kilometers, or
RPKM
Represents the number of kilometres flown by revenue passengers.
Revenue passengers Represents the total number of fare paying passengers flown on all flight
segments (excluding passengers redeeming their frequent flyer miles).
RONW Return on Net Worth.
SABRE Sabre Inc.
Sabre GDS Sabre Travel Information Network, a GDS.
Scheduled Airline An airline permitted by DGCA to operate scheduled flights
SITA Societe International de Telecommunications Aeronautiques.
Total Expenses Represents the aggregate of employee remuneration and benefit, aircraft
fuel expenses, selling and distribution expenses, aircraft lease rentals,
depreciation, interest and Other Operating Expenses.
Total Revenues Represents the aggregate of Operating Revenues and Non-operating
Revenues.
Turnaround time The time between two continuous flights with the same aircraft.
Y Class / Y The economy class section on our aircraft.
Yield Net Passenger Revenue earned per kilometer flown.
viii
CERTAIN CONVENTIONS; FINANCIAL AND MARKET DATA
All references to “we”, “our”, “us”, “the Company” or “our Company” or words of similar import in this Draft Red Herring
Prospectus are to Jet Airways.
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial statements prepared
and restated in accordance with Indian GAAP, the Companies Act and SEBI Guidelines included elsewhere in this Draft Red
Herring Prospectus. We have no subsidiaries. Accordingly, financial information relating to us is presented on a non-
consolidated basis. Our fiscal year commences on April 1 and ends on March 31. In this Draft Red Herring Prospectus, any
discrepancies in any table between the total and the sums of the amounts listed are due to rounding.
There are significant differences between Indian GAAP, IFRS and U.S. GAAP; accordingly, the degree to which the Indian
GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely
dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian
accounting practices on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited.
We and the Selling Shareholder have not attempted to quantify the impact of these differences on the financial data included
herein, and we and the Selling Shareholder urge you to consult your own advisors regarding such differences and their impact on
our financial data.
All reference to “fiscal”, “Fiscal” “FY” or “Financial Year” in this Draft Red Herring Prospectus refers to the 12 months ending
on March 31.
All references to “India” in this Draft Red Herring Prospectus are to the Republic of India together with its territories and
possessions, and all references to the “US” or the “U.S.” or the “USA”, or the “United States” are to the United States of
America together with its territories and possessions. All references to the “Government” are to the Government of India, unless
otherwise indicated.
All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of India. All references to “US$”, “U.S. Dollar”
or “US Dollars” are to United States Dollars, the official currency of the United States of America.
For additional definitions, please see the section entitled “Definitions and Abbreviations” and “Glossary of Technical Terms”
beginning on pages i and vi, respectively, of this Draft Red Herring Prospectus.
Industry and market data used throughout this Draft Red Herring Prospectus has been obtained from industry publications,
Government of India sources and internal company reports. Industry publications generally state that the information contained
in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not
guaranteed and their reliability cannot be assured. Although we believe industry, market and government data used in this Draft
Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal company reports, while believed by
us to be reliable, have not been verified by any independent sources.
ix
FORWARD-LOOKING STATEMENTS
This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward looking statements can
generally be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “may”,
“objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import.
Similarly, statements that describe our objectives, strategy, plans or goals are also forward-looking statements.
All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to
differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual
results to differ materially from our expectations include, among others:
• general economic and business conditions;
• our ability to successfully implement our strategy and our growth and expansion plans;
• factors affecting travel, including business travel;
• increasing competition in the airline industry;
• increases in fuel, maintenance and repair costs and insurance premia;
• increases in employee costs, including wage levels of pilots, flight crew and engineers;
• manufacturers’ defects or mechanical problems with our aircraft or incidents caused by human error;
• changes in the value of the Indian rupee and other currencies, in particular, the U.S. Dollar;
• cyclical or seasonal fluctuations in our operating results;
• fares that we are able to obtain from different sectors;
• changes in laws and regulations that apply to the aviation industry;
• changes in fiscal, economic or political conditions in India;
• social or civil unrest or hostilities with neighboring countries or acts of international terrorism;
• epidemics or infectious outbreaks affecting travel; and
• changes in the foreign exchange control regulations, interest rates and tax laws in India.
For further discussion of factors that could cause our actual results to differ, please see the sections entitled “Risk Factors”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere
in this Draft Red Herring Prospectus. In the light of inherent risks and uncertainties, the forward-looking statements, events and
circumstances discussed in this Draft Red Herring Prospectus might not occur and are not guarantees of future performance.
Neither our Company, the Selling Shareholder, their respective directors and officers, any Underwriter nor any of their respective
affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or
to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with
SEBI requirements, for purposes of the Offer, our Company and the BRLMs will ensure that investors in India are informed of
material developments relating to our business until such time as the grant of listing and trading permission by the Stock
Exchanges.
x
CURRENCY OF PRESENTATION
This Draft Red Herring Prospectus contains translations of certain U.S. Dollar amounts into Rupees (and certain Rupee amounts
into U.S. Dollars) that have been presented solely to comply with the requirements of Clause 6.8.4 of the SEBI (Disclosure and
Investor Protection) Guidelines, as amended (“SEBI Gudelines”). Investors are cautioned to not rely on such translated amounts.
These convenience translations should not be construed as a representation that those Rupee or U.S. Dollar amounts could have
been, or could be, converted into U.S. Dollars or Rupees, as the case may be, at any particular rate, the rates stated below, or at
all. Except as otherwise stated in this Draft Red Herring Prospectus, all translations from Rupees to U.S. Dollars (and all
translations from U.S. Dollars to Rupees) contained in this Draft Red Herring Prospectus have been based on the Interbank
market mid rates as taken from Bloomberg as on September 29, 2004, which was Rs.46.01 = U.S.$1.00.
The following table sets forth, for each period indicated, information concerning the number of Rupees for which one U.S. Dollar
could be exchanged at the Interbank market mid rates on the last business day of the particular period. The column titled average
in the table below is the average of the Interbank market mid rates for each day in the period.
Period Period End Average High Low
Rs. Rs. Rs. Rs.
Fiscal 2000 43.62 43.34 43.66 42.42
Fiscal 2001 46.62 45.69 46.88 43.63
Fiscal 2002 48.82 47.68 48.83 46.56
Fiscal 2003 47.47 48.40 49.05 47.47
Fiscal 2004 43.60 45.94 47.47 43.60
Six months ended
September 30, 2004 45.95 45.53 46.47 43.54
____________
Source: Bloomberg
The Interbank market mid rate as on [?] was Rs. [?] = U.S. $1.00.
xi
RISK FACTORS
An investment in our Equity Shares involves a high degree of risk. You should carefully consider all of the information in this
Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity
Shares. If any of the following risks actually occur, our business, financial condition and results of operations could suffer, the
trading price of our Equity Shares could decline, and you may lose all or part of your investment.
Internal Risk Factors
We operate in a very competitive industry.
There is substantial competition in the airline industry. As the Indian airline industry is further liberalized, we expect
competition to intensify as new entrants begin to compete against us, our existing competitors further expand their operations and
we enter new markets where we compete with well established competitors.
Competition with existing competitors in the market has been, and we believe will continue to be, intense. Currently, our
principal competitors in the domestic sector include Indian Airlines, a Government-owned company, together with its subsidiary,
Alliance Air, and Air Sahara and Air Deccan, two privately owned companies. We may face competition from other new
competitors in the near future. According to published reports, other enterprises are contemplating entering the domestic aviation
market.
Certain of our competitors, including Government-owned companies, may have significantly greater resources than those
available to us. Our existing and future competitors or new entrants into the market may undercut our fares in the future,
increase capacity on their routes in an effort to increase their market share or attempt to conduct low-fare or “no frills” airline
operations. For example, according to published reports, Indian Airlines is planning to undertake an expansion of its aircraft
fleet and is awaiting Government approval for such expansion. In such an event, we cannot assure you that our level of market
share, yields and volume of passenger traffic, and revenues would not be adversely affected.
Our market position will depend upon effective marketing initiatives and our ability to anticipate and respond to various
competitive factors affecting the industry, including pricing strategies by competitors. Any failure by us to compete effectively,
including in terms of pricing or providing high-quality innovative services, could have a material adverse effect on our results of
operations.
We also compete with other airlines for labor in skilled positions such as pilots, aircraft maintenance engineers (“AMEs”),
technicians and in-flight crew. Our competitors may offer wage and benefit packages that are more attractive than our wage and
benefit packages. If we are unable to attract and retain qualified employees, particularly skilled personnel such as pilots that
have been trained by us, our business and expansion plans may be adversely affected.
We also compete with other airlines for access to airport facilities, parking bays for aircraft and prime time departure slots. An
inability to lease, acquire or access airport infrastructure, facilities or services on reasonable terms or at preferred times may have
an adverse impact on our operations.
We have only a limited number of suppliers for our aircraft and engines. Any problem with these aircraft, whether real or
perceived, could significantly harm our business.
One of the key elements of our business strategy is to operate limited types of aircraft, with each type having similar equipment.
Operating a fleet of similar aircraft with similar equipment leads to cost savings because maintenance issues are simplified, spare
parts and inventory requirements are reduced, scheduling is more efficient and training costs are lowered. Operating limited
types of aircraft also allows our employees to become knowledgeable about the airframe and engine, thereby increasing their
efficiency and productivity.
As of the date of this Draft Red Herring Prospectus, 34 aircraft in our total fleet of 42 aircraft are Boeing 737s, while eight
aircraft are ATR 72-500s. We chose the Boeing 737 because of its reliability, advanced technology, and fuel efficiency. We use
the ATR 72-500s primarily for short haul flights. We have entered into lease agreements for seven additional Boeing 737-800
aircraft expected to be delivered in 2005 for lease terms ranging between approximately six and seven years. In December 2004
we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with CFM56-7B24 engines. The
expected date of delivery of such aircraft is between January 2006 and October 2007. Definitive purchase agreements will need
to be negotiated and entered into on or prior to January 31, 2005, unless otherwise extended. If the purchase agreements are
entered into, then closer to the delivery dates of each aircraft we will determine the financing arrangements under which these
aircraft will be obtained. The entry into such purchase agreement and financial arrangements in connection therewith is also
subject to the Company obtaining board approval and such necessary regulatory approvals as may be required.
All of our Boeing 737 aircraft are equipped with engines manufactured by CFM International, S.A. (“CFM International”), with
the Boeing 737 Classic series (Boeing 737-300, 737-400 and 737-500) using one type of CFM engine and the Boeing 737 NG
xii
series (Boeing 737-600, 737-700, 737-800 and 737-900) using another type of CFM engine. Our ATR 72-500s are equipped
with engines manufactured by Pratt & Whitney Canada Corp.
Our dependence on these limited types of aircraft and engines makes us particularly vulnerable to any problems that might be
associated with such aircraft or the engines. Our business would be significantly harmed if a design defect or mechanical
problem with such aircraft or engines were discovered, causing our aircraft to be grounded while any such defect or problem is
being corrected, assuming it could be corrected at all. The DGCA could also suspend or restrict the use of our aircraft in the
event of any actual or perceived mechanical or design problems while it conducts its own investigation. Our business would also
be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the Boeing 737 or the ATR 72-500
aircraft because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving a Boeing
737 or an ATR 72-500 aircraft.
A number of factors could adversely affect our ability to obtain additional Boeing 737 or the ATR 72-500 aircraft, including any
accidents, industrial unrest or natural calamity or other event affecting the manufacturing facilities of the Boeing Company
(“Boeing”) or Avions de Transport Regional (“ATR”) and thereby affecting their ability to fulfill their contractual obligations or
to do so in a timely manner. We could experience similar problems in the procurement of engines manufactured by CFM
International and by Pratt &Whitney Canada Corp.
If these or other parties are unable to perform their contractual obligations to deliver aircraft or engines to us, we would have to
approach another supplier for aircraft or engines of a similar seat configuration and mission capability. Airbus is currently the
only other manufacturer from which we could acquire alternate aircraft to our Boeing 737 fleet. If we were to purchase aircraft
from Airbus, we would lose the fleet commonality benefits described above. We cannot also assure you that any such aircraft
would have the same operating advantages as the Boeing 737. In addition, we cannot assure you that we could acquire such
aircraft in the same time frame as currently expected or at comparable prices. We would incur substantial transition costs,
including costs associated with retraining our employees and replacing our manuals. Our operations could also be harmed by the
failure or inability of Boeing, CFM International, ATR or Pratt & Whitney Canada Corp. to provide sufficient parts or related
support services on a timely basis.
We rely on maintaining high daily aircraft utilization for our revenues. High aircraft utilization also makes us vulnerable to
delays. If an aircraft becomes unavailable, we may suffer greater damage to our service, reputation and profitability than
airlines with larger fleets.
One of the key elements of our business strategy is to maintain high daily aircraft utilization, which represents the average
number of Block hours operated per day per aircraft for the total aircraft fleet. High daily aircraft utilization allows us to enhance
the efficiency of our operations and generate more revenue from our aircraft and is achieved in part by reducing turnaround time
at airports so that we can fly more hours on an average in a day. Aircraft utilization is reduced by delays resulting from the
following factors, most of which are beyond our control:
• security requirements;
• air traffic and airport congestion;
• adverse weather conditions, especially in North India during winter months;
• defects or mechanical problems with our aircraft;
• unavailability of cockpit and in-flight crew;
• strikes or work stoppages; and
• acts of third parties upon which we rely for requirements such as fueling and maintenance.
In addition, the expansion of our business to include new destinations and more frequent flights on existing routes could increase
the risk of delays, to the extent the expansion increases our exposure to congested airports, longer flight durations or air traffic
congestion. Delays could reduce our daily aircraft utilization and, in turn, limit our ability to achieve and maintain profitability
as well as damage our reputation. Further, high aircraft utilization increases the risk that once an aircraft falls behind schedule
during the day, it could remain behind schedule during the remainder of that day, which could result in disruption in operating
performance leading to passenger dissatisfaction as a result of delayed or cancelled flights or missed connecting flights.
Our business is dependent on the Mumbai airline market and a reduction in demand in this market could harm our business.
Also, any interruptions or disruptions at the Mumbai airport or at any of our other hubs could harm our business.
Currently, 1,008 of our 1,924 weekly flights have Mumbai as either their destination or origin. In addition, we park 19 of our
fleet of 42 aircraft at the Mumbai airport overnight. Mumbai is the primary base of our operations. As a result, we remain
dependent on the Mumbai airport and airline market. A small part of our workforce at Mumbai is unionized. Our business could
be harmed by any circumstances causing a reduction in traffic to and from the Mumbai area, such as adverse changes in
economic conditions, work stoppages or slowdowns by our workforce in Mumbai, negative public perception of the city,
significant price increases in airport access costs and fees imposed on passengers or the impact of terrorist attacks or strikes in the
city or in the State of Maharashtra or neighboring States.
xiii
In addition to Mumbai, the other hubs of our operations are Delhi, Bangalore, Chennai and Kolkata. Our operations at each of
these hubs include flights that gather and distribute traffic from markets in the geographic region surrounding the hub to other
major cities. Any interruptions or disruptions at these airports could also harm our business.
If we commence services to additional international destinations, we will face different risks than those associated with our
domestic operations.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004 and May
2004, respectively, pursuant to the Government of India’s permission allowing private domestic air carriers to fly to these
destinations. The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20 aircraft to
provide services to other international destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman,
Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three years. The Company is
accordingly considering the feasibility of flying to other international destinations. However, these policy changes are not yet
effective, and detailed guidelines will need to be notified by the Ministry of Civil Aviation. As and when the changes in policy
become effective, the Government will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaty
for the respective countries to which we desire to fly. There is no certainty when these policy changes will become effective and
whether or when we will be permitted to fly to destinations of our choice.
If we commence services to additional international destinations, we will face different risks than those associated with our
domestic operations. We have only limited experience in operating flights to international destinations. In particular, for long
haul destinations, we would be required to operate bigger, wide-bodied aircraft than the types that we currently operate. We also
would need to acquire flight slots from local airport authorities or carriers. These expanded activities could require us to make
significant capital expenditure and/or incur substantial indebtedness. In addition, the operation of such larger aircraft over long
routes would involve additional complexities, including securing the services of qualified pilots, flight staff and engineers with
international experience.
Factors that may have an impact on our international growth strategy include:
• delay or inability to obtain permissions and approvals from regulatory authorities;
• delay or inability to acquire flight slots on terms that are financially viable;
• changes to our cost structure;
• factors affecting demand in international travel to and from India, including the general condition of the global
economy;
• operational, financial, marketing and legal challenges (including compliance with foreign laws) that are different from
those that we currently encounter;
• our ability to operate and manage in a cost effective manner, a larger operation;
• greater exposure to exchange rate volatility;
• our ability to secure a sufficient number of additional aircraft on favorable lease or purchase terms; and
• our ability to hire, train and retain sufficient numbers of pilots, flight crew and engineers with international experience.
Many of these factors are beyond our control. There can be no assurance that we will be able to successfully expand our
international operations, if and when we are permitted, and our failure to do so may have a material adverse effect on our
prospects and future results of operations. See “Business – International Operations” on page 52 of this Draft Red Herring
Prospectus.
Our failure to successfully implement our growth strategy would harm the market value of our Equity Shares.
Our growth strategy involves expanding the number of markets we serve, including international markets, and increasing the
frequency of flights to the markets we currently serve. Achieving these goals is essential for us to benefit from cost efficiencies
resulting from economies of scale and to increase our operating revenues and profits. Increasing the number of markets we serve
and our flight frequencies depend on our ability to identify the appropriate Indian and international markets upon which to focus
and to gain suitable airport access and route approval in these markets. Any condition that would prevent or delay our access to
airports or routes that will be vital to our growth strategy, including the ability to process more passengers, the imposition of
flight capacity restrictions, or our ability to maintain existing slots or obtain additional slots could constrain the expansion of our
operations.
Expansion of our markets and flight frequencies may also strain our existing management resources and operational, financial
and management information systems to the point that they may no longer be adequate to support our operations, requiring us to
make significant expenditures in these areas.
In the light of these factors, we cannot assure you that we will be able to successfully establish new markets or expand our
existing markets, and failure to do so would harm our strategy, business and the value of our Equity Shares.
xiv
We rely heavily on automated systems to operate our business, and any failure of these systems could harm our business.
We depend on automated systems to operate our business, including our computerized airline reservation system, SABRE, global
distribution systems (“GDSs”) such as Abacus, Amadeus, Galileo, Sabre GDS and Worldspan, telecommunications systems,
websites and other automated systems. Our reservation and website systems must be able to accommodate a high volume of
traffic and deliver important flight information. Substantial or repeated reservation, website or telecommunications systems
failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline.
Any disruption in these systems could result in the loss of important data, increase our expenses and generally harm our business.
Our maintenance costs will increase as our fleet ages.
The average age of our aircraft is currently approximately 4.5 years and our aircraft require less maintenance currently than they
will in the future. We also currently incur lower maintenance expenses because some of the parts on our aircraft are under multi-
year warranties. As our fleet ages and the warranties on our aircraft expire, our maintenance costs will increase, both on an
absolute basis and as a percentage of our operating expenses. For example, in fiscal 2006 and 2007, D Checks are scheduled for
nine and eight Boeing 737 aircraft, respectively, which will result in the unavailability of such aircraft for a period of
approximately 45 days during each such D Check. Although we cannot reasonably predict how much our maintenance costs will
increase in the future, we expect that they will increase.
We may be unable to maintain our company culture as our business grows. If we are unable to attract and retain qualified
personnel at reasonable costs, our business may be harmed.
We believe that our growth potential and maintenance of our service-oriented company culture are directly linked to our capacity
to attract and maintain the best professionals available in the Indian airline industry. We are dedicated to providing professional,
high-quality service in a positive work environment and being innovative in finding ways to improve our business. We place
high emphasis on the selection and training of employees with the potential to add value to our business and who we believe fit
in with and contribute to our company culture. As we grow, we may be unable to identify, hire or retain enough people who
meet the above criteria, or we may have trouble maintaining this company culture as we become a larger company. Our
company culture is crucial to our business plan, and failure to maintain that culture could adversely affect our business and
results of operations.
Although our labor costs are lower than airlines in developed countries, we expect salaries, wages and benefits to increase on a
gross basis and these costs may increase as a percentage of our overall expenses, which could harm our business. Our expansion
plans will require us to hire, train and retain a significant number of new employees in the future. From time to time, the airline
industry has experienced a shortage of personnel, especially pilots, AMEs and technicians. We have also experienced a high
level of attrition of our in-flight crew. Attrition rates for employees (based on the average number of personnel at the beginning
of such period and at the end of such period) in fiscal 2002, 2003 and 2004 were 8.9%, 13.2% and 14.1%, respectively, and
11.0% (on an annualized basis) in the six months ended September 30, 2004. In-flight crew attrition rates for such periods were
15.4%, 18.3%, 26.9% and 21.2% (on an annualized basis), respectively. In addition, attrition rates for airport services staff in
fiscal 2002, 2003 and 2004 and for the six months ended September 30, 2004 were 10.6%, 18.3%, 15.9% and 13.6% (on an
annualized basis), respectively. We compete with other airlines for labor in these highly skilled positions. For certain of our non-
unionized staff such as pilots, cabin attendants and engineers, we have in consultation with such staff agreed to certain annual
compensation levels until 2007. These contemplate annual increases in fiscal years 2006 and 2007. Our competitors may offer
wage and benefit packages that are more attractive than our wage and benefit packages. We may be adversely affected if highly
skilled employees such as pilots, who have been trained by us, leave our employment and join our competitors. If we are unable
to attract and retain qualified and skilled employees at a reasonable cost, our business and expansion plans may be adversely
affected.
Our success depends in large part upon our senior management, directors and key personnel and our ability to attract and
retain them.
We are highly dependent on our senior management, our directors and our other key personnel. Our future performance will
depend upon the continued services of these persons. We do not maintain key man life insurance for any of the senior members
of our management team, our directors or our other key personnel. Competition for senior management in our industry is intense,
and we may not be able to retain our senior management personnel or attract and retain new senior management personnel in the
future. The loss of any of the members of our senior management, our directors or other key personnel may adversely affect our
business and results of operations.
Mr. Naresh Goyal and Tail Winds have significant control over us, including as a result of the terms of our Articles of
Association, and have the ability to direct our business and affairs; their interests may conflict with your interests as a
shareholder.
Our promoters, Tail Winds and Mr. Naresh Goyal, will control approximately 80% of our outstanding Equity Shares upon
completion of the Offer.
xv
.
Our Articles of Association confer certain rights on Mr. Naresh Goyal, the NG Group and certain companies controlled by Mr.
Naresh Goyal (such as Jet Enterprises) relating to the governance of the Company. Mr. Goyal is the permanent Chairman of the
Company and Chairman of our Board, and is entitled to chair all meetings of shareholders or directors, respectively, for so long
as he is willing to do so (irrespective of the shareholding of Mr. Goyal or the NG Group). In Mr. Goyal’s absence at any
shareholders’ or directors’ meeting, one of the directors nominated by the NG Group shall preside. The Chairman shall have the
casting vote at any shareholders’ or directors’ meeting and has the power to direct the convening of any Board meeting. In
addition, irrespective of the shareholding of Mr. Goyal or NG Group, the quorum for any meeting of the board of directors shall
require the presence of at least one third of its total strength, which must include at least an equal number of directors who are
NG Group nominees, unless the absent NG Group nominee directors consent in writing to a quorum requirement being satisfied.
However, in the event of a quorum not being available at an adjourned meeting the directors present shall constitute the quorum
and may transact business at such an adjourned meeting. .
For so long as the NG Group holds 26% or more of the Equity Shares of the Company:
• Approval of the NG Group shall be required to authorize or issue any share capital;
• The NG Group shall be entitled to appoint one third of the Company’s directors, which directors may be removed or
replaced only by the NG Group;
• The NG Group shall be entitled to designate one or more of its appointed directors as the Managing Director(s),
Manager or Executive Director(s) of the Company, and the NG Group shall be entitled to specify the terms of
appointment of, or remove, any Managing Director, Manager or Executive Director;
• The quorum for any meeting of shareholders shall require the presence of a representative of the NG Group (although
actions may be taken at an adjourned meeting even if an NG Group representative is not present); and
• The NG Group shall be entitled to appoint one of its nominated directors to each committee of the Board, subject to
applicable requirements of law.
In addition, for so long as the NG Group holds 10% or more of the Equity Shares of the Company, if Mr. Goyal is unable to
continue as the Chairman of the Company, then the Chairman of the Board shall act as Chairman of the Company. In addition,
for so long as the NG Group holds 10% or more of the Equity Shares of the Company, if Mr. Goyal is unable to continue as the
Chairman of the Board, then one of the NG Group Directors shall act as Chairman of the Board.
Our Articles of Association can only be amended if members holding not less than 75% of our Equity Shares (and who are
entitled to vote) cast votes in favor of such amendments and such votes include the favorable votes of the NG Group (so long as
the NG Group is a shareholder and vote on such amendments, irrespective of the amount of Equity Shares held by the NG
Group).
Accordingly, our promoters and the NG Group have the ability to exercise significant influence over matters requiring
shareholders’ or directors’ approval, even if their ownership interest in our equity capital should be reduced significantly. This
control could delay, defer or prevent a change of control of us, impede a merger, consolidation, take-over or other business
combination involving us, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control
of us. For further details, see “Main Provisions of the Articles of Association.”
We have entered into certain transaction with certain promoter group companies, including with respect to our licenses to use the
“Jet Airways” mark and our principal GSA agreement. These transactions may potentially involve conflicts of interest. See
“Risk Factors- We do not own the ‘Jet Airways’ mark” and “Related Party Transactions” as set out on pages xvi and 109,
respectively, of this Draft Red Herring Prospectus.
We rely on third parties to provide us with facilities and services that are integral to our business.
We have entered into agreements with third-party contractors to provide certain facilities and services required for our
operations, such as aircraft maintenance. We expect to enter into similar agreements in any new markets we enter. The loss or
expiration of these contracts or any inability to renew them or negotiate contracts with other providers at comparable rates could
harm our business. Our reliance on others to provide essential services for us also gives us less control over costs, and the
efficiency, timeliness and quality of contract services.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs.
Approximately 11% of our aggregate workforce as of September 30, 2004 was unionized, comprising certain categories of our
employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of settlements with the respective unions at
Mumbai, Delhi and Kolkata, which are valid from periods between 2005 and 2008. Industrial action or work stoppages by our
employees could be disruptive to our operations and could harm our business and results of operations.
xvi
We also rely on the services of approximately 2,100 travel agents in India who sell our tickets and who receive commission for
the sale of such tickets. Any concerted action by these travel agents against us could adversely affect our results of operations.
We do not own the “Jet Airways” mark.
There is significant goodwill in the “Jet Airways” name and trademark, which is a registered trademark in India. The use of the
“Jet Airways” trademark (together with certain variations thereof) has been licensed to us for use in India on an exclusive, non-
assignable basis by Jet Enterprises Private Limited (a company substantially owned by Mr. Naresh Goyal) (“Jet Enterprises”)
pursuant to a Trade Marks Registered User Agreement dated October 15, 2000, as amended (the “Registered User Agreement”).
Certain other variations of the “Jet Airways” trademark and certain other related trademarks (for which Jet Enterprises has
applied, or proposes to apply for, registration) have also been licensed to us by Jet Enterprises on an exclusive non-assignable
basis for use in India pursuant to a Common Law Trade Marks User Agreement dated October 15, 2000, as amended (the
“Common Law Agreement”). Once a trademark is registered, such trademark should be licensed to us under a registered user
agreement.
Under the Registered User Agreement, we are required to pay Jet Enterprises license fees that vary between 0.10% and 0.20% of
our gross revenues (as defined in the Registered User Agreement), while under the Common Law Agreement, we are required to
pay a fixed annual license fee of Rs.0.1 million for each trademark licensed under the Common Law Agreement. The Registered
User Agreement and the Common Law Agreement are valid for a period of fifteen years, commencing October 2000, and are
renewable at the option of Jet Enterprises for a further period of ten years.
Jet Enterprises has taken steps to register the “Jet Airways” mark and related trademarks outside India. The “Jet Airways”
trademark is currently registered in Hong Kong, Singapore, U.A.E., the U.K. and Mauritius and Jet Enterprises is seeking to
register this trademark in certain other jurisdictions outside India.
Certain parties have raised objections to the registration of the “Jet Airways” trademark in the U.K. and in the United States. For
further particulars, see litigation of promoter group companies beginning on page 128 of this Draft Red Herring Prospectus.
We intend to enter into additional trademark license agreements with Jet Enterprises for the use of the trademark in Sri Lanka,
Nepal and other countries. Pursuant to a letter dated December 15, 2004, Jet Enterprises has confirmed to us that as long as we
are not in default under any registered user agreements or common law agreements pursuant to which Jet Enterprises has licensed
trademarks to us, Jet Enterprises will license the use of the “Jet Airways” and related trademarks to us for use in the other
countries where Jet Enterprises has registered or applied for registration of the “Jet Airways” trademark and where we seek to
operate in the future. License fees will be payable to Jet Enterprises for the use of these trademarks under such other license
agreements that may be entered into by us with Jet Enterprises. We cannot, however, provide any assurance that such licenses
will be granted by Jet Enterprises to us or that the terms of such licenses, including license fees payable under such agreements,
will be favorable to us.
If the “Jet Airways” trademark and related trademarks become unavailable to us or we are required to pay a higher license fee for
the use of these trademarks, our business, financial condition and results of operations could be materially and adversely affected.
In addition, Article 3 of our Articles of Association specifies that Jet Enterprises has, pursuant to certain trademark license
agreements, granted the Company an exclusive, non-assignable license to use certain trademarks, including the “Jet Airways”
trademark, in accordance with the terms of such license agreements. Our Articles of Association further contemplate that upon
expiry or termination of such license agreements, we will discontinue the use of the name “Jet Airways” and related trademarks,
service marks, copyrights, domain names and designs, including any variations thereof. In such event, we are also required to
change our corporate name and assign all rights relating to the name “Jet Airways” and related intellectual property rights to Jet
Enterprises. Under our Articles, our shareholders are also required, subject to applicable law, to exercise their voting rights to
ensure that we comply with such terms.
We have high levels of indebtedness. If we fail to comply with our financing covenants, some of our financing agreements
may be terminated.
As of September 30, 2004, we had Rs.31,481 million long-term indebtedness and subordinated debt obligations. Approximately
32.2% of our total indebtedness (including subordinated debt) is on a floating rate basis and linked to LIBOR.
Under certain of our financing agreements, we are required to comply with specified covenants. In addition, certain of our lease
agreements require that Tail Winds should continue as the majority shareholder of the Company and Mr. Naresh Goyal should
hold not less than 51% of the shares of Tail Winds, and a failure to comply with either condition will result in an event of default.
The terms of our financing agreements may limit our ability to obtain additional financing for working capital and other purposes
and could result in the diversion of substantial cash flow from our operations to service our financing obligations, thereby
limiting our ability to plan for or react to changes in our business and the airline industry and to general economic conditions.
Our general sales agents for India and certain other countries are controlled by our promoter, Mr. Naresh Goyal.
xvii
Our general sales agent (“GSA”) for India is Jetair Private Limited (“Jetair”), which is controlled by Mr. Naresh Goyal. We have
a GSA agreement with Jetair for a period of four years commencing April 1, 2004. Such agreement with Jetair requires
Government approval under the Companies Act, and we currently have received approval for such agreement for a period of
three years commencing April 1, 2004. Pursuant to such GSA agreement, we pay Jetair an overriding commission of 3% on all
passenger sales and 2.5% on all cargo sales. This commission is payable in addition to the sales commissions that is payable to
sales and travel agents of 5% on Rupee fares and cargo and 7% on foreign exchange fares. Our agreement with Jetair provides
for charge back of certain expenses, including remuneration of certain employees (sales, reservation and service staff) who are
rendering services which should be rendered by Jetair as our GSA, computer reservation system (“CRS”) costs (up to a
maximum of 25% of such CRS costs) and Societe International de Telecommunications Aeronautiques (“SITA”) communication
charges, in amounts as determined by us. In fiscal 2004 and the six months ended September 30, 2004, commissions to Jetair
constituted 2.5% and 3.1%, respectively, of our Total Expenses for such periods. We propose to join the Billing Settlement Plan
(“BSP”) system in India, an IATA sponsored standardized ticketing and collection system. If we migrate sales to the BSP
system, we expect that our GSA agreement with Jetair may require modification.
While we are already a part of the BSP systems in certain countries outside India, there can be no assurance that we will join the
BSP system in India or amend the terms of the GSA agreement with Jetair.
In addition, we have GSA agreements with Jet Airways LLC, Dubai, UAE and its two subsidiaries Jet Airways of India Inc.,
USA (for USA and Canada) and India Jet Airways (Pty) Ltd., South Africa (for South Africa). These companies are all promoter
group companies. In fiscal 2004 and the six months ended September 30, 2004, commissions to these companies constituted
0.5% and 0.4%, of our Total Expenses for such periods.
Our transactions with these promoter group companies may potentially involve conflicts of interest. There can be no assurance
that in such circumstances, our promoter will not favor the interests of Jetair or other promoter group companies over our
interests.
Any further issuance of Equity Shares by us or sales of our Equity Shares by Tail Winds or any other major shareholder may
adversely affect the trading price of the Equity Shares.
Any future issuance of our Equity Shares by us could dilute your shareholding. Any such future issuance of our Equity Shares or
sales of our Equity Shares by Tail Winds or any other major shareholder may also adversely affect the trading price of our Equity
Shares, and could impact our ability to raise capital through an offering of our securities. In addition, any perception by investors
that such issuances or sales might occur could also affect the trading price of our Equity Shares. Upon completion of the Offer,
20% of our post-Offer paid-up equity capital on a fully diluted basis held by Tail Winds will be locked up for a period of three
years from the date of allotment of Equity Shares in the Offer. All other remaining Equity Shares that are outstanding prior to
the Offer will be locked up for a period of one year from the date of allotment of Equity Shares in the Offer.
The trading price of our Equity Shares may be affected by variations in our results of operations.
We expect our quarterly operating results to fluctuate in the future based on a variety of factors, including:
• the timing and success of our growth plans as we lease or purchase additional aircraft, increase flights in existing
markets and enter new markets;
• changes in passenger fares, fuel, aircraft rentals, interest component of hire purchase rentals and maintenance costs; and
• increases in personnel, marketing and other operating expenses to support our anticipated growth.
In addition, seasonal variations in traffic, weather conditions such as fog and poor visibility, and certain expenditures affect our
operating results from quarter to quarter. The highest levels of traffic and revenue on our routes are generally realized from
October to February. Given our high proportion of fixed costs, this seasonality affects our profitability from quarter to quarter.
Many of our areas of operations in North India experience bad weather conditions in the winter, causing increased costs
associated with delayed and cancelled flights and accommodating passengers who have been unable to travel.
Due to the factors described above, our operating results may vary from quarter to quarter. In addition, it is possible that in any
future quarter our operating results could be below the expectations of investors and any published reports or analyses regarding
the Company. In that event, the price of our Equity Shares could decline, perhaps substantially.
The issue of Equity Shares pursuant to our proposed Employee Stock Purchase Scheme or any grant of stock options under
our proposed Employee Stock Option Scheme will result in a charge to our profit and loss account and will adversely impact
our profits.
After the listing of our Equity Shares in this Offer, we intend to adopt either an Employee Stock Purchase Scheme (the “ESPS”)
or an Employee Stock Option Scheme (the “ESOP”) in which eligible employees and directors of the Company and any other
person permitted under applicable law or regulation can participate, subject to such approvals as may be necessary. The criterion
for selection will be determined by our Board and approved by our shareholders. The ESPS or ESOP will comply with the SEBI
(Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares pursuant
xviii
thereto will be subject to compliance with all applicable laws and regulations. We propose to issue a maximum of 0.5% of our
post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur in fiscal 2006, although
there can be no assurance as to the timing of adoption of any such scheme, which may occur in fiscal 2006 or thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss account equal to the product of
such number of Equity Shares issued and the difference between the applicable market price of our Equity Shares and the price at
which our employees and directors will purchase the Equity Shares. We have not as yet determined the issue price at which
Equity Shares will be sold, the number of Equity Shares proposed to be issued, the identity of such eligible personsnd the timing
of adoption of the ESPS scheme or the date of issue of Equity Shares thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of the number of Equity Shares
proposed to be issued in accordance with the accounting principles used for determining such charge using the fair value method
or applicable market price of our Equity Shares. Such charge will be amortized over the vesting period of the stock option. We
have not as yet determined the number of stock options to be granted, the exercise price or the number of Equity Shares to be
issued, the identity of the eligible persons and the timing of the ESOP scheme.
There are a number of legal proceedings against us, our directors, our promoters and promoter group companies.
We, our directors, our promoters and promoter group companies are parties to certain legal proceedings initiated by or against us
that are incidental to our business and operations. These legal proceedings are pending at different stages of adjudication before
various courts and tribunals. Should any new developments arise, such as a change in Indian law or rulings against us by
appellate courts or tribunals, we may need to make provisions in our financial statements, which could increase our expenses and
our current liabilities. Furthermore, if significant claims are determined against us and we are required to pay all or a portion of
the disputed amounts, this may have a material adverse effect on our business and profitability.
We have challenged the grant by the Cochin International Airport Limited (“CIAL”) of an exclusive ground handling services
contract to Air India at the Monopolies and Restrictive Trade Practices Commission. As a result of this contract, we are
prevented from arranging our own ground handling services (which we are entitled to provide at all other airports in India) and
instead are required to use the services of Air India. Under such arrangements, we are required to pay Air India ground handling
charges that are significantly greater than the costs we would otherwise have incurred in arranging our own ground handling
services. We are currently making payments of a part of such charges to Air India under protest. In the event that we are
required to pay Air India the entire outstanding amounts, including any interest payable thereon, our financial condition and
results of operations could be adversely affected.
We have filed a writ petition in the High Court, Mumbai (being Writ Petition No.208 of 2001), challenging the order of the
Municipal Corporation of Greater Mumbai levying octroi duty (an entry tax) of approximately Rs. 290 million on certain of the
Company’s fleet of aircraft. If the imposition of the octroi duty is upheld, our results of operations could be adversely affected.
In addition, there are certain outstanding civil litigation initiated by and against us. We are also subject to certain consumer
claims, claims by our employees and certain claims against us by the income tax and sales tax authorities in India. We believe
that these claims, even if finally determined against us, will not result in a material adverse effect to our results of operations.
Mr. Naresh Goyal and certain of our promoter group companies are parties to certain legal proceedings by and against them that
are incidental to their business and operations. They are subject to certain civil and criminal cases filed against them and certain
claims made by the income tax authorities. We believe these claims, even if finally determined against them, will not result in a
material adverse effect to our Company’s business.
For more information regarding legal proceedings by or against us, our directors, our promoters and our promoter group
companies, please see the section entitled “Outstanding Litigation” beginning on page 116 of this Draft Red Herring Prospectus.
Certain of our promoter group companies are loss making.
Certain of our promoter group companies have incurred losses in the financial years ended March 31, 2002, March 31, 2003
and/or March 31, 2004. For more information, please see the section entitled “Our Promoters and Group Companies” beginning
on page 96 of this Draft Red Herring Prospectus.
As at September 30, 2004, we had contingent liabilities as disclosed in our Statement of Assets and Liabilities under Indian
GAAP, and our results of operations could be adversely affected if any of these contingent liabilities materializes.
Our contingent liabilities, as of September 30, 2004, were Rs.4,039 million. These comprised the following:
(Rs. in millions)
Unprovided income tax demands which are disputed in appeals 37
xix
Unprovided claims against the Company, pending civil and consumer suits 79
Unprovided claims for Octroi duty on aircraft by the Municipal Corporation of Greater Mumbai not accepted by
the Company
290
Disputed claims against the Company towards landing and navigation charges made by the AAI 197
Disputed claims against the Company towards ground handling charges levied at Cochin International Airport. 235
Letters of credit outstanding 1,629
Bank guarantees outstanding 1,572
Total Rs. 4,039
Note: In addition to the aforesaid contingent liabilities, we will be required to pay arrears of cumulative dividends aggregating Rs.88 million in respect of the
cumulative convertible redeemable preference shares issued to International Finance Corporation (“IFC”).
If any of these contingent liabilities materializes, our results of operations could be adversely affected.
We have not entered into any definitive agreements to utilize a substantial portion of the net proceeds of the Fresh Issue.
We intend to use the net proceeds of the Fresh Issue for repayment of debt, capital expenditure and general corporate purposes.
See “Objects of the Offer” on page 28 of this Draft Red Herring Prospectus. We have not entered into any definitive agreements
to utilize the net proceeds for capital expenditures relating to investments in equipment, engines and spares, including a flight
simulator, or for the purchase of any land in connection with an investment in an integrated training center, or for general
corporate purposes. There can be no assurance that we will be able to conclude definitive agreements for such capital
expenditures on terms anticipated by us. Pending any use of the net proceeds of the Fresh Issue, we intend to invest the funds in
high quality, interest bearing liquid instruments including deposits with banks. These investments will be authorized by our
Board or a duly authorized committee thereof.
External Risk Factors
Substantial increases in fuel costs or the unavailability of sufficient quantities of fuel would harm our business.
Fuel expenditure constitutes a significant portion of our Total Expenses. In fiscal 2002, fiscal 2003, fiscal 2004 and the six
months ended September 30, 2004, aircraft fuel expenditure constituted 19.9%, 20.4%, 21.9% and 26.1%, respectively, of our
Total Expenses for such periods. Significant increases in fuel costs would harm our financial condition and results of operations.
Historically, our fuel expenditure has been subject to wide price fluctuations in the price of aviation turbine fuel (“ATF”), which
is based primarily on the international price of crude oil. The price of crude oil is influenced by geopolitical issues, government
regulation and various supply and demand factors, including periods of market surplus and shortage. The price of ATF in India
is also dependent on other factors including the following:
• limited competition in India because ATF is currently available at airports from only three Government-controlled
companies (Indian Oil Corporation (“IOC”), Bharat Petroleum Corporation Limited (“BPCL”) and Hindustan Petroleum
Corporation Limited (“HPCL”));
• periodic variations in the ex-refinery price charged for ATF by IOC, BPCL and HPCL; the price is fixed every month
based on the Arab Persian Gulf Platt ATF prices and the cost of crude oil;
• fluctuations in the exchange rate between the U.S. Dollar and the Rupee, since a substantial percentage of crude oil is
imported;
• excise duty on ATF, which is currently 8% (in addition, applicable education cess is also required to be paid);
• sales tax on ATF is levied at all the stations we currently service in India (except for Diu, Leh and Port Blair), and is
currently between 4% and 30.55%, with a weighted average of approximately 22.1% for the six month period ended
September 30, 2004; and
• inability to enter into price hedging arrangements for fuel supply due to Government regulations, which do not permit
domestic airlines such as us to hedge the price of ATF on the basis that we do not import ATF.
Because of the effect of these events on the price and availability of fuel, the cost and future availability of fuel cannot be
predicted with any degree of certainty. In the event of a fuel supply shortage or higher fuel prices, we may be required to curtail
some of our scheduled services. Also, some of our competitors may have more leverage than us in obtaining fuel. We cannot
assure you that future increases in prices of fuel can be offset, in part or at all, by increases in passenger fares.
Lack of airport infrastructure and facilities in India could adversely affect our business.
We, like other airlines, are dependent on the quality of airport infrastructure for our future expansion and the availability and cost
of terminal space, slots and aircraft parking are critical to our operations. Two of the key airport facilities from which we
operate, Mumbai and Delhi, are highly congested and passenger processing is currently at or near maximum capacity. An
increase in the number of airlines operating from Mumbai and Delhi may result in an increase in congestion and delays at these
airport facilities, which could have a material adverse effect on our operations. All parking bays for aircraft and prime time
departure slots in Mumbai and Delhi are already fully utilized. There is limited availability of parking bays in other major
airports we connect. We are expanding our fleet and require additional ground and maintenance facilities, including gates and
xx
hangars, and support equipment. These and other required facilities and equipment may be unavailable in a timely or economic
manner. Our inability to lease, acquire or access airport facilities on reasonable terms or at preferred times to support our growth
could have a material adverse effect on our operations.
In February, 2004, the Government invited expressions of interest in connection with the proposed restructuring and
modernization of the airports at Mumbai and Delhi. Work has commenced on green-field airport projects at Bangalore and
Hyderabad which are being constructed by private parties. These developments may lead to increases in the cost of using airport
infrastructure and facilities and may also result in an increase in related costs such as landing charges. Such increases may
adversely affect our operating results.
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline.
Investors, particularly FIIs, should carefully review such foreign investment restrictions prior to making any investment in
our Equity Shares.
Pursuant to the industrial policy of the Government of India (the “Industrial Policy”) and the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended (the “FEMA Regulations”),
any investment in an Indian domestic airline by persons resident outside India requires the prior approval of the Foreign
Investment Promotion Board, the Government of India (“FIPB”). However, the Ministry of Civil Aviation, Government of India
(“MoCA”), pursuant to Notification No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of
India on November 13, 2004) has permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector
up to 49% through the “automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also
permits investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline. Amendments to
the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are awaited.
The Reserve Bank of India (the “RBI”), by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognised
Overseas Corporate Bodies (“OCBs”), such as Tail Winds, as an eligible class of investors under the various investment
routes/schemes under the rules and regulations promulgated under the Foreign Exchange Management Act, 1999, as amended
(“FEMA”). Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3, 2003, issued the Foreign
Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003 (the “OCB
Regulations”) to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8, 2003, the RBI clarified, among
other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the OCB
Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA Regulations (i.e., with
the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI), an
erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for the transfer
of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to residents, subject to the
terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi and Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested the FIPB
to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain clarifications on behalf of
an Indian company in the domestic airlines sector which was contemplating an initial public offering. The FIPB was informed
that the company was promoted by a Non Resident Indian (“NRI”) who held the shares of such company through an OCB in
which such NRI had a 100% shareholding. The FIPB was further informed that the initial public offering by the company would
be made to persons within the definition of Indian residents (including Foreign Institutional Investors (“FIIs”) and Qualified
Institutional Buyers (“QIBs”) registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer
for sale of shares in the company by the OCB to such Indian residents.
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are eligible,
and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the “adverse
list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
xxi
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and QIBs
registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial institutions or other
non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for the Allotment of Equity Shares under this Offer. We will be
required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a domestic airline.
In addition, our permission to operate scheduled services granted by the Director General of Civil Aviation (“DGCA”) and the
guidelines issued by the DGCA from time to time, including the Aeronautical Information Circular No.4/2004 dated March 1,
2004 issued by the DGCA (the “AIC No. 4”) specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector must not be
a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector must not
have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in Indian
nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector may have
representation on the board of directors of a domestic airline company, but such representation shall not exceed one-
third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the Company in
accordance with AIC No. 4, read with the MoCA Notification No. AV.13011/10/96 DT (Vol II) dated November 10, 2004, and
other applicable laws, rules, regulations, guidelines and approvals.
The foreign investment restrictions described above may prevent us from raising funds by the issue of shares or convertible
securities to persons resident outside India, reduce our operational flexibility or prevent us from entering into a transaction, such
as a takeover, that is in the best interest of our shareholders.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the Selling
Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that they are eligible
under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company and will not
offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible under applicable laws, rules,
regulations, guidelines and approvals to acquire Equity Shares of the Company. The Company, the Selling Shareholder, the
Underwriters and their respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for
advising any investor on whether such investor is eligible to acquire Equity Shares of the Company.
The airline industry in India is subject to extensive regulation. Changes in government regulation imposing additional
restrictions on our operations could increase our operating costs and result in service delays and disruptions.
The MoCA is the approving authority for the lease or acquisition of additional aircraft by private airlines. We are also required
to operate on certain routes to economically less developed parts of India as specified by the DGCA under its Route Dispersal
Guidelines. The DGCA regulates the Route Dispersal Guidelines, and any changes in these guidelines may affect our ability to
generate revenues and profits. The DGCA is also the authority that issues and regulates the operating permit of airlines, certifies
and registers aircraft, permits increases in route frequencies and administers all related aviation regulations.
In addition, the guidelines issued by the DGCA (including AIC No. 4) stipulate the following restrictions and conditions that
affect our business and operations:
• we must be registered and have our principal place of business within India;
• the Chairman of our Board and at least two thirds of our Directors must be citizens of India;
• we must not enter into any shareholders agreement or similar arrangements with a foreign airline or an entity acting on
behalf of a foreign airline, which allows such foreign airline to have effective control in our management.
• we are not permitted to enter into an agreement with a foreign airline which may give such foreign airline the right to
interfere in the management of our business;
• we are not permitted to enter into financial or commercial tie-ups with a foreign airline;
• no foreign airline is permitted to have management or ownership interest in us;
xxii
• we are not permitted to enter into any financial arrangements with a foreign airline for the purpose of lease-finance,
hire-purchase or other loan arrangements;
• we are not permitted to enter into management contracts with foreign airlines; and
• we require specific approvals from the DGCA for certain arrangements, such as employing foreign pilots and engineers.
Any adverse change in these regulations or the imposition of additional restrictions and conditions that affect our business and
operations could impact our ability to grow.
The Airports Authority of India (“AAI”) determines landing charges, route navigation facility charges, terminal navigation
landing charges, allocation of parking bays and allocation of slot timings at 41 of the 42 airports to which we fly in India. For
Cochin, a privately owned airport, the CIAL determines landing charges. Our performance can be affected by any adverse
increase in such charges, unavailability of parking bays and departure slots required by us.
The Government of India is currently considering permitting private domestic air carriers to fly to additional international
destinations. Any delay or inability to obtain permissions and approvals from relevant regulatory authorities could have a
material adverse effect on our international expansion strategy and results of operations.
The Indian aviation regulatory framework is undergoing changes. Indian regulatory authorities may re-evaluate foreign
investment restrictions and other regulations currently applicable to the Indian airline industry. We cannot yet assess how the
evolving regulatory framework will affect our business and results of operations. No assurance can be given that these or other
changes in the Indian airline industry regulations will not have a material adverse effect on our business and results of operations.
Exchange rate instability may adversely affect our financial condition and results of operations.
Our revenues are denominated substantially in Rupees and a significant part of our operating expenses, such as fuel, aircraft and
engine maintenance services, interest and principal obligations under the terms of our foreign debt and aircraft lease payments
are denominated in, or linked to, U.S. Dollars. We face exchange rate risks to the extent that our expenses and debt repayments
are denominated in currencies other than Indian rupees. In fiscal 2004, approximately 15% of our Total Revenues, which are
derived from tickets sold in foreign currencies and 25% of our Total Expenses, such as aircraft and engine maintenance services,
aircraft lease payments, computer reservation systems costs and aircraft insurance, were in currencies other than Indian Rupees,
predominantly U.S. Dollars. In addition, 32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004
is foreign currency denominated.
Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our exchange rate risk.
While in the past we have entered into derivative contracts with various counterparties to protect ourselves against a depreciation
of the Rupee in relation to the U.S. Dollar, there can be no assurance that we will be able to continue to do so. As of September
30, 2004, there were no foreign currency forward contracts outstanding.
Any exchange rate fluctuations that we are unable to effectively hedge against, may lead to a decrease in our profit margins, or to
operating losses caused by increases in U.S. Dollar denominated costs, increases in interest expense or exchange losses on
unhedged fixed obligations and indebtedness denominated in foreign currency.
The airline industry is characterized by low profit margins and high fixed cost obligations, and we may be unable to compete
effectively with other airlines with greater financial resources or lower operating costs.
The airline industry is characterized generally by low profit margins and high fixed cost obligations, primarily for hire purchase
charges, engineering and maintenance charges, aircraft fuel, debt service and rent. The expenses of an aircraft flight do not vary
significantly with the number of passengers and tonnage of cargo carried and, as a result, a relatively small change in the number
of passengers or in pricing could have a disproportionate effect on an airline’s operating and financial results. Accordingly, a
minor shortfall in expected revenue levels could harm our business.
In addition, the airline industry is highly competitive and is particularly susceptible to price discounting because airlines incur
only nominal costs to provide service to passengers occupying otherwise unsold seats. We currently compete with other airlines
on all of our routes. We may be unable to compete effectively with other airlines that introduce service or discounted fares in the
markets that we serve.
Our reputation and financial results could be harmed in the event of an accident or incident involving our aircraft.
An accident or incident involving one of our aircraft could involve repair or replacement of a damaged aircraft and its
consequential temporary or permanent loss from service, and significant potential claims of injured passengers and others.
Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry
practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses resulting from an
accident or incident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our
xxiii
business and operating results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception
that we are less safe or reliable than other airlines, which would harm our business.
Airlines are often affected by factors beyond their control, including traffic congestion at airports, weather conditions, bird
hits, increased security measures, natural disasters and epidemics, any of which could harm our operating results and
financial condition.
We, like other airlines, are subject to delays caused by factors beyond our control, including air traffic congestion at airports,
adverse weather conditions, natural disasters, bird hits and increased security measures. Delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn affect profitability. During periods of fog, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic
control problems, bird hits and breaches in security could harm our financial condition and results of operations. In addition, any
epidemics or infectious outbreaks or other health related concerns that impact customers’ willingness to travel could adversely
affect our business and results of operations.
The airline industry tends to experience adverse financial results during general economic downturns.
Since a substantial portion of airline travel, for both business and leisure, is discretionary, the airline industry tends to experience
adverse financial results during general economic downturns. Soft economic conditions would continue to put pressure on the
profitability of the industry and us. Any general reduction in airline passenger traffic will harm our business and results of
operations.
Insurance cover is unavailable for certain risks or may be inadequate.
The availability of insurance is fundamental to airline operations. However, insurance cover is generally not available for certain
risks such as mechanical breakdowns. We believe our insurance coverage is consistent with industry practice. To the extent that
any uninsured risks materialize, our operating results and financial performance could be detrimentally affected.
Insurance costs for airlines increased substantially as a result of the September 11, 2001 terrorist attacks in the United States,
and further increases would harm our business.
Following the September 11, 2001 terrorist attacks, aviation insurers dramatically increased airline insurance premiums and
significantly reduced the maximum amount of insurance coverage liability available to airlines.
Aviation insurers could further increase their premiums in the event of additional terrorist attacks, hijackings, airline crashes or
other events adversely affecting the airline industry. Significant increases in insurance premia would harm our financial
condition and results of operations.
Our performance is linked to the stability of policies and the political situation in India.
The role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained
significant over the years. Since 1991, the Government of India has pursued policies of economic liberalization, including
significantly relaxing restrictions on the private sector. Since 1996, the Government of India has changed six times. There can
be no assurance that these liberalization policies will continue in the future. The rate of economic liberalization could change,
and specific laws and policies affecting airlines, foreign investment, currency exchange rates and other matters affecting
investments in Indian companies could change as well. A significant change in India’s economic liberalization and deregulation
policies could disrupt business and economic conditions in India, thus affecting our business.
The current Indian central government is a coalition of several parties. The withdrawal of one or more of these parties could
result in political instability. Any political instability could delay the reform of the Indian economy and could have a material
adverse effect on the market for our services.
Terrorist attacks or war or conflicts involving India or other countries could adversely affect business sentiment and the
financial markets and adversely affect our business.
Incidents such as the September 11, 2001, terrorist attacks on New York and Washington D.C., and other recent incidents such as
those in Bali, Indonesia, and Madrid, Spain, may adversely affect global equity markets and economic growth as well as the
Indian economy and stock markets. Such acts negatively impact business and economic sentiment, which could adversely affect
our business and profitability.
Also, India has from time to time experienced, and continues to experience, social and civil unrest and hostilities with
neighboring countries. Armed conflicts, particularly between India and Pakistan, could disrupt communications and adversely
affect the Indian economy. Such events could also create a perception that investments in Indian companies involve a high
degree of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including our
xxiv
Equity Shares. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could
have an adverse effect on our business.
After this Offer, the price of our Equity Shares may be volatile, or an active trading market for our Equity Shares may not
develop.
Prior to this Offer, there has been no public market for our Equity Shares. The trading price of our Equity Shares may fluctuate
after this Offer due to a variety of factors, including our results of operations and the performance of our business, competitive
conditions, general economic, political and social factors, volatility in the Indian and global securities markets, trends in business
and leisure travel, the performance of the Indian and global economy and significant developments in India’s fiscal regime.
There can be no assurance that an active trading market for our Equity Shares will develop or be sustained after this Offer, or that
the price at which our Equity Shares are initially offered will correspond to the prices at which they will trade in the market
subsequent to this Offer.
Note to Risk Factors
• Public offer of 17,266,801 Equity Shares for cash at a price of Rs.[?] per Equity Share, aggregating Rs.[?] million,
comprising a Fresh Issue of 14,245,111 Equity Shares by the Company and an Offer for Sale of 3,021,690 Equity Shares
by the Selling Shareholder. The Offer comprises a Net Offer to the public of 16,066,801 Equity Shares and an
Employee Reservation Portion of 1,200,000 Equity Shares. The face value of the Equity Shares is Rs.10 and the Offer
Price is [?] times of the face value. The Offer will constitute 20% of the fully diluted post Offer paid-up equity capital
of the Company.
• The book value per Equity Share was Rs.17.81 and Rs.26.46 as of March 31, 2004 and as of September 30, 2004,
respectively, as per our restated financial statements under Indian GAAP.
• The net worth of the Company was Rs.2,164 million and Rs.2,848 million as of March 31, 2004 and as of September 30,
2004, respectively, as per our restated financial statements under Indian GAAP.
• For related party transactions, see “Related Party Transactions” on page 109 of this Draft Red Herring Prospectus.
• The average cost of acquisition of our Equity Shares by our promoters is Rs.8.70 per Equity Share.
• Investors may note that in case of over-subscription in the Offer, allotment to Non Institutional Bidders, and Retail
Individual Bidders shall be on a proportionate basis. For more information, see “Method of Proportionate Basis of
Allotment” on page 166 of this Draft Red Herring Prospectus.
• For any clarification or information relating to the Offer, investors are free to contact the BRLMs, who will be obliged
to provide such clarification or information to the investors.
• Investors may contact the BRLMs and the Syndicate Members for any complaints pertaining to the Offer.
• Investors are advised to see “Basis for Offer Price” on page 162 of this Draft Red Herring Prospectus.
1
SUMMARY
You should read the following summary together with the Risk Factors and the more detailed information about us
and our financial statements included in this Draft Red Herring Prospectus.
Overview
We are a leading airline in India, providing regular scheduled services on routes between all of India’s major cities.
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We believe that our focus on providing high-quality, reliable service has enabled us to
become the preferred airline for travelers in India.
We have flown over 48 million revenue passengers (defined as fare paying passengers flown on all flight segments)
since commencing operations on May 5, 1993 until November 30, 2004. We flew approximately 5.82 million
revenue passengers in fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers
in fiscal 2004 and 3.78 million revenue passengers in the six months ended September 30, 2004. Our share of the
domestic market based on revenue passengers was 11.2% in fiscal 1995, 45.3% in fiscal 2002, 45.9% in fiscal 2003,
45.3% in fiscal 2004 and 42.3% in the six months ended September 30, 2004. Source: DGCA
Our aircraft fleet currently comprises 42 aircraft, of which 34 are Boeing 737 aircraft and eight are ATR 72 aircraft.
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India and
currently operate 1,924 flights weekly.
We intend to maintain a disciplined growth strategy by increasing frequency on our existing routes and entering
attractive new markets. Our aircraft fleet has grown from four aircraft in 1993 to 42 aircraft today. Operating a
fleet consisting of limited types of aircraft lowers our operating costs as maintenance issues are simplified, spare
parts inventory requirements are reduced, scheduling is more efficient and training costs are lower, ground time is
reduced and reliability is enhanced. The current average age of our aircraft is 4.5 years. We believe our average
fleet age compares favorably with airlines of our size in India and overseas.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March
2004 and May 2004, respectively. In addition, we are actively evaluating the feasibility of commencing operations
of regular scheduled services selectively to other international destinations, subject to receipt of necessary
permissions and approvals from regulatory authorities.
Our Operating Revenues have increased from Rs.25,263 million in fiscal 2002 to Rs.28,757 million in fiscal 2003
and Rs.34,474 million in fiscal 2004. In the six months ended September 30, 2004, our operating revenues were
Rs.19,264 million, an increase of 17.9% from our operating revenues of Rs.16,345 million in the six months ended
September 30, 2003. Market growth, increase in our fleet size, our pricing strategy and our entry into new markets
have been primarily accountable for increases in our revenues.
Tail Winds Limited, an Isle of Man company, holds over 99.99% of our Equity Shares. Tail Winds Limited is
wholly-owned by Mr. Naresh Goyal. Mr. Naresh Goyal, our Chairman, has more than three decades of management
and operational experience in the travel and airline industry and brings the benefit of this expertise to our business
strategy.
Competitive Strengths
We believe the following are our principal competitive strengths, which differentiate us from other airlines:
Focus on business travel: We offer several services directed towards the convenience of the business traveler,
including telephone check-in facilities, through and “in-city” check-in facilities, priority baggage service, high
frequency services on major routes, same-day return flights on major routes at convenient timings, point to point
connections, providing flight information on cellular phones of customers, our customer loyalty program, e-
ticketing, business class section on almost all flights and airport lounges for business class passengers at most
airports. These facilities and our focus on providing high-quality reliable service have contributed to us becoming
the preferred airline for business travelers in India.
Young fleet comprising limited types of aircraft: Our young fleet has enabled us to enjoy a high degree of
performance reliability and to develop a reputation for being an airline that delivers a safe, on-time, modern and
comfortable travel experience. Our aircraft types provide us with state-of-the-art technology and simplified
maintenance procedures that allows us to make adjustments to effectively manage our response to market
developments. 34 of our fleet of 42 aircraft are Boeing 737 variants and the remaining eight are ATR 72-500
aircraft. We were the first airline to introduce the Boeing 737 NG aircraft in India. Operating a fleet of limited
2
types of aircraft leads to increased cost savings in terms of maintenance and spare parts, scheduling is more efficient
and employee efficiency and productivity are increased.
Utilizing our aircraft efficiently: In fiscal 2004 and the six months ended September 30, 2004, our aircraft operated
an average of 9.46 and 9.84 hours per day, respectively. By achieving high utilization, we are able to optimize crew
movement, spread our fixed costs over a greater number of flights and available seat kilometers. We achieve high
aircraft utilization because:
• newer aircraft can be scheduled to fly more hours per day as they are more reliable and require less
maintenance than older aircraft; and
• our staff are able to achieve quick, efficient, airport turnarounds which enable us to increase the number of
daily flights per aircraft.
Strong brand and customer loyalty: We believe that we have established a strong brand that helps to distinguish us
from our competitors by identifying us as a safe and reliable airline that is highly focused on customer service and
that provides an enjoyable flying experience. We believe that our focus on every aspect of customer service, such
as our choice of aircraft, aircraft interiors, our care of passengers in-flight and on the ground, our attention to detail,
the convenient connections which we offer and our high reliability, has enhanced brand awareness and our
reputation for quality. We believe that our strong brand has enabled us to establish alliances with other leading
brands for our unique frequent flyer programs, including with international airlines, domestic and international
hotels, a car rental company and for a co-branded credit card.
Some of the key areas of our customer focus are:
• our fleet of modern generation aircraft with custom designed aircraft interiors;
• our friendly and efficient in-flight service, with meals or heavy snacks being served on nearly all flights;
• high on-time performance;
• tele check-in facilities for business class travelers and Jet Privilege members;
• city check-in facilities in Mumbai, Delhi, Kolkata, Chennai and Bangalore;
• same day return check-in facilities;
• our Jet Privilege frequent flyer program; and
• e-ticketing in accordance with IATA standards and on-line reservations.
We also offer through check-in facilities to passengers of 11 leading international airlines to and from our
connecting destinations. We also believe that our five-tier “Jet Privilege” loyalty program is an innovative program
among those offered by other domestic airlines in India.
We believe we are meeting and exceeding our customer service expectations. We have received numerous awards
that recognize the quality of our service, including the Business World award for the most respected company in the
travel and hospitality sector in 2003 and 2004, the Best Domestic Airline of Asia by the Asian readers of Travel
Trade Gazette for the years 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline
Category) for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004.
Motivated workforce and proven management team: We benefit from a highly motivated workforce that brings
high enthusiasm to air travel and a commitment to superior standards of friendly and reliable quality service that we
believe distinguishes us in our markets. We believe that the positive feedback we have received from our customers
is directly a result of the priority our employees place on delivering top quality customer service. We invest a
significant amount of time and resources into carefully developing the best training practices and selecting
individuals to join our team who share our focus on quality and improvement. We conduct ongoing training
programs that incorporate industry best practices and encourage strong and open communication channels among
members of our team so that we can continue to improve the services we provide. We are led by a management
team with significant airline industry experience.
Access to facilities at major airports: The major hub of our operations is Mumbai where 19 of our fleet of 42
aircraft are parked (of which 18 have been allotted overnight parking bays and one aircraft is parked for a few hours
at night), followed by 12 in Delhi, six at Chennai, three in Kolkata and two at Bangalore. Our access to overnight
parking bays and landing slots at these five hubs helps us to originate flights from these cities. It also enhances our
aircraft utilization and efficiency of our maintenance activities.
Extensive sales and distribution network: We have access to the sales and distribution network of Jetair, which is a
leading GSA in India with offices in approximately 69 locations. Jetair represents, in addition to us, 15
international airlines in India. In addition, we are represented by general sales agents in 74 countries outside India
that sell and/or distribute our tickets to international in-bound passengers. Our airline reservation system is hosted
on SABRE. We offer 24-hour reservations services at Mumbai, Delhi, Kolkata and Chennai. We also have
3
agreements with major GDSs, including Abacus, Amadeus, Galileo, Sabre GDS and Worldspan. We have entered
into interline agreements with major international airlines and marketing cooperation agreements with three
international airlines. We have joined billing settlement plan programs in North America, U.K., France, Germany,
Switzerland and other key countries. We introduced e-ticketing and direct internet booking in July 2004. We
intend to encourage the use of direct internet bookings by our customers because we believe it is an efficient
distribution channel.
Business Strategy
The key elements of our business strategy include:
Differentiate our product and service: We believe a key to our long-term success is that we offer customers a
better alternative in airline travel. We offer our passengers a unique flying experience by providing new aircraft,
pre-assigned seating, reliable performance, meals on nearly all flights, city check-in facilities in Mumbai, Delhi,
Kolkata, Chennai and Bangalore, tele check-in facilities for business class travelers and Jet Privilege members,
same day return check-in facilities and a well developed frequent flyer program. We place high emphasis on
customer service and quality. We intend to continue to communicate openly with our customers regarding their
needs and areas which require continued improvement. Based on customer feedback, we believe that passengers
prefer our customer service to that of our competitors and that this preference is an important factor in their decision
to fly with us over other airlines.
Continue to maintain a young fleet comprising a minimal number of different aircraft types: We intend to
continue our strategy of maintaining a young fleet and a minimal number of different aircraft types to preserve the
simplicity of our operations and control our operating costs.
Maximize revenues through efficient use of technology, focused marketing and optimization of resources: We
intend to continue to maximize our revenues through efficient use of technology, focused marketing and
optimization of resources. For this purpose, we use a state-of-the-art yield management system developed by
SABRE. We also intend to continue to focus on improving productivity and unit costs through reduction of
recurring maintenance costs and more efficient utilization of our crew.
Further strengthen the brand name under which we operate: We intend to continue to enhance the “Jet Airways”
brand recognition in the marketplace through brand building efforts, communication and promotional initiatives
such as participation in industry events, public relations and investor relations efforts. We believe that these
initiatives, as well as the listing of our Equity Shares, will enhance the visibility of our brand name and strengthen
our recognition as a leader in the Indian aviation industry.
Focus on domestic aviation sector: We intend to further penetrate our key markets in India by increasing the
number of flights per day on our key routes and commencing flights to new destinations in India. We believe that
this is important to passengers who choose airlines based on depth of schedule. We intend to continue our focus on
providing high-quality services and facilities to our customers to consolidate our position as a preferred airline for
business travelers in India.
Operate flights to select international destinations, subject to obtaining necessary Governmental approvals and
other conditions. We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu,
Nepal, in March 2004 and May 2004, respectively, pursuant to the Government of India permitting private sector
domestic carriers to fly to certain SAARC countries. The Government of India announced on December 29, 2004
that the Union Cabinet has approved a change in the aviation policy, allowing Indian scheduled carriers with a
minimum of five years continous operations and at least 20 aircraft to provide services to other international
destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia
Arabia, which would be reserved for Air India and Indian Airlines for three years. However, these policy changes
are not yet effective, and detailed guidelines will need to be notified by the Ministry of Civil Aviation. As and
when the changes in policy become effective, the Government will also need to negotiate, and allocate to us,
entitlements under the applicable bilateral treaties for the respective countries to which we desire to fly. The
Government will also specify the frequency of flights that we will be entitled to operate. There is no certainty when
these policy changes will become effective and whether or when we will be permitted to fly to destinations of our
choice. We believe that other international destinations may be attractive primarily due to the significant revenue
growth potential and high yields that may be obtained, in light of the increasing customer demand for flights to and
from these destinations and India. We believe that we are well placed to service these markets due to our reputation
for high-quality service and customer awareness of our brand. A significant number of passengers including persons
of Indian origin and non-resident Indians from these destinations use our airline in India. We believe there has been
an increase in the growth of outbound travel by Indian residents and intend to target this market.
Reduce existing high interest debt: We have significant financing obligations, relating to debt incurred in
connection with financing the purchase of our aircraft and engines as well as operating leases for our aircrafts and
4
engines. We believe that reducing significant financing obligations will improve our ability to meet our strategic
goals. We intend to reduce our existing high interest debt, including through utilization of the proceeds of the Fresh
Issue.
Continue to focus on personnel training and on motivating our workforce: We intend to continue to focus on
personnel training to improve employee productivity and to ensure that our employees understand our core
strategies. We believe in open communication, which creates a dynamic working environment and in setting out
clear well defined policies and goals. We intend to continue providing competitive wages and incentives to motivate
our workforce.
5
THE OFFER
Equity Shares offered by:
Fresh Issue by the Company 14,245,111 Equity Shares
Offer for Sale by the Selling Shareholder 3,021,690 Equity Shares
Total 17,266,801 Equity Shares
Of which:
Employee Reservation Portion 1,200,000 Equity Shares
Therefore:
Net Offer to the Public 16,066,801 Equity Shares
QIB Portion
At least 9,640,081 Equity Shares
(Allocation on a discretionary basis)
Non Institutional Portion Up to 2,410,020 Equity Shares
(Allocation on a proportionate basis)
Retail Portion Up to 4,016,700 Equity Shares
(Allocation on a proportionate basis)
Equity Shares outstanding prior to the Offer 72,088,900 Equity Shares
Equity Shares outstanding after the Offer 86,334,011 Equity Shares
Objects of the Offer Please see the section entitled “Objects of the Offer” on page
28 of this Draft Red Herring Prospectus.
6
SUMMARY FINANCIAL INFORMATION
SEBI Guidelines require us to include summary financial statements information as restated to reflect the retrospective
effect of the accounting policies adopted by the Company as of September 30, 2004 (“Summary Restated Statements”).
The following summary financial information, other than for the six months ended September 30, 2003, has been
extracted from the Summary Restated Statements prepared in accordance with Indian GAAP, the Companies Act and
SEBI Guidelines, included in the section entitled “Financial Information”. The Summary Restated Statements have
been examined as described in the joint Auditors Report of Deloitte Haskins & Sells and Chaturvedi & Shah dated
December 20, 2004, in the section entitled “Financial Information”. The Auditors’ Report refers to the auditors’
reliance on the financial statements for the years ended March 31, 2000, March 31, 2001, March 31, 2002, March 31,
2003 and March 31, 2004 audited by C.C.Chokshi & Company.
This Draft Red Herring Prospectus also includes audited financial statements for the six months ended September 30,
2004, prepared in accordance with Indian GAAP and which have not been restated in accordance with SEBI
Guidelines (the “Interim Audited Financial Statements”). The Interim Audited Financial Statements have been audited
by Deloitte Haskins & Sells and Chaturvedi & Shah as described in their audit report dated December 20, 2004
included in the section entitled “Financial Information”. The summary financial statements given below for the six
months ended September 30, 2003 have not been restated in accordance with SEBI Guidelines, and have been
extracted from the audit report for such period prepared by Deloitte Haskins & Sells and Chaturvedi & Shah which
audit report is not included in this Draft Red Herring Prospectus.
You should read this summary information in conjunction with our Summary Restated Statements and Interim Audited
Financial Statements including the significant accounting policies and notes thereto and the reports thereon and also
the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in this Draft Red Herring Prospectus. Financial statements prepared in accordance with Indian GAAP differ
in certain significant respects from financial statements prepared under IFRS or U.S. GAAP. See the section entitled
“Summary of Significant Differences between Indian GAAP, IAS/IFRS and U.S. GAAP” on page 251 of this Draft Red
Herring Prospectus for more information.
Summary of Statement of Profits and Losses
Year ended March 31,
Six months
ended
September
30,
Six months
ended
September
30,
2000 2001 2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating revenues 226,076 275,606 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
Expenditure
Employees Remuneration and
Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Other Operating Expenses
(including maintenance &
airport charges etc) 6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,700,001 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenses 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
EBITDAR
(1) (4)
5,255,688 6,146,587 6,794,097 6,953,761 10,907,614 4,707,275 5,709,321
EBITDA
(2) (4)
2,854,956 3,670,465 3,828,997 4,173,497 8,641,186 3,502,021 4,702,655
EBIT
(3) (4)
768,852 1,070,189 340,663 (559,218) 3,489,643 956,459 2,411,794
Profit (Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Profit (Loss) after taxation as per
audited accounts 101,750 124,813 (134,313) (2,444,501) 1,631,095 (155,023) 1,293,597
(1) EBITDAR is defined as profit before interest, taxation, depreciation, amortization and aircraft rentals (fixed), excluding Non-operating
Revenues and excluding any adjustments to profit as required under SEBI Guidelines.
(2) EBITDA is defined as profit before interest, taxation, depreciation and amortization, excluding Non-operating Revenues and excluding any
adjustments to profit as required under SEBI Guidelines.
7
(3) EBIT is defined as profit before interest and taxation, excluding Non-operating Revenues and excluding any adjustments to profit as required
under SEBI Guidelines.
(4) The Company believes that EBITDAR, EBITDA and EBIT provide useful information but should not be considered as an indication of, or as
an alternative to, profit attributable to shareholders or as an alternative to cash flow as a measure of liquidity. Other companies may calculate
EBITDAR, EBITDA and EBIT in a different manner than the Company.
Summary of Statement of Profits and Losses, as Restated
Year ended March 31,
Six months ended
September 30,
2000 2001 2002 2003 2004 2004
(Rs. thousands)
Profit (Loss) after taxation as per
audited accounts (A) 101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Add (Less):
Total of adjustments after tax
impact 90,048 193,480 (176,735) 1,249,038 (139,230) (609,682)
Net Profit (Loss), as restated 191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
8
Summary of Statement of Assets and Liabilities, as Restated
As of March 31,
2000 2001 2002 2003 2004
As of
September 30, 2004
(Rs. thousands)
Net fixed assets (including
capital work in progress) 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
Investments - - - 597,000 2,334,164 5,008,292
Current assets, loans and
advances 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
Of which:
Cash and bank balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
Current liabilities and provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
Deferred tax (Asset)/Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
Loans 16,556,083 17,833,194 31,996,450 34,983,525 29,019,090 28,139,790
Of which:
Secured loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
Unsecured loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Subordinated debt - - 2,640,000 2,840,733 3,080,775 3,341,100
Net worth 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Of which:
Share capital 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
Summary of Key Financial Ratios
As of March 31,
2000 2001 2002 2003 2004
As of
September 30, 2004
EPS
(1)
(Basic) (Rs.) 2.66 4.25 (5.34) (17.84) 19.44 8.70
(4)
Cash EPS
(2)
(Basic) (Rs.) 32.50 41.75 45.05 50.03 90.65 41.96
(4)
Net asset value per Equity Share
(Rs.) 18.73 21.97 16.20 (1.64) 17.81 26.46
Return on Net Worth 14.20% 13.95% (16.67%) (177.75%) 68.93% 24.01%
EBITDAR margin
(3)
26.52% 24.59% 26.89% 24.18% 31.64% 29.64%
(1) Earnings per Equity Share. EPS for September 30, 2004 above is not comparable with the other periods as it is not annualized.
(2) Net profit after tax and annualized return on preference capital before depreciation and provision for obsolesence divided by total number of
Equity Shares.
(3) EBITDAR margin is calculated by dividing EBITDAR for the relevant period by Operating Revenues for such period.
(4) The EPS for September 30, 2004 is not comparable with that of other periods as it is not annualized.
Summary of Operating Data
As of and for the year ended March 31,
As of and for the six months
ended September 30,
2002 2003 2004 2003 2004
Passengers carried (millions) 5.82 6.41 6.91 3.27 3.78
ASKMs
(1)
(millions) 7,780 8,496 9,162 4,542 4,796
RPKMs
(2)
(millions) 4,777 5,291 5,852 2,771 3,245
Passenger Load Factor
(3)
(%) 61.4% 62.3% 63.9% 61.0% 67.7%
Number of aircraft at period end 38.0 41.0 41.0 39.0 41.0
Average number of aircraft during period 34.9 38.9 40.8 40.6 41.0
Number of domestic stations served (+
international stations served) 44 40 41 (+1) 40 42 (+2)
Aircraft utilization
(4)
(hours/day per aircraft) 9.66 9.41 9.46 9.48 9.84
Average stage length (kilometers)
(5)
792 805 816 821 818
____________
(1) Available Seat Kilometers; represents the average number of Block hours operated per day per aircraft for the total aircraft fleet.
(2) Revenue Passenger Kilometers; represents the number of kilometres flown by revenue passengers.
(3) Revenue Passenger Kilometres expressed as a percentage of Available Seat Kilometres.
(4) The average number of Block hours operated per day per aircraft for the total aircraft fleet.
(5) The average number of kilometres flown per flight.
9
GENERAL INFORMATION
Authority for the Offer
Jet Airways
The Fresh Issue by the Company has been authorized by a resolution of its Board of Directors passed at their meeting
held on November 4, 2004, subject to the approval of the shareholders through a special resolution to be passed
pursuant to Section 81(1A) of the Companies Act. The shareholders approved the Fresh Issue of Equity Shares at an
EGM of the shareholders of the Company held on December 28, 2004. Pursuant to the authority granted by the Board
of Directors of the Company at its meeting held on November 4, 2004, a Committee of the Board approved the Fresh
Issue by the Company on January 4, 2005.
Selling Shareholder
The Offer for Sale has been authorized by a resolution of the board of directors of Tail Winds Limited dated December
27, 2004, which has also (i) authorized the Company to take decisions on its behalf in relation to the Offer and (ii)
appointed the Company to act as its attorney with respect to any matter in connection with the Offer. The Selling
Shareholder assumes no responsibility for any of the statements made by the Company in this Draft Red Herring
Prospectus relating to the Company, its business and related disclosures, except statements relating to the Selling
Shareholder.
Prohibition by SEBI
Our Company, our Directors, our promoters, the directors and persons in control of our promoters, our group
companies, other companies promoted by our promoters and companies with which our Company’s Directors are
associated as directors, have not been prohibited from accessing or operating in the capital markets or restrained from
buying, selling or dealing in securities under any order or direction passed by SEBI.
Eligibility for the Offer
Our Company is eligible for the Offer in accordance with Clause 2.2.2 of the SEBI Guidelines as described below:
• The Offer is made through the 100% Book Building Process wherein a minimum of 50% of the Net Offer will
be allotted to QIBs; and
• The post-Offer capital of the Company shall be more than Rs.100 million.
Further, the Offer is subject to the fulfillment of the following conditions as required under Clause 19(2)(b) of the
Securities Contracts (Regulation) Rules, 1957, as amended (“SCRR”):
• A minimum of 2,000,000 Equity Shares (excluding reservations, firm allotments and promoters contribution)
are offered to the public;
• The Net Offer size, which is the Offer Price multiplied by the number of Equity Shares offered to the public, is
a minimum of Rs.1,000 million; and
• The Net Offer is made through the Book Building Process with allocation of 60% of the Offer size to QIBs as
defined under the SEBI Guidelines.
The Company undertakes that the number of tranferees and allottees in the Offer shall be at least 1,000. Otherwise, the
entire application money shall be refunded forthwith. Further, if at least 60% of the Net Offer cannot be allotted to
QIBs, then the entire application money shall be refunded forthwith. In case of delay, if any, in refund, the Company
shall pay interest on the application money at the rate of 15% per annum for the period of delay.
The promoters, the Company, group companies and associate companies are not defined as willful defaulters by the
RBI/Government of India authorities and there are no violations of securities laws committed by them in the past or
pending against them. No penalty has been imposed by SEBI and other regulatory bodies against us, our Directors, our
promoters and other companies promoted by our promoters.
10
Disclaimer Clause
AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO
SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING
PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME
HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY
EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE
OFFER IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR
OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD
MANAGERS, DEUTSCHE EQUITIES INDIA PRIVATE LIMITED, HSBC SECURITIES AND CAPITAL
MARKETS (INDIA) PRIVATE LIMITED, UBS SECURITIES INDIA PRIVATE LIMITED, CITIGROUP
GLOBAL MARKETS INDIA PRIVATE LIMITED, DSP MERILL LYNCH LIMITED AND KOTAK
MAHINDRA CAPITAL COMPANY LIMITED, HAVE CERTIFIED THAT THE DISCLOSURES MADE IN
THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN
CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES AS FOR THE
TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN
INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED OFFER. IT SHOULD
ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE
FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN
THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS ARE
EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY
DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS
PURPOSE, THE BOOK RUNNING LEAD MANAGERS, DEUTSCHE EQUITIES INDIA PRIVATE
LIMITED, HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PRIVATE LIMITED, UBS
SECURITIES INDIA PRIVATE LIMITED, CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED,
DSP MERRILL LYNCH LIMITED AND KOTAK MAHINDRA CAPITAL COMPANY LIMITED HAVE
FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED JANUARY 6, 2005 IN ACCORDANCE
WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:
“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATIONS
LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC.
AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED
HERRING PROSPECTUS PERTAINING TO THE SAID OFFER.
ON THE BASIS OF SUCH EXAMINATION AND DISCUSSIONS WITH THE COMPANY, IT’S
DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE
STATEMENTS CONCERNING THE OBJECTS OF THE OFFER, PROJECTED PROFITABILITY, PRICE
JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND
OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT:
(A) THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH
THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE OFFER;
(B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID OFFER AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY
OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH;
AND
(C) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR
AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS
TO THE INVESTMENT IN THE PROPOSED OFFER.
WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT
RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH
REGISTRATIONS ARE VALID.
WHEN UNDERWRITTEN WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE
UNDERWRITERS TO FULFIL ANY UNDERWRITING COMMITMENTS.
WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR
INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO
LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE PROMOTERS
CONTRIBUTION SUBJECT TO LOCK-IN WILL NOT BE DISPOSED/SOLD/TRANSFERRED BY THE
11
PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED
HERRING PROSPECTUS WITH SEBI TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD
AS STATED IN THE DRAFT RED HERRING PROSPECTUS.
ALL LEGAL REQUIREMENTS PERTAINING TO THE OFFER WILL BE COMPLIED WITH AT THE
TIME OF FILING OF THE RED HERRING PROSPECTUS WITH THE REGISTRAR OF COMPANIES,
MUMBAI, MAHARASHTRA, IN TERMS OF SECTION 56, SECTION 60 AND SECTION 60B OF THE
COMPANIES ACT.
THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE
COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT
OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND/OR OTHER CLEARANCES
AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED OFFER. SEBI FURTHER RESERVES
THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGERS,
ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED HERRING PROSPECTUS.”
Caution
The Industrial Policy prohibits foreign airlines from making any direct or indirect equity investment in a domestic
airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines issued by
the DGCA from time to time, including AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
In addition, there are various restrictions under Indian laws and regulations applicable to foreign investment in a
domestic airline. For more information relating to foreign investment restrictions in our Company, see the section
entitled “Regulations and Policies – Foreign Ownership Restrictions” on page 111 of this Draft Red Herring
Prospectus.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares in
compliance with all applicable laws, rules, regulations, guidelines and approvals, including, without limitation, AIC
No. 4.
Investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs
and QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental
financial institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and
NRIs.
Investors should note that this Offer is not being made to any multilateral or bilateral development financial
institution or to any OCB.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates
and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals
to acquire Equity Shares of the Company and will not offer, sell, pledge or transfer the Equity Shares of the
Company to any person who is not eligible under applicable laws, rules, regulations, guidelines and approvals to
acquire Equity Shares of the Company. The Company, the Selling Shareholder, the Underwriters and their
respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for
advising any investor on whether such investor is eligible to acquire Equity Shares of the Company.
12
The Company, its Directors, the Selling Shareholder and the BRLMs accept no responsibility for statements made
otherwise than in this Draft Red Herring Prospectus or in the advertisements or any other material issued by or at our
instance and anyone placing reliance on any other source of information, including our website, www.jetairways.com,
would be doing so at his or her own risk.
The BRLMs accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding
entered into among the BRLMs, the Company and the Selling Shareholder (acting through the Company, its duly
constituted attorney), and the Underwriting Agreement to be entered into among the Underwriters, the Company and
the Selling Shareholder (acting through the Company, its duly constituted attorney).
All information shall be made available by the BRLMs and the Company to the public and investors at large and no
selective or additional information would be available for a section of the investors in any manner whatsoever,
including at road show presentations, in research or sales reports, at bidding centers or elsewhere.
Disclaimer in Respect of Jurisdiction
The Offer is being made in India to persons resident in India including Indian nationals resident in India who are
majors, Hindu Undivided Families (HUFs), companies, corporate bodies and societies registered under the applicable
laws in India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions,
scheduled commercial banks, regional rural banks, co-operative banks (subject to RBI permission), trusts registered
under the Societies Registration Act, 1860, as amended, or any other law relating to trusts, and who are authorized
under their constitution to hold and invest in equity shares, venture capital funds (“VCFs”) registered with SEBI, State
Industrial Development Corporations, permitted insurance companies, provident funds with a minimum corpus of Rs.
250 million and pension funds with a minimum corpus of Rs. 250 million and to permitted non-residents including
NRIs, FIIs registered with SEBI and foreign venture capital investors (“FVCIs”) registered with SEBI, provided that
they are eligible under all applicable laws and regulations to hold Equity Shares of the Company.
This Draft Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to Equity
Shares offered hereby in any jurisdiction other than India or to any person to whom it is unlawful to make an offer or
invitation in such jurisdiction. Any person into whose possession this Draft Red Herring Prospectus comes is required
to inform himself or herself about, and to observe, any relevant restrictions. Any dispute arising out of this Offer will be
subject to the exclusive jurisdiction of appropriate court(s) in Mumbai only.
No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for
that purpose, except that this Draft Red Herring Prospectus has been submitted to SEBI. Accordingly, the Equity
Shares may not be offered or sold, directly or indirectly, in any jurisdiction, except in accordance with the legal
requirements applicable in such jurisdiction, and this Draft Red Herring Prospectus may not be distributed in any
jurisdiction other than India. Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of our Company since the
date hereof or that the information contained herein is correct as of any time subsequent to this date.
Disclaimer Clause of the NSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to NSE. NSE has, pursuant to its letter
dated [•], given permission to the Company to use the NSE’s name in this Draft Red Herring Prospectus as one of the
stock exchanges on which this Company’s securities are proposed to be listed subject to the Company fulfilling criteria
for listing including the criteria related to the paid-up capital and market capitalization (i.e., the paid up capital shall be
not less than Rs.100 million and the market capitalization shall be not less than Rs.250 million at the time of listing).
The NSE has scrutinized this Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company. It is to be distinctly understood that the aforesaid permission given
by NSE should not in any way be deemed or construed to mean that this Draft Red Herring Prospectus has been cleared
or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of
the contents of this Draft Red Herring Prospectus; nor does it warrant that this Company’s securities will be listed or
will continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of this
Company, its promoters, its management or any scheme or project of this Company.
Every person who desires to apply for or otherwise acquires any securities of the Company may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against the NSE whatsoever by reason of
any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition
whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
13
Disclaimer Clause of the BSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to BSE. BSE has pursuant to its letter
dated [•], given permission to this Company to use BSE’s name in this Draft Red Herring Prospectus as one of the
stock exchanges on which this Company’s securities are proposed to be listed. BSE has scrutinized this Draft Red
Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this
Company.
BSE does not in any manner:
• warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring
Prospectus; or
• warrant that this Company’s securities will be listed or will continue to be listed on BSE; or
• take any responsibility for the financial or other soundness of this Company, its promoters, its management or
any scheme or project of this Company;
and it should not for any reason be deemed or construed to mean that this Draft Red Herring Prospectus has been
cleared or approved by BSE. Every person who desires to apply for or otherwise acquires any securities of this
Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against
BSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such
subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason
whatsoever.
Filing
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the
Companies Act, will be delivered for registration to the RoC and a copy of the Prospectus to be filed under Section 60
of the Companies Act will be delivered for registration with the RoC. A copy of this Draft Red Herring Prospectus has
been filed with the Corporation Finance Department of SEBI at Ground Floor, Mittal Court, “A” Wing, Nariman Point,
Mumbai 400 021.
Listing
Applications have been made to the NSE and BSE for permission to deal in and for an official quotation of our Equity
Shares. NSE will be the Designated Stock Exchange.
If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the Stock
Exchanges mentioned above, our Company will forthwith repay, without interest, all moneys received from the
applicants in pursuance of this Draft Red Herring Prospectus. If such money is not repaid within eight days after our
Company becomes liable to repay it, i.e., from the date of refusal or within 70 days from the Bid/Offer Closing Date,
whichever is earlier, then the Company, and every Director of the Company who is an officer in default shall, on and
from such expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application
money, as prescribed under Section 73 of the Companies Act.
Our Company, with the assistance of the BRLMs, shall ensure that all steps for the completion of the necessary
formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within
seven working days of finalization and adoption of the basis of allotment for the Offer.
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the
Companies Act, which is reproduced below:
“Any person who:
(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares
therein, or
(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other
person in a fictitious name,
shall be punishable with imprisonment for a term which may extend to five years.”
14
Minimum Subscription
If we do not receive the minimum subscription of 90% of the Fresh Issue amount, including devolvement of
Underwriters, if any, within 60 days from the Bid/Offer Closing Date, our Company shall forthwith refund the entire
subscription amount received. If there is a delay beyond eight days after our Company becomes liable to pay the
amount, our Company shall pay interest prescribed under Section 73 of the Companies Act.
Withdrawal of the Offer
Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Offer any time after the
Bid/Offer Opening Date without assigning any reason therefor.
Letters of Allotment or Refund Orders
We shall give credit to the beneficiary account with depository participants within two working days of finalization of
the basis of allotment of Equity Shares. We shall dispatch refund orders, if any, of value up to Rs.1,500, by “Under
Certificate of Posting”, and will dispatch refund orders above Rs.1,500, if any, by registered post or speed post at the
sole or first Bidder’s sole risk within 15 days of the Bid/Offer Closing Date.
In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Guidelines, we further
undertake that:
• Allotment and transfer of Equity Shares will be made only in dematerialized form within 15 days from the
Bid/Offer Closing Date;
• Dispatch of refund orders will be done within 15 days from the Bid/Offer Closing Date; and
• We shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if
allotment or transfer is not made, refund orders are not dispatched and/or demat credits are not made to
investors within the 15-day time period prescribed above.
We will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Offer.
Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by us, as an Escrow
Collection Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such
cheques, pay orders or demand drafts at other centers will be payable by the Bidders.
Offer Program
BID/OFFER OPENS ON :
BID/OFFER CLOSES ON :
Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the
Bid/Offer Period as mentioned above at the bidding centers mentioned on the Bid cum Application Form except that on
the Bid/Offer Closing Date, the Bids shall be accepted only between 10 a.m. and 1 p.m. (Indian Standard Time) and
uploaded until such time as may be permitted by the NSE and BSE on the Bid/Offer Closing Date.
In case of revision in the Price Band, the Bid/Offer Period will be extended for three additional days after
revision of Price Band subject to the Bidding/Offer Period not exceeding 13 days. Any revision in the Price
Band and the revised Bid/Offer Period, if applicable, will be widely disseminated by notification to the NSE and
BSE, by issuing a press release, and also by indicating the change on the web site of the BRLMs and at the
terminals of the Syndicate.
Book Running Lead Managers to the Offer
Deutsche Equities India
Private Limited
DB House
Hazarimal Somani
Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4800
Fax:: 91 22 2200 6765
Email: [email protected]
HSBC Securities and
Capital Markets (India)
Private Limited
52/60, Mahatma Gandhi
Road
Fort, Mumbai 400 001
Tel: 91 22 2267 4921
Fax:: 91 22 2263 1984
Email: [email protected]
UBS Securities India
Private Limited
2
nd
Floor, Hoechst
House
Nariman Point
Mumbai 400 021
Tel: 91 22 2286 2000
Fax:: 91 22 2281 4676
Email: [email protected]
Citigroup Global Markets
India Private Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9982
Fax: 91 22 5631 9803
Email: jet.ipo@citigrou
p.com
DSP Merrill Lynch
Limited
Mafatlal Centre, 10
th
Floor,
Nariman Point
Mumbai 400 021
Tel : 91 22 2265 1702
Fax: 91 22 2262 1187
Email:
[email protected]
Kotak Mahindra Capital
Company Limited
3rd Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5634 1100
Fax: 91 22 2282 6632
Email:
[email protected]
15
Statement of Inter-Se Allocation of Responsibility
The responsibilities and co-ordination for various activities in this Offer have been distributed among the BRLMs as
under:
Sr.No. Activities Responsibility Co-ordinator
1.
Capital structuring with the relative components and formalities such as
type of instruments etc.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
UBS
2.
Due diligence of our Company’s operations/ management/ business
plans/ legal etc. Drafting and design of the Draft Red Herring Prospectus
and of statutory advertisement including memorandum containing salient
features of the Prospectus. The BRLMs shall ensure compliance with
stipulated requirements and completion of prescribed formalities with the
Stock Exchanges, RoC and SEBI including finalization of Prospectus and
RoC filing of the same.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
HSBC
3.
Drafting and approval of all publicity material other than statutory
advertisement as mentioned in (2) above including corporate
advertisement, brochure, roadshow presentations, FAQs, corporate films
etc.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
Citigroup
4.
Appointment of other intermediaries viz. Registrar(s), Printers,
Advertising Agency and Bankers to the Offer.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
KMCC
5.
International Institutional Marketing of the Offer, which will cover, inter
alia,
Finalizing the list and division of investors for one to one meetings; and
Finalizing roadshow schedule and investor meeting schedules
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
Deutsche Equities
6.
Domestic Institutional Marketing of the Offer, which will cover, inter
alia,
Finalizing the list and division of investors for one to one meetings; and
Finalizing roadshow schedule and investor meeting schedules
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
DSPML
7.
Non-Institutional and Retail Marketing of the Offer, which will cover,
inter alia,
Formulating marketing strategies, preparation of publicity budget;
Finalizing Media and PR strategy;
Finalizing centres for holding conferences for brokers etc.;
Finalizing collection centres; and
Follow-up on distribution of publicity and Offer material including form,
prospectus and deciding on the quantum of the Offer material.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
KMCC
8
Managing the Book, co-ordination with Stock Exchanges for book
building software, bidding terminals and mock trading and finalization of
pricing and institutional allocation in consultation with the Company
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
UBS
9.
The post bidding activities including management of escrow accounts,
coordination non-institutional allocation, intimation of allocation and
dispatch of refunds to Bidders etc. The post Offer activities will involve
essential follow up steps, which include the finalization of listing of
instruments and dispatch of certificates and demat delivery of shares,
with the various agencies connected with the work such as the Registrar
to the Offer and Bankers to the Offer and the bank handling refund
business. The merchant banker shall be responsible for ensuring that
these agencies fulfil their functions and enable it to discharge this
responsibility through suitable agreements with the Company.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
DSPML
Syndicate Member(s)
Kotak Securities Limited
Bakhtawar, 1st Floor
229 Nariman Point
Mumbai 400 021
India
Tel: (91) 22 5634 1100
Fax: (91) 22 5630 3927
Registered Office of the Company
Jet Airways (India) Limited
SM Centre, Andheri Kurla Road,
Andheri (East),
Mumbai 400 059, India
16
Tel: 91 22 2850 5080
Fax: 91 22 2856 0622
Email: [email protected]
Company Secretary and Compliance Officer
Mr. A.R. Rajaram
Jet Airways (India) Limited
SM Centre, Andheri Kurla Road
Andheri (East)
Mumbai 400 059, India
Tel: (91) 22 28527744
Fax: (91) 22 28527745
Email: [email protected]
Advisor to the Offer
Infrastructure Development Finance Company Limited
Ramon House
169, Backbay Reclamation
Mumbai – 400 020
Tel: 91 22 5633 9100
Fax: 91 22 2283 8156
Monitoring Agency
[ ] will be appointed the Monitoring Agency by our Company to monitor the proceeds of the Fresh Issue.
Registrar to the Offer
Karvy Computershare Private Limited
Karvy House, 46, Avenue 4, Street No.1
Banjara Hills, Hyderabad 500 034
Tel.: (91) 402 331 2451,
Fax: (91) 402 331 1968
Email: [email protected]
Investors can contact the Compliance Officer or the Registrar to the Offer in case of any pre-Offer or post-Offer
related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary
accounts, refund orders etc.
Legal Advisors to the Company
As to Indian law: As to the federal laws of the United States of America:
Gagrat & Co. Hogan & Hartson LLP
Plaza Cinema Building Columbia Square
Connaught Circus 555 Thirteenth Street NW
New Delhi 110 001, India Washington DC 20004, USA
Tel: (91) 11 2332 2311 Tel: (1 202) 637 5600
Legal Advisors to the Underwriters
As to Indian law: As to the federal laws of the United States of America:
P&A Law Offices Jones Day
1
st
Floor, Dr. Gopal Das Bhavan 31/F Edinburgh Tower, The Landmark
28, Barakhamba Road 15 Queen’s Road Central
New Delhi 110 001, India Hong Kong
Tel: (91) 11 2373 8793 Tel: (852) 2526 6895
Auditors to the Company
Deloitte Haskins & Sells
12, Dr. Annie Besant Road
17
Opposite Shiv Sagar Estate
Worli, Mumbai 400 018, India
Tel: 91 22 5667 9000
Chaturvedi & Shah
(member of Nexia International)
Laxmi Towers
‘A’ Wing, Bandra Kurla Complex
Mumbai 400 051, India
Tel: 91 22 5642 8400
Bankers to the Offer and Escrow Collection Banks
Citibank N.A.
Bombay Mutual Building
293 D.N. Road
Fort, Mumbai 400 001
India
Tel: 91 22 2269 1713
Fax: 91 22 2269 1715
Deutsche Bank AG
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4600
Fax: 91 22 2207 6553
The Hong Kong and Shanghai Banking Corporation
52/60, Mahatma Gandhi Road,
Mumbai 400 001
Tel: 91 22 2267 4921
Fax: 91 22 2262 3890
Kotak Mahindra Bank Limited
Mittal Court, 'C' Wing,
Nariman Point,
Mumbai 400 021
Tel: 91 22 2265 5285
Fax: 91 22 2281 7527
Bankers to the Company
Abu Dhabi Commercial Bank Ltd.
Rehmat Manzil
75-B Veer Nariman Road
Mumbai 400 038
Tel: 91 22 2283 9509
Fax: 91 22 2287 0686
Barclays Bank Plc
21/23 Maker Chambers VI
Nariman Point
Mumbai 400 021
Tel: 91 22 5638 7114
Fax: 91 22 5638 7184
Calyon Bank
Hoechst House, 11th Floor
Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9000
18
Fax: 91 22 5635 1813
Citibank N.A.
7
th
Floor, Plot C-61
Bandra Kurla Complex
G-Block, Bandra
Mumbai 400 051
Tel: 91 22 2653 5029/5030
Fax: 91 22 2653 5861/5862
Corporation Bank
Veena Chambers
21 Dalal Street
Mumbai 400 023
Tel: 91 22 2267 1715
Fax: 91 22 2267 2101
Deutsche Bank AG
Kodak House
222, Dr. D.N. Road
Fort
Mumbai 400 001
Tel: 91 22 2206 1050/2207 0692
Fax: 91 22 2207 2966/2206 7322
HDFC Bank Ltd.
Ground Floor, Maneckji Wadia Bldg.
(Kalpataru Heritage)
Nanik Motwani Marg
Fort
Mumbai 400 023
Tel: 91 22 2490 2961
Fax: 91 22 2496 3994
The Hong Kong and Shanghai Banking Corporation
52/60 Mahatma Gandhi Road
Mumbai 400 001
Tel: 91 22 2268 1020
Fax: 91 22 2265 3812
ICICI Bank Limited
Free Press House
215, Nariman Point
Mumbai 400 021
Tel: 91 22 2281 8077/2653 6457/35
Fax: 91 22 2653 1233
IDBI Bank Ltd.
Mittal Tower, ‘C’ Wing
Nariman Point
Mumbai 400 021
Tel: 91 22 2282 4057/65
Fax: 91 22 2282 4071
ING Vysya Bank Ltd.
Mittal Towers, A Wing, Ground Floor
210, Nariman Point
Mumbai 400 021
Tel: 91 22 2288 2616/5666 6419
Fax: 91 22 2281 8558
Standard Chartered Bank
19
90 Mahatma Gandhi Road
Mumbai 400 001
Tel: 91 22 2268 3575
Fax: 91 22 2262 4912
State Bank of India
Overseas Branch
World Trade Centre
Cuffe Parade
Mumbai 400 005
Tel: 91 22 2218 1518/2218 9161
Fax: 91 22 2218 8343/8741
UTI Bank Ltd.
1
st
Floor, Janmabhoomi Bhavan
Janmabhoomi Marg
Fort
Mumbai 400 005
Tel: 91 22 2283 5782/84/86/87/88
Fax: 91 22 2284 4113
Credit Rating
Since the Offer is of equity shares, credit rating is not required.
Trustees
Since the Offer is of equity shares, the appointment of Trustees is not required.
Book Building Process
Book building refers to the collection of Bids from investors, which is based on the Price Band, with the Offer Price
being finalized after the Bid/Offer Closing Date. The principal parties involved in the Book Building Process are:
• The Company;
• Book Running Lead Managers; and
• Syndicate Member(s) who are intermediaries registered with SEBI or registered as brokers with the Stock
Exchange(s) and eligible to act as underwriters.
The SEBI Guidelines have permitted an issue of securities to the public through the 100% Book Building Process,
wherein at least 60% of the Net Offer shall be allocated on a discretionary basis to QIBs. Further, up to 15% of the Net
Offer shall be available for allotment on a proportionate basis to Non Institutional Bidders and up to 25% of Net Offer
shall be available for allotment on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Offer Price. We will comply with the SEBI Guidelines for this Offer. In this regard, we have
appointed the BRLMs to procure subscriptions to the Offer.
The Book Building Process under the SEBI Guidelines is relatively new and investors are advised to make their own
judgment about investment through this process prior to making a Bid in the Offer. Pursuant to amendments to the
SEBI Guidelines, QIBs are not allowed to withdraw their Bid after the Bid/Offer Closing Date. See “Terms of the
Offer” on page 140 of this Draft Red Herring Prospectus for more details.
Steps to be taken by the Bidders for Bidding:
• Check whether he/she is eligible for Bidding including having regard to all applicable Indian laws, rules,
regulations, guidelines and approvals;
• A Bidder must necessarily have a demat account; and
• Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red
Herring Prospectus and in the Bid cum Application Form.
Investors should note that:
20
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
Illustration of Book Building and Price Discovery Process (Investors should note that this illustration is solely for
the purpose of illustration and is not specific to the Offer)
Bidders can bid at any price within the Price Band. For instance, assume a Price Band of Rs.20 to Rs.24 per Equity
Share, offer size of 1,800 Equity Shares and receipt of five Bids from Bidders. A graphical representation of the
consolidated demand and price would be made available at the bidding centers during the Bidding/Offer Period. The
illustrative book as set forth below shows the demand for the Equity Shares of the Company at various prices and is
collated from Bids from various investors.
Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription
500 24 500 27.78%
1,000 23 1,500 83.33%
1,500 22 3,000 166.67%
2,000 21 5,000 277.78%
2,500 20 7,500 416.67%
The price discovery is a function of demand at various prices. The highest price at which the Company is able to offer
the desired quantity of Equity Shares is the price at which the book cuts off, i.e., Rs.22 in the above example. The
Company, in consultation with the BRLMs, will finalize the Offer Price at or below such cut off price, i.e., at or below
Rs.22. All Bids at or above this Offer Price and cut-off Bids are valid Bids and are considered for allocation in the
respective category.
Underwriting Agreement
After the determination of the Offer Price and prior to filing of the Prospectus with the RoC, the Company, the Selling
Shareholder (acting through the Company, its duly constituted attorney) and the Underwriters will enter into an
Underwriting Agreement for the Equity Shares proposed to be offered through the Offer. It is proposed that pursuant to
the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the
event that the members of the Syndicate do not fulfill their underwriting obligations. Pursuant to the terms of the
Underwriting Agreement, the obligations of the Underwriters are subject to certain conditions to closing, as specified
therein.
The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
(This portion has been intentionally left blank and will be completed prior to filing of the Prospectus with RoC)
Name and Address of the Underwriters
Indicated Number of Equity Shares to be
Underwritten
Amount Underwritten
(Rs. in million)
Deutsche Equities India Private Limited
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
India
[?] [?]
HSBC Securities and Capital Markets (India)
Private Limited
52/60 Mahatma Gandhi Road
Fort, Mumbai 400 021
India
[?] [?]
UBS Securities India Private Limited
2
nd
Floor, Hoechst House
Nariman Point, Mumbai 400 021
India
[?] [?]
Citigroup Global Markets India Private
Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
21
DSP Merrill Lynch Limited
Mafatlal Centre, 10
th
Floor
Nariman Point, Mumbai 400 021
India
[?] [?]
Kotak Mahindra Capital Company Limited
3
rd
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
Kotak Securities Limited
1
st
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
The above Underwriting Agreement is dated [•].
In the opinion of our Board of Directors and the BRLMs (based on a certificate given by the Underwriters), the
resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective
underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1)
of the SEBI Act or registered as brokers with the Stock Exchange(s).
Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments.
Notwithstanding the above table, the BRLMs and the Syndicate Members shall be responsible for ensuring payment
with respect to Equity Shares allocated to investors procured by them. In the event of any default in payment, the
respective Underwriter, in addition to other obligations defined in the Underwriting Agreement, will also be required to
procure/subscribe to the extent of the defaulted amount as specified in the Underwriting Agreement. Allotment to
QIBs is discretionary as per the terms of this Draft Red Herring Prospectus and may not be proportionate in any way
and the patterns of allotment to the QIBs could be different for the various Underwriters.
22
CAPITAL STRUCTURE
Our share capital as of the date of filing of Draft Red Herring Prospectus with SEBI is set forth below:
Aggregate nominal
value
Aggregate value at
Offer Price
(Rs. million)
A. Authorized Capital
130,000,000 Equity Shares of Rs.10 each 1,300
70,000,000 Preference Shares of Rs.10 each 700
B. Issued, Subscribed And Paid-Up Capital
72,088,900 Equity Shares of Rs.10 each 720.9
69,828,750 Cumulative Convertible Redeemable Preference
Shares (“CCRPS”) of Rs.10 each
698.2
C. Offer to the public pursuant to this Draft Red Herring Prospectus
17,266,801 Equity Shares of Rs.10 each
Out of the above:
a) Fresh Issue
14,245,111 Equity Shares of Rs.10 each 142.5 [•]
b) Offer for Sale
3,021,690 Equity Shares of Rs.10 each 30.2 [•]
D. Employee Reservation Portion
1,200,000 Equity Shares of Rs.10 each 12.0 [•]
E. Net Offer to the Public
16,066,801 Equity Shares of Rs.10 each 160.7 [•]
F. Equity Capital after the Offer
86,334,011 Equity Shares of Rs.10 each
863.3
G. Share Premium Account
Before the Offer 0
After the Offer [•]
(a) The authorized share capital was increased from Rs.1 million to Rs.300 million pursuant to a resolution passed
by our shareholders at an EGM held on January 6, 1993.
(b) The authorized share capital was increased from Rs.300 million to Rs.330 million pursuant to a resolution
passed by our shareholders at an EGM held on December 16, 1993.
(c) The authorized share capital was increased from Rs.330 million to Rs.950 million pursuant to a resolution
passed by our shareholders at an EGM held on December 19, 1994.
(d) The authorized share capital was increased from Rs.950 million to Rs.2,000 million, which was divided into
equity share capital of Rs.1,000 million and preference share capital of Rs.1,000 million, pursuant to a
resolution passed by our shareholders at an EGM held on December 1, 2000.
(e) The authorized share capital of Rs.2,000 million was reclassified into equity share capital of Rs.1,300 million
and preference share capital of Rs.700 million pursuant to a resolution passed by our shareholders at an EGM
held on December 28, 2004.
The details of the Equity Shares being offered in the Offer for Sale by the Selling Shareholder is as under:
Name of the Shareholder Number of equity shares offered % of pre-Offer equity capital
Tail Winds Limited 3,021,690 4.2%
Equity Shares, being offered by the Selling Shareholder as a part of the Offer for Sale, have been held by such Selling
Shareholder for a minimum period of one year at the time of filing the Draft Red Herring Prospectus with SEBI.
23
Notes to the Capital Structure
1. Share Capital History
Equity Share Capital
Date on which
Equity Shares
were allotted and
made fully paid-up
Number of
Equity
Shares
Face
value
Offer
Price
Nature of
payment of
consideration
Reasons for
allotment
Cumulative
paid-up
equity
capital
Cumulative
share
premium
Name of Person/
Entity to which
Equity Shares
Allotted
(Rs.) (Rs.) (Rs.
millions)
April 1, 1992 2 10 10 Cash Signatories to
Memorandum of
Association
* Nil Mr. P.V. Venkata
Chalam; Mrs. Anita
Naresh Goyal
April 1, 1992 9,998 10 10 Cash Further allotment 0.10 Nil Mr. P.V. Venkata
Chalam; Mrs. Anita
Naresh Goyal
June 11, 1993 2,585,000 10 10 Cash Further allotment 25.95 Nil Tail Winds Limited
July 6, 1993 6,262,000 10 10 Cash Further allotment 88.57 Nil Tail Winds Limited
July 30, 1993 1,143,000 10 10 Cash Further allotment 100.00 Nil Tail Winds Limited
February 23, 1994 8,796,000 10 10 Cash Further allotment 187.96 Nil Tail Winds Limited
November 17, 1994 12,547,000 10 10 Cash Further allotment 313.43 Nil Tail Winds Limited
June 19, 1996 31,343,000 10 10 Cash Further allotment 626.86 Nil Tail Winds Limited
November 21, 1996 9,402,900 10 Nil Not applicable Bonus shares 720.88 Nil Tail Winds Limited
Total 72,088,900
* Rs. 20 only
Preference Share Capital
Date on which
preference shares
were allotted and
made fully paid-up
Number of
preference
shares
Face
value
Offer
Price
Nature of
payment of
consideration
Reasons for
allotment
Cumulati
ve Paid-
up equity
capital
Cumulative
Share
Premium
Name of person/
entity to which
preference shares
allotted
(Rs.) (Rs.) (Rs.
millions)
February 15, 2001 69,828,750 10 10 Cash Issue of
preference shares
698.29 Nil International Finance
Corporation
2. Promoters Contribution and Lock-in
Name
Date on which equity
shares were allotted/
acquired and made
fully paid-up
Nature of
payment of
consideration
Number of
Equity
Shares
Percentage
of pre-
Offer
paid-up
equity
capital (%)
Percentage
of post-Offer
paid-up
equity
capital (%)
Lock-in
period
Tail Winds June 19, 1996 Cash 7,863,903 10.91% 9.11% Three years
Tail Winds November 21, 1996 Bonus Shares 9,402,900 13.04% 10.89% Three years
Total 17,266,803 23.95% 20.00%
In addition to the lock-in periods specified above, the entire pre-Offer issued equity share capital of the Company less
the number of Equity Shares for which transfer is made under the Offer for Sale will be locked in for a period of one
year from the date of Allotment of Equity Shares in this Offer. The total number of Equity Shares which are locked in
for one year is 51,800,407.
Locked-in Equity Shares held by the promoters can be pledged with banks or financial institutions as collateral security
for loans granted by such banks or financial institutions. Further, in terms of clause 4.16(b) of the SEBI Guidelines,
Equity Shares held by the promoters may be transferred to and among the promoter group or to a new promoter or
persons in control of the Company subject to continuation of the lock-in in the hands of the transferees for the
remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as
applicable.
In addition, the Equity Shares subject to lock-in will be transferable subject to compliance with the SEBI Guidelines as
amended from time to time.
On December 28, 2004, Mr. Naresh Goyal transferred by way of sale one Equity Share each (held by Mr. Goyal as a
nominee of Tail Winds) to Mr. Saroj K. Datta, Mr. Carl Saldanha, Mr. Prasun Sengupta, Mr. Mahiyar Sadri and Ms.
24
Jennifer D’Silva, respectively, at a consideration of Rs.800 per Equity Share. Other than such transaction, no Equity
Shares have been acquired, purchased or sold by our promoters or any director of Tail Winds during a period of six
months preceding the date on which this Draft Red Herring Prospectus is filed with the SEBI.
Mr. Naresh Goyal, one of the directors of Tail Winds, holds Equity Shares of our Company:
Name of director Number of Equity Shares held
Mr. Naresh Goyal as nominee of Tail Winds 9,995
3. Equity Shares held by the top ten shareholders
Our top seven shareholders and the Equity Shares held by them on the date of filing this Draft Red Herring Prospectus
with SEBI and ten days prior to the date of filing this Draft Red Herring Prospectus with SEBI are as follows:
Number of Equity Shares held
Name
On the date of
filing this Draft
Red Herring
Prospectus with
SEBI
Ten days prior to
the date of filing
this Draft Red
Herring
Prospectus with
SEBI
Tail Winds
72,078,900 72,078,900
Mr. Naresh Goyal as nominee of Tail Winds 9,995 9,995
Mr. Saroj K. Datta 1 1
Mr. Carl Saldanha 1 1
Mr. Prasun Sengupta 1 1
Mr. Mahiyar Sadri 1 1
Ms. Jennifer D’Silva 1 1
Our top two shareholders and the Equity Shares held by them two years prior to the date of filing this Draft Red
Herring Prospectus with SEBI are as follows:
Name
Number of Equity Shares held two years prior
to the date of filing this Draft Red Herring
Prospectus with SEBI
Tail Winds 72,078,900
Mr. Naresh Goyal as nominee of Tail Winds
10,000
4. IDFC is not an existing promoter or shareholder of our Company. As of the date of this Draft Red Herring
Prospectus, there are no outstanding warrants, options or rights to convert debentures, loans or other financial
instruments into our Equity Shares save and except for the conversion right accorded to IDFC pursuant to the
Subordinated Rupee Debt Agreement dated August 20, 2001 which IDFC has conditionally waived pursuant to its letter
dated December 17, 2004.
5. Shareholding Pattern
The table below presents our shareholding pattern before the proposed Offer and as adjusted for the Offer.
Equity Shares owned prior to the Offer Equity Shares owned after the Offer
Shareholder Category Number % Number %
Promoters 72,088,895 100.00% 69,067,205 80.00%
Mr. Saroj K. Datta 1 * 1 *
Mr. Carl Saldanha 1 * 1 *
Mr. Prasun Sengupta 1 * 1 *
Mr. Mahiyar Sadri 1 * 1 *
Ms. Jennifer D’Silva 1 * 1 *
Public (pursuant to the Offer) Nil 0% 17,266,801 20.00%
Total 72,088,900 100.00% 86,334,011 100.00%
* less than 0.000001%
25
6. Buyback and Standby Arrangements
None of Tail Winds, the Company, their respective director(s) or the BRLMs has entered into any buyback and/or
standby arrangements for the purchase of our Equity Shares from any person.
7. We have not raised any bridge loan against the proceeds of the Offer.
8. Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by
persons resident outside India requires the prior approval of the FIPB. However, the MoCA, pursuant to a Notification
No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of India on November 13, 2004)
has permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector up to 49% through
the “automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also permits
investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline.
Amendments to the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are
awaited.
The RBI, by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognized OCBs, such as Tail Winds,
as an eligible class of investors under the various investment routes/schemes under the rules and regulations
promulgated under the FEMA. Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3,
2003, issued the OCB Regulations to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8,
2003, the RBI clarified, among other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the
OCB Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA
Regulations (i.e., with the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI),
an erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for
the transfer of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to
residents, subject to the terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi & Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested
the FIPB to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain
clarifications on behalf of an Indian company in the domestic airlines sector which was contemplating an initial public
offering. The FIPB was informed that the company was promoted by an NRI who held the shares of such company
through an OCB in which such NRI had a 100% shareholding. The FIPB was further informed that the initial public
offering by the company would be made to persons within the definition of Indian residents (including FIIs and QIBs
registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer for sale of shares in
the company by the OCB to such Indian residents.
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
26
No further approvals of the FIPB or the RBI are required for the Allotment of Equity Shares under this Offer. We will
be required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines
issued by the DGCA from time to time, including AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4, read with the MoCA notification No. AV.13011/10/96 DT (Vol II) dated
November 10, 2004, and other applicable laws, rules, regulations, guidelines and approvals.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor whether such investor is eligible to acquire
Equity Shares of the Company.
9. At least 60% of the Net Offer shall be allocated to QIBs on a discretionary basis. Further, up to 15% of the
Net Offer will be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 25% of the Net
Offer will be available for allocation to Retail Individual Bidders, subject to valid Bids being received from them at or
above the Offer Price. Under-subscription, if any, in the Non-Institutional and Retail Individual categories would be
allowed to be met with spill over from any other category at the sole discretion of the Company and the BRLMs.
10. Only permanent employees and directors of the Company and Tail Winds who are Indian Nationals based in
India and are physically present in India on the date of submission of the Bid-cum-Application Form (“Employees”)
would be eligible to apply in this Offer under the Employee Reservation Portion on competitive basis. Employees
other than as mentioned hereinabove are not eligible to participate under the Employee Reservation Portion. Bids by
Employees can be made also in the “Net Offer” to the public and such Bids shall not be treated as multiple Bids. If the
aggregate demand in the Employee Reservation Portion is greater than 1,200,000 Equity Shares at or above the Offer
Price, allocation shall be made on a proportionate basis subject to a maximum Allotment to any Employee of Rs.2.5
million. The unsubscribed portion, if any, from the Equity Shares in the Employee Reservation Portion will be treated
as part of the Net Offer and Allotment shall be made in accordance with the description in “Statutory and Other
Information” beginning on page 165 of this Draft Red Herring Prospectus.
11. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Offer, subject to the
maximum limit of investment prescribed under relevant laws applicable to each category of investor.
12. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment,
rights issue or in any other manner during the period commencing from submission of the Draft Red Herring
Prospectus with SEBI until the Equity Shares offered hereby have been listed.
13. We presently do not have any intention or proposal to alter our Company’s capital structure for a period of six
months commencing from the date of opening of this Offer, by way of split/ consolidation of the denomination of
Equity Shares or further issue of Equity Shares or securities convertible into Equity Shares, whether on a preferential
basis or otherwise except for issue of Equity Shares pursuant to either an ESPS or an ESOP scheme, for which we will
seek the approval of our shareholders after the completion of the Offer if we decide to proceed with an ESPS or ESOP
27
scheme. However, during such period or at a later date, we may issue Equity Shares or securities linked to Equity
Shares to finance an acquisition, merger or joint venture or as consideration for such acquisition, merger or joint
venture, if an opportunity of such nature is determined by our Board to be in the interest of our Company.
14. We have not issued any Equity Shares out of revaluation reserves or for consideration other than cash except
the issue of bonus shares described in “Notes to Capital Structure – Share Capital History” beginning on page 23 of this
Draft Red Herring Prospectus.
15. There will be only one denomination of the Equity Shares of our Company unless otherwise permitted by law
and our Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to
time.
16. We have seven members as of the date of this Draft Red Herring Prospectus.
17. The Equity Shares held by our promoters are not subject to any pledge.
28
OBJECTS OF THE OFFER
The objectives of the Offer are to achieve the benefits of listing, raise capital and retire certain outstanding debt. We
believe that listing of our Equity Shares will enhance our visibility and brand name.
The net proceeds of the Fresh Issue after deducting all Offer related expenses are estimated to be approximately Rs.[•]
million. We will not receive any proceeds of the Offer for Sale by the Selling Shareholder. For details of the Offer
expenses, see the section “Statutory and Other Information – Expenses of the Offer” on page 167 of this Draft Red
Herring Prospectus.
The main objects clause and objects incidental or ancillary to the main objects clause of our Memorandum enable us to
undertake our existing activities and the activities for which funds are being raised by us through the Fresh Issue.
The details of the proceeds of the Fresh Issue are summarized in the table below:
(in millions)
Gross proceeds of the Fresh Issue Rs.[•]
Offer related expenses Rs.[•]
Net proceeds of the Fresh Issue Rs.[•]
The following table summarizes the use of proceeds:
Estimated Cost (in
millions)
Repayment of debt and redemption of CCRPS Up to Rs.7,921
(1)
Capital expenditures Rs.4,610
General corporate purposes Rs.[•]
Total estimated cost Rs.[•]
(1)
Will be determined after finalization of the Offer Price.
Details of Use of Proceeds
Repayment of Debt and Redemption of CCRPS
We intend to use the net proceeds of the Fresh Issue to prepay existing high cost debt of Infrastructure Development
Finance Company Limited (“IDFC”) in August 2005 and to redeem the CCRPS issued to IFC, within 90 days of
completion of the Offer. In addition, the net proceeds will be used to pay all or a portion of the scheduled principal
amounts (excluding interest) of our existing long-term debt due through March 2006 of an amount of up to Rs.3,016
million.
The details of debt and CCRPS that we propose to repay or redeem with the net proceeds of the Fresh Issue are as
follows:
Amount
( Rs. millions)
Payment Date
Interest Rate / Yield
IFC 1,305
(1)(2)
Within 90 days of completion
of Offer
18.00%
(2)
IDFC 3,601
August 2005 12.45%
Current portion of existing long-term
debt
Up to 3,016
(3)
Periodically through March
2006
Upto 10.78%
Total Up to 7,921
(3)
(1) These amounts are U.S. Dollar liabilities translated into Rupees, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00; exact
Rupee equivalent amount of such U.S. Dollar liabilities will be determined at the time of repayment/prepayment.
(2) Amount paid is mandatory redemption amount of our CCRPS issued to IFC.
(3) This is currently an estimate only. This amount is an aggregate of several Rupee and U.S. Dollar liabilities, where U.S. Dollar liabilities have
been translated into Rupees, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00; exact Rupee equivalent amount of such U.S.
Dollar liabilities will be determined at the time of repayment/prepayment.
Capital Expenditures
We also intend to use the net proceeds for the following capital expenditures relating to our operations:
29
Estimated Cost
(U.S.$ million)
Estimated Cost
(Rs. million)
Investment in second flight simulator 15.0 690
(1)
Investment in maintenance hangar and related workshop 15.0 690
(1)
Investment in additional spare engines 25.0 1,150
(1)
Investment in additional spares and ground handling equipment 35.0 1,610
(1)
Investment in a new integrated training center 10.0
(2)
460
Total 100.0 4,601
(1) These are estimated U.S. Dollar liabilities, translated into Rupees for convenience purposes only, at an exchange rate of Rs.46.01 = U.S.$1.00.
(2) These are estimated Rupee liabilities, translated into U.S. Dollars, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00.
We have not entered into any definitive agreements for the purchase of any equipment or spares, including any flight
simulator, or purchase of any land in connection with our investment in a new integrated training center.
Investment in Flight Simulator
We need an additional simulator for training our pilots to fly Boeing NG aircraft. We purchased one simulator in June
2001. Based on existing usage and our expansion plans, we believe we require an additional simulator within the next
12 months. We believe the expected cost will be U.S.$15 million (Rs.690 million), including octroi and installation
costs, which we expect to finance from the net proceeds of the Fresh Issue.
Investment in maintenance hangar and related workshop
We are currently constructing a hangar with related workshops and training facilities at Mumbai airport. This hangar
will enable us to carry out scheduled and unscheduled maintenance tasks, including C and, in due course, D Checks.
Our new hangar would result in maintenance cost savings by reducing usage of third party hangar and support facilities.
The hangar is expected to be operational by March 2005. We expect to use approximately U.S.$15 million (Rs.690
million) of the net proceeds of the Fresh Issue to build support facilities (including tools, equipment and related
workshops) for the hangar and engineering training facilities in the complex.
Investment in additional spare engines
Currently, we have six spare aircraft engines. Based on spare engine calculations specified by CFM International and
our plans to lease additional aircraft, we require up to four additional spare engines by March 2006. We expect to use
approximately U.S.$25 million (Rs.1,150 million) of the net proceeds of the Fresh Issue to purchase such engines.
Investment in additional spares and ground handling equipment
In view of the expansion of our fleet, we will require additional spare parts and ground handling equipment. We expect
to use approximately U.S.$35 million (Rs.1,610 million) of the net proceeds of the Fresh Issue to purchase spare parts
and ground handling equipment.
Investment in a new integrated training center
We plan to build a new integrated training center in Mumbai to provide training facilities to our pilots, inflight crew
and ground staff. We estimate that we will require approximately 80,000 sq. feet of built up area for our training
facilities. We expect to use approximately Rs.460 million of the net proceeds of the Fresh Issue for the the land
required, the construction of and the facilities for the training centre and the acquisition of teaching aids required at our
training centre.
General corporate purposes
We intend to use the remaining net proceeds of Rs.[•] million for general corporate purposes, including expansion of
our operations domestically and/or internationally.
Offer Related Expenses
The Offer related expenses include, among others, underwriting and selling commissions, printing and distribution
expenses, legal fees, advertisement expenses and registrar and depository fees. The estimated Offer expenses are as
follows:
30
Activity
Expense (in millions)
Lead management, underwriting and selling commissions Rs.[?]
(1)
Advertising and marketing expenses [?]
Printing and stationery [?]
Other (registrars fees, legal fees, etc.) [?]
Total estimated Offer expenses [?]
_________
(1) Will be completed after finalization of Offer Price.
Other than listing fees which will be paid by our Company, all expenses with respect to the Offer will be shared
between the Company and the Selling Shareholder on a pro-rata basis, in the ratio of the Equity Shares issued by the
Company in the Fresh Issue and the Equity Shares sold by the Selling Shareholder in the Offer for Sale.
Interim Use of Proceeds
Pending use of net proceeds for general corporate purposes, we intend to invest the net proceeds from the Fresh Issue in
high quality, interest bearing liquid instruments including deposits with banks. These investments will be authorized
by our Board or a duly authorized committee thereof.
31
INDUSTRY
The Indian economy
India, the world's largest democracy in terms of population (1,064 million people), had a real GNP on purchasing
power parity basis of approximately U.S.$3,068 billion in 2003, making it the fourth largest economy in the world,
after the United States of America, China and Japan, as per the World Development Report 2005.
In 1991, the Government of India initiated a series of comprehensive macroeconomic and structural reforms to promote
economic stability and growth. The key policy reforms that were initiated by the Government were focused on
implementing fundamental economic reforms, deregulation of industry, accelerating foreign investment and pushing
forward a privatization program for disinvestment in public sector units. Consequent to the reform’s program, India’s
economy registering registered robust growth with an average real GDP growth of 5.8% over the period fiscal 1999 to
fiscal 2004.
The following table sets forth the annual percentage change in certain key indicators of the Indian economy.
As of and for the year ended March 31,
(annual percentage change, except for foreign exchange reserves)
2000 2001 2002 2003 2004
(%) (%) (%) (%) (%)
Real GDP growth
(1)
6.1 4.4 5.8 4.0 8.1
Industrial Production
(2)
6.6 5.1 2.6 5.8 6.8
Inflation Rate based on Wholesale Price Index (average)
(2)
3.3 7.1 3.7 3.4 5.4
Imports (% to GDP)
(2)
12.4 11.8 11.7 12.8 n.a.
Exports (% to GDP)
(2)
9.1 10.4 10.0 11.2 n.a.
Foreign Exchange Assets (in US$ billions)
(2)
35.1 39.6 51.1 71.9 107.5
_________
Source:
(1) Economic survey conducted by the Government of India annually. Data for 2003 is as per quick estimates and 2004 is as per advance estimates,
as provided in the Economic Survey.
(2) Data released by Centre for Monitoring Indian Economy (“CMIE”).
The following table sets forth, for the periods indicated, the inflow into India of foreign direct investment and portfolio
investment.
Year ended March 31,
2000 2001 2002 2003
(U.S.$ millions)
Foreign direct investment 2,167 4,029 6,131 4,660
Portfolio investment
3,024
2,760
2,020
979
_________
Source: Data released by CMIE.
Evolution of the Indian Aviation Industry
During the last two-and-a-half decades, world-wide, the air transport industry has substantially moved away from
government control and ownership towards deregulation and private ownership. The origins of this trend are generally
attributed to the deregulation of the U.S. airline industry in the late 1970s, which led to lower fares and higher
improved productivity of assets and capital. Spurred by these benefits, several countries have pursued the path of
liberalization and privatization. This transformation also subsumed another trend of privatization of government
owned airlines designated by a country’s government to operate international air services to and from that country as
evidenced in Australia (Qantas Airways), U.K. (British Airways), Germany (Lufthansa) and Japan (Japan Airlines).
The Indian aviation sector was also characterized by a high degree of Government control prior to 1990. The
Government of India nationalized the airline industry in 1953 through enactment of the Air Corporations Act. Pursuant
to this Act, there were only two players left in the Indian aviation sector, both of which were owned and controlled by
the Government: (a) Indian Airlines, primarily serving domestic sector with operations to select international
destinations and (b) Air India, serving the international sectors.
The liberalization in the Indian civil aviation industry began in 1990 with private sector players being allowed to
operate as air taxi operators, but not permitted to operate scheduled services. A number of private players commenced
32
domestic operations as air taxi operators including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC
Airlines and East West Airlines.
In 1994, with the repeal of the Air Corporations Act, private carriers were permitted to operate scheduled services.
Private air taxi operators were granted scheduled carrier status upon fulfillment of certain applicable criteria. However,
some of these operators could not continue with their business and closed operations by 1997. Among the many
private airlines which started operations with the deregulation of the Indian civil aviation sector, only two continue to
have operations in the country – Jet Airways and Air Sahara. In August 2003, Air Deccan, another private carrier
commenced operations taking the total number of private carriers providing scheduled services to three. According to
published reports, other enterprises are contemplating entering the Indian domestic aviation market.
Competitive Landscape
The Indian aviation sector can be broadly divided into following four main categories:
• Domestic airlines, which provide scheduled flights within India and to select international destinations;
• International airlines, which operate scheduled international air services to and from India;
• Non-scheduled operators, which includes charter operators and air taxi operators; and
• Air cargo services, which includes air transportation of cargo and mail.
The table below provides certain information regarding airlines operating scheduled domestic flights as of, unless
otherwise indicated, December 15, 2004:
Jet Airways
Air Sahara
(1)
Indian Airlines and its
subsidiary Alliance
Air
(2)
Air Deccan
(3)
Description Private full service
carrier, operates on
domestic and select
international routes.
Private full service
carrier, operates on
domestic and select
international routes.
Government owned,
operates both on domestic
and international routes
Private no frills airline,
operates on domestic
routes.
Incorporation year 1992 1993 1953 (Indian Airlines) 1995
(4)
Fleet size 42 20 62 11
Fleet type Boeing 737 and ATR Boeing 737 and CRJ-
200
Airbus, Boeing 737 and
Dornier
ATR and Airbus
No. of domestic
destinations served (+
international)
42 + 2 22 + 2 58 + 20 23
No. of domestic flights
per day
271 110 288 76
No. of seats per day 33,500 11,300 38,000 6,200
(1) Derived from information provided at www.airsahara.net, current as of November 1, 2004.
(2) Derived from information provided at www.indian-airlines.com, current as of December 15, 2004.
(3) Derived from information provided at www.airdeccan.net, current as of December 15, 2004.
(4) Originally incorporated as Deccan Aviation Private Limited, a non-scheduled and helicopter operator.
In addition to these four players, Air India also carries domestic passengers on domestic legs of its international flights,
offering both full and discounted fares.
Recent developments in the aviation industry
Naresh Chandra Committee Report – Road map for the civil aviation sector
In July 2003, the Ministry of Civil Aviation set up a five-member committee under the chairmanship of Mr. Naresh
Chandra, an eminent former bureaucrat, to prepare a comprehensive roadmap for the promotion of Indian civil aviation
sector that will provide the basis for a new National Civil Aviation Policy
The Committee held detailed consultations with airlines, chambers of commerce, the travel and tourism industries and
the public, and studied representations received from them. The Committee submitted the first part of its report in
December 2003, which recommended certain structural changes to strengthen the aviation sector and make air travel
more affordable. The Committee's recommendations included the following:
• Allow domestic private airlines to provide international air transport services to and from India.
• Reduce excise duty and sales tax on ATF.
33
• Rationalize IATT (Indian Air Travel Tax), FTT (Foreign Travel Tax) and PSF (Passenger Service Fee).
• Enable private sector oil companies to sell ATF at airports.
• Removal of minimum fleet size (five aircraft) and capital requirements (Rs.100 million) for setting up
operations.
• Privatization of Indian Airlines and Air India.
• Increase the limit of foreign investment in an airline from 40% to 49% and permitting foreign airlines to invest
in Indian air carriers.
• Allow foreign investment up to 100% in non-scheduled services such as chartered aircraft and helicopter
services.
• Airport charges to be reduced in line with international levels and reduction in route navigation and landing
charges.
• Corporatization of Air Traffic Control.
• Setting up of an Aviation Economic Regulatory Authority (“AERA”).
The second part of the Naresh Chandra Committee Report which deals with the implementation of the proposed
roadmap has been presented to the Government in October 2004. This part deals with training, aviation security, safety
regulations and steps required to be taken with respect to airport management and infrastructure.
Subsequent to the submission of the Naresh Chandra Committee Report, the following developments have taken place
in the Indian aviation sector:
• The Government permitted private domestic airlines to fly certain international destinations in the SAARC
region with effect from December 2003.
• The Government has abolished IATT and FTT from January 9, 2004.
• The Government has reduced excise duty on ATF from 16% to 8% from January 9, 2004.
• Landing charges for aircraft with less than 80 seats have been abolished and reduced by 15% for larger aircraft
with effect from February 11, 2004. Navigation charges for aircraft weighing less than 20 tonnes have been
substantially reduced with effect from February 11, 2004. For other aircraft, the method of calculating the
charges had already been rationalized to reflect both the weight of the aircraft and the distance flown.
• The Government issued a notification dated November 10, 2004 increasing the foreign investment limit from
40% to 49%, while maintaining its earlier position of not allowing foreign airlines to invest in domestic
airlines.
Domestic airlines being allowed to fly overseas
The Government has allowed private carriers to fly overseas to select destinations in the SAARC region. The
Government also announced on December 29, 2004 that the Union Cabinet has approved a change in aviation policy,
allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20 aircraft to provide
services to other international destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman,
Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three years. We are
accordingly considering the feasibility of flying to other international destinations, although it is uncertain when this
policy change will become effective and which destinations we may be permitted to service. This would enlarge the
growth opportunity for domestic carriers as they can extend their existing customer relationships and brand equity to
the international sectors.
Emergence of no frills airlines
With the emergence of no frills airlines in the United States and Europe and the resultant revolution witnessed by the
aviation sector, the concept of no frills airlines started generating interest in Asia and a number of no frills airlines have
34
emerged in the Asian continent. India saw its first no frills airline, Air Deccan, commencing operations in August
2003. It has been reported that other business houses are considering the commencement of no frills airline operations
in India.
Industry Growth
The domestic aviation sector growth fuelled by a fast growing economy and rising consumerism, has been relatively
resilient, as compared to other countries, to international events like September 11 and SARS and has maintained a
compounded annual growth rate (“CAGR”), of 8.9% over fiscal 2002 to fiscal 2004. This has been approximately the
same as growth in the international sector, which grew at a CAGR of 10.5% over fiscal 2002 to fiscal 2003. The table
below gives the growth in the number of passengers:
Fiscal
Domestic Sector
Passengers (millions)
(1)
Year on Year Growth
International Sector
Passengers (millions)
(2)
Year on Year Growth
1995 11.06 -
1996 12.19 10.3%
1997 11.70 -4.0%
1998 11.55 -1.3% 10.66
1999 12.02 4.2% 11.02 3.4%
2000 12.71 5.7% 11.45 3.9%
2001 13.71 7.9% 12.28 7.2%
2002 12.85 -6.3% 11.91 -3.05
2003 13.95 8.5% 13.16 10.5%
2004 15.25 9.3% - -
_________
Source: DGCA
(1) Information does not include air taxi operators.
(2) Scheduled passenger traffic to and from India.
According to the DGCA, the total number of passengers carried by scheduled domestic airlines in India was 15.25
million in fiscal 2004 and 8.80 million in the six months ended September 30, 2004.
The growth in demand has been matched by the growth in domestic capacity. The Indian aviation sector grew at a rate
of 7.7% over fiscal 2001 to fiscal 2003 in terms of Available Seat Kilometers.
Fiscal 1996 1997 1998 1999 2000 2001 2002 2003
ASKMs 12,334 14,645 16,436 17,928 19,089 19,897 20,849 22,833
Source: DGCA
Key Industry characteristics
Highly underpenetrated markets
Despite recent growth in air passenger traffic, India continues to have gross under penetration of air services with an
average air travel of 0.014 trips per person per year as compared to an average of 2.02 trips per person per year in the
United States. This signals the level of potential demand which may be generated as the economy grows and air travel
becomes more affordable for a larger population, which otherwise uses road or rail transports.*
* Source: derived from data released by the World Development Report 2005, the Bureau of Transportation Statistics, Department of Transportation,
U.S.A. and the DGCA.
High fixed cost operating environment
The domestic aviation sector in India experiences higher input costs in terms of fuel charges and airport related charges.
Domestic airlines generally have to pay higher charges than those paid by international airlines procuring fuel within
India since such international airlines are exempt from paying excise duty and sales tax*. Also, landing and navigation
charges at Indian airports are higher than similar charges at airports in neighboring countries such as Bangladesh, Sri
Lanka and Nepal.
* Source: Naresh Chandra Committee Report-I.
35
Regulatory and infrastructure constraints
The domestic aviation sector in India continues to be highly regulated. The Route Dispersal Guidelines require all
scheduled airlines to provide a certain number of ASKMs on routes classified as Category II and Category IIA, which
results in lower average passenger load factor and yield for airlines. See “Regulations and Policies” at page 110 of this
Draft Red Herring Prospectus. However, the Government is considering replacing these guidelines by a “subsidy
structure” although it is uncertain if or when such guidelines will be amended. The domestic aviation sector is also
characterized by entry barriers in terms of limited availability of parking bays and slots. The future growth of the
domestic aviation sector in India will depend to a large extent on the availability of quality infrastructure, particularly
airport infrastructure.
Demand Drivers
High economic growth
Growth in air transport (both passengers and cargo) is closely associated with growth in GDP, both internationally and
nationally. For a 1% increase in Indian GDP, domestic passengers are expected to increase by 1.1%. For international
passengers, this sensitivity is about 1.3%, indicating that past growth in this sector has been negatively impacted by
factors like high regulation, infrastructure constraints and capacity availability. The policies and program of economic
liberalization followed since the early 1990s, which have stimulated GDP growth and foreign investment, may be
considered as major factors contributing to the growth in domestic air travel between 1993 and 2004. The outlook for
the Indian economy remains favorable with the Reserve Bank of India projecting a 6% to 6.50% growth rate in fiscal
2005.
Increasing consumerism and affordability
The aviation market in India consists of two principal groups: leisure travelers and business travelers. Leisure traffic
tends to be more price-elastic. While historically, business travelers have formed the majority of the domestic air travel
in India, with increasing income levels and the emergence of flexible fare schemes, a shift is likely in the travel habit of
the middle to high income groups from premium class travel in trains to air traffic. In contrast to 15.25 million airline
passengers in fiscal 2004, the Indian railways carried approximately 52 million* passengers in its premium class
products, i.e., air conditioned and first class coaches.
* Source: CMIE
Growth in tourism
The Indian tourism market has been growing at a significant pace over the last few years, with the government giving
impetus to the industry through various schemes and organized events. Inbound tourist traffic into India increased by
13% from 2.4 million* in fiscal 2002 to 2.7 million* in fiscal 2003. Travel and tourism expenditure in India is
expected to achieve an annualized real growth of 8.8%* over the 10-year period from fiscal 2004 to fiscal 2014.
*Source: Tourism of India 2003 statistics, World Travel & Tourism Council India 2004 Report.
36
BUSINESS
Overview
We are a leading airline in India, providing regular scheduled services on routes between all of India’s major cities.
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We believe that our focus on providing high-quality, reliable service has enabled us to
become the preferred airline for travelers in India.
We have flown over 48 million revenue passengers (defined as fare paying passengers flown on all flight segments)
since commencing operations on May 5, 1993 until November 30, 2004. We flew approximately 5.82 million revenue
passengers in fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers in fiscal
2004 and 3.78 million revenue passengers in the six months ended September 30, 2004. Our share of the domestic
market based on revenue passengers was 11.2% in fiscal 1995, 45.3% in fiscal 2002, 45.9% in fiscal 2003, 45.3% in
fiscal 2004 and 42.3% in the six months ended September 30, 2004. Source: DGCA
Our fleet currently comprises 42 aircraft, of which 34 are Boeing 737 aircraft and eight are ATR 72-500 aircraft. We
currently provide regular scheduled services to 42 destinations in India and two destinations outside India and operate
1,924 flights weekly.
We intend to maintain a disciplined growth strategy by increasing frequency on our existing routes and entering
attractive new markets. Our aircraft fleet has grown from four aircraft in 1993 to 42 aircraft today. Operating a fleet
consisting of limited types of aircraft lowers our operating costs as maintenance issues are simplified, spare parts
inventory requirements are reduced, scheduling is more efficient and training costs are lower, ground time is reduced
and reliability is enhanced. The current average age of our aircraft is 4.5 years. We believe our average fleet age
compares favorably with airlines of our size in India and overseas.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively. In addition, we are actively evaluating the feasibility of commencing operations of regular
scheduled services selectively to other international destinations, subject to receipt of necessary permissions and
approvals from regulatory authorities.
Our Operating Revenues have increased from Rs.25,263 million in fiscal 2002 to Rs.28,757 million in fiscal 2003 and
Rs.34,474 million in fiscal 2004. In the six months ended September 30, 2004, our operating revenues were Rs.19,264
million, an increase of 17.9% from our operating revenues of Rs.16,345 million in the six months ended September 30,
2003. Market growth, increase in our fleet size, our pricing strategy and our entry into new markets have been
primarily accountable for increases in our revenues.
Tail Winds Limited, an Isle of Man company, holds over 99.99% of our Equity Shares. Tail Winds Limited is wholly-
owned by Mr. Naresh Goyal. Mr. Naresh Goyal, our Chairman, has more than three decades of management and
operational experience in the travel and airline industry and brings the benefit of this expertise to our business strategy.
Competitive Strengths
We believe the following are our principal competitive strengths, which differentiate us from other airlines:
Focus on business travel: We offer several services directed towards the convenience of the business traveler,
including telephone check-in facilities, through and “in-city” check-in facilities, priority baggage service, high
frequency services on major routes, same-day return flights on major routes at convenient timings, point to point
connections, providing flight information on cellular phones of customers, our customer loyalty program, e-ticketing,
business class section on almost all flights and airport lounges for business class passengers at most airports. These
facilities and our focus on providing high-quality reliable service have contributed to us becoming the preferred airline
for business travelers in India.
Young fleet comprising limited types of aircraft: Our young fleet has enabled us to enjoy a high degree of performance
reliability and to develop a reputation for being an airline that delivers a safe, on-time, modern and comfortable travel
experience. Our aircraft types provide us with state-of-the-art technology and simplified maintenance procedures that
allows us to make adjustments to effectively manage our response to market developments. 34 of our fleet of 42
aircraft are Boeing 737 variants and the remaining eight are ATR 72-500 aircraft. We were the first airline to introduce
the Boeing 737 NG aircraft in India. Operating a fleet of limited types of aircraft leads to increased cost savings in
terms of maintenance and spare parts, more efficient scheduling and better employee efficiency and productivity.
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Utilizing our aircraft efficiently: In fiscal 2004 and the six months ended September 30, 2004, our aircraft operated an
average of 9.46 and 9.84 hours per day, respectively. By achieving high utilization, we are able to optimize crew
movement, spread our fixed costs over a greater number of flights and available seat kilometers. We achieve high
aircraft utilization because:
• newer aircraft can be scheduled to fly more hours per day as they are more reliable and require less
maintenance than older aircraft; and
• our staff are able to achieve quick, efficient, airport turnarounds which enable us to increase the number of
daily flights per aircraft.
Strong brand and customer loyalty: We believe that we have established a strong brand that helps to distinguish us
from our competitors by identifying us as a safe and reliable airline that is highly focused on customer service and that
provides an enjoyable flying experience. We believe that our focus on every aspect of customer service, such as our
choice of aircraft, aircraft interiors, our care of passengers in-flight and on the ground, our attention to detail, the
convenient connections which we offer and our high reliability, has enhanced brand awareness and our reputation for
quality. We believe that our strong brand has enabled us to establish alliances with other leading brands for our unique
frequent flyer programs, including with international airlines, domestic and international hotels, a car rental company
and for a co-branded credit card.
Some of the key areas of our customer focus are:
• our fleet of modern generation aircraft with custom designed aircraft interiors;
• our friendly and efficient in-flight service, with meals or heavy snacks being served on nearly all flights;
• high on-time performance;
• tele check-in facilities for business class travelers and Jet Privilege members;
• city check-in facilities in Mumbai, Delhi, Kolkata, Chennai and Bangalore;
• same day return check-in facilities;
• our Jet Privilege frequent flyer program; and
• e-ticketing in accordance with IATA standards and on-line reservations.
We also offer through check-in facilities to passengers of 11 leading international airlines to and from our connecting
destinations. We also believe that our five-tier “Jet Privilege” loyalty program is an innovative program among those
offered by other domestic airlines in India.
We believe we are meeting and exceeding our customer service expectations. We have received numerous awards that
recognize the quality of our service, including the Business World award for the most respected company in the travel
and hospitality sector in 2003 and 2004, the Best Domestic Airline of Asia by the Asian readers of Travel Trade
Gazette for the years 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline Category)
for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004.
Motivated workforce and proven management team: We benefit from a highly motivated workforce that brings high
enthusiasm to air travel and a commitment to superior standards of friendly and reliable quality service that we believe
distinguishes us in our markets. We believe that the positive feedback we have received from our customers is directly
a result of the priority our employees place on delivering top quality customer service. We invest a significant amount
of time and resources into carefully developing the best training practices and selecting individuals to join our team
who share our focus on quality and improvement. We conduct ongoing training programs that incorporate industry
best practices and encourage strong and open communication channels among members of our team so that we can
continue to improve the services we provide. We are led by a management team with significant airline industry
experience.
Access to facilities at major airports: The major hub of our operations is Mumbai where 19 of our fleet of 42 aircraft
are parked (of which 18 have been allotted overnight parking bays and one aircraft is parked for a few hours at night),
followed by 12 in Delhi, six at Chennai, three in Kolkata and two at Bangalore. Our access to overnight parking bays
and landing slots at these five hubs helps us to originate flights from these cities. It also enhances our aircraft
utilization and efficiency of our maintenance activities.
Extensive sales and distribution network: We have access to the sales and distribution network of Jetair, which is a
leading GSA in India with offices in approximately 69 locations. Jetair represents, in addition to us, 15 international
airlines in India. In addition, we are represented by general sales agents in 74 countries outside India that sell and/or
distribute our tickets to international in-bound passengers. Our airline reservation system is hosted on SABRE. We
offer 24-hour reservations services at Mumbai, Delhi, Kolkata and Chennai. We also have agreements with major
GDSs, including Abacus, Amadeus, Galileo, Sabre GDS and Worldspan. We have entered into interline agreements
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with major international airlines and marketing cooperation agreements with three international airlines. We have
joined billing settlement plan programs in North America, U.K., France, Germany, Switzerland and other key
countries. We introduced e-ticketing and direct internet booking in July 2004. We intend to encourage the use of
direct internet bookings by our customers because we believe it is an efficient distribution channel.
Business Strategy
The key elements of our business strategy include:
Differentiate our product and service: We believe a key to our long-term success is that we offer customers a better
alternative in airline travel. We offer our passengers a unique flying experience by providing new aircraft, pre-assigned
seating, reliable performance, meals on nearly all flights, city check-in facilities in Mumbai, Delhi, Kolkata, Chennai
and Bangalore, tele check-in facilities for business class travelers and Jet Privilege members, same day return check-in
facilities and a well developed frequent flyer program. We place high emphasis on customer service and quality. We
intend to continue to communicate openly with our customers regarding their needs and areas which require continued
improvement. Based on customer feedback, we believe that passengers prefer our customer service to that of our
competitors and that this preference is an important factor in their decision to fly with us over other airlines.
Continue to maintain a young fleet comprising a minimal number of different aircraft types: We intend to continue
our strategy of maintaining a young fleet and a minimal number of different aircraft types to preserve the simplicity of
our operations and control our operating costs.
Maximize revenues through efficient use of technology, focused marketing and optimization of resources: We intend
to continue to maximize our revenues through efficient use of technology, focused marketing and optimization of
resources. For this purpose, we use a state-of-the-art yield management system developed by SABRE. We also intend
to continue to focus on improving productivity and unit costs through reduction of recurring maintenance costs and
more efficient utilization of our crew.
Further strengthen the brand name under which we operate: We intend to continue to enhance the “Jet Airways”
brand recognition in the marketplace through brand building efforts, communication and promotional initiatives such as
participation in industry events, public relations and investor relations efforts. We believe that these initiatives, as well
as the listing of our Equity Shares, will enhance the visibility of our brand name and strengthen our recognition as a
leader in the Indian aviation industry.
Focus on domestic aviation sector: We intend to further penetrate our key markets in India by increasing the number
of flights per day on our key routes and commencing flights to new destinations in India. We believe that this is
important to passengers who choose airlines based on depth of schedule. We intend to continue our focus on providing
high-quality services and facilities to our customers to consolidate our position as a preferred airline for business
travelers in India.
Operate flights to select international destinations, subject to obtaining necessary Governmental approvals and other
conditions. We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in
March 2004 and May 2004, respectively, pursuant to the Government of India permitting private sector domestic
carriers to fly to certain SAARC countries. The Government of India announced on December 29, 2004 that the Union
Cabinet has approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years
continous operations and at least 20 aircraft to provide services to other international destinations. These destinations
exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air
India and Indian Airlines for three years. However, these policy changes are not yet effective, and detailed guidelines
will need to be notified by the Ministry of Civil Aviation. As and when the changes in policy become effective, the
Government will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the
respective countries to which we desire to fly. The Government will also specify the frequency of flights that we will
be entitled to operate. There is no certainty when these policy changes will become effective and whether or when we
will be permitted to fly to destinations of our choice. We believe that other international destinations may be attractive
primarily due to the significant revenue growth potential and high yields that may be obtained, in light of the increasing
customer demand for flights to and from these destinations and India. We believe that we are well placed to service
these markets due to our reputation for high-quality service and customer awareness of our brand. A significant number
of passengers including persons of Indian origin and non-resident Indians from these destinations use our airline in
India. We believe there has been an increase in the growth of outbound travel by Indian residents and intend to target
this market.
Reduce existing high interest debt: We have significant financing obligations, relating to debt incurred in connection
with financing the purchase of our aircraft and engines as well as operating leases for our aircrafts and engines. We
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believe that reducing significant financing obligations will improve our ability to meet our strategic goals. We intend
to reduce our existing high interest debt, including through utilization of the proceeds of the Fresh Issue.
Continue to focus on personnel training and on motivating our workforce: We intend to continue to focus on
personnel training to improve employee productivity and to ensure that our employees understand our core strategies.
We believe in open communication, which creates a dynamic working environment and in setting out clear well
defined policies and goals. We intend to continue providing competitive wages and incentives to motivate our
workforce.
Aircraft
We currently operate a fleet of 42 aircraft comprising 34 Boeing 737 aircraft and eight ATR 72-500 aircraft. In
addition, two Boeing 737-400 aircraft leased by us have been sub-leased to an airline in Japan. We expect to take
delivery of seven additional Boeing 737-800 aircraft in 2005.
Currently, 33 of our Boeing aircraft are configured with two classes, Economy, or Y class, and Club Premiere, or CP,
and one Boeing 737-800 aircraft is temporarily on a 175 Y configuration. The ATR 72-500 aircraft have a single
Economy class configuration.
We use Boeing aircraft on metropolitan routes where there is high demand. We use ATR aircraft primarily on lower
density regional routes and on certain low-demand flight timings on certain routes where we normally use Boeing 737
aircraft.
The composition of our fleet as of November 30, 2004 is more fully described below:
Aircraft Type
Configuration
Average
Age
(Years) Number
Hire Purchase/
Finance Lease
Hire
Purchase/
Finance Lease
Remaining
(Years)
Operating
Lease
Average
Term of
Operating
Lease
Remaining
(Years)
Boeing 737-400 112 Y and 24 CP 6.95 6 3 4.88 3 2.26
Boeing 737-700 102 Y and 20 CP 4.36 12 8 7.30 4 3.10
Boeing 737-800* 126 Y and 28 CP 4.15 14 11 7.81 3 4.83
Boeing 737-900 138 Y and 32 CP 1.47 2 2 10.50 0 -
ATR 72-500 64 Y 4.26 8 0 - 8 1.71
Total 4.5 42 24 7.50 18 2.63
________
* One existing Boeing 737-800 aircraft is temporarily on a 175 Y configuration.
The Boeing 737-400 aircraft are fitted with CFM56-3C engines, and the Boeing 737-700 and 737-800 aircraft are fitted
with CFM56-7B engines. The ATR72-500 aircraft are fitted with Pratt & Whitney-127 engines. 40 of our 42 aircraft
were new when we inducted them into our fleet. This allowed us to configure the aircraft, choose the seats and
interiors and design the galleys to meet our requirements.
Our simplified fleet structure allows us to maintain cost-efficient operations by reducing maintenance and training
costs, reducing spare parts inventory requirements and supporting high reliability and aircraft utilization. The average
daily utilization rate of our aircraft in fiscal 2002, 2003 and 2004 and for the six month period ended September 30,
2004 was approximately 9.66, 9.41, 9.46 and 9.84 Block hours, respectively.
Our Boeing 737 aircraft have common maintenance routines, require standardized training for our crews and have a
seat configuration that helps balance yield and optimize load factor on our routes.
We have hire purchase agreements for 23 Boeing 737 aircraft and a finance lease agreement for one aircraft. We have
operating leases for our remaining 18 aircraft. We have entered into lease agreements for seven Boeing 737-800
aircraft which we expect to be delivered in 2005 for periods ranging between six and seven years approximately.
In December 2004 we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with
CFM56-7B24 engines. The expected date of delivery of such aircraft is between January 2006 and October 2007.
Definitive purchase agreements will need to be negotiated and entered into on or prior to January 31, 2005, unless
otherwise extended. If the purchase agreements are entered into, then closer to the delivery dates of each aircraft we
will determine the financing arrangements under which these aircraft will be obtained. The entry into such purchase
agreement and financial arrangements in connection therewith is also subject to the Company obtaining board approval
and such necessary regulatory approvals as may be required.
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We have entered into a general terms agreement with CFM International in connection with certain warranties provided
for the CFM engines we use in our Boeing aircraft. In case of aircraft leased by us, we can acquire these warranties
only through an assignment of such warranties from the leasing company.
Under the terms of our hire purchase financing and finance lease arrangements, we are responsible for maintaining,
repairing and insuring the aircraft (including third party liability insurance) and paying various taxes. We have the
option to purchase the aircraft either during the term of hire purchase and finance lease on payment of outstanding
amounts or at the end of the term for a nominal option price.
Under the terms of our existing operating and finance lease agreements for Boeing 737 and ATR 72-500 aircraft, we
are responsible for repair, maintenance and overhaul, and insurance, although our lessors may be responsible for
making certain contributions towards maintenance. The Company is required to return the aircraft in an agreed
condition after expiry of the lease period.
Performance
The following table presents certain information relating to our operations for the fiscal periods indicated:
As of and for the year ended March 31, As of and for the six months
ended September 30,
2000 2001 2002 2003 2004 2003 2004
Period end fleet size
(1)
29 30 38 41 41 39 41
Average fleet size during period 27.5 29.6 34.9 38.9 40.8 40.6 41
ASKMs
(2)
(millions) 6,328 6,818 7,780 8,496 9,162 4,542 4,796
RPKMs
(3)
(millions) 4,093 4,810 4,777 5,291 5,852 2,771 3,245
Passenger Load Factor
(4)
(%) 64.7% 70.5% 61.4% 62.3% 63.9% 61.0% 67.7%
Average revenue per passenger
(5)
(Rs.)
3,385 3,502 3,517 3,506 4,031 4,046 4,145
(1) Fleet size represents aircraft which have a valid certificate of registration and certificate of airworthiness issued by the DGCA
(2) Available Seat Kilometers, defined as the aircraft seating capacity multiplied by the number of kilometers the seats are flown.
(3) Revenue Passenger Kilometers; represents the number of kilometres flown by revenue passengers.
(4) Revenue Passenger Kilometres expressed as a percentage of Available Seat Kilometres.
(5) Net Passenger Revenues divided by number of revenue passengers.
Routes and Schedules
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India, and
operate 1,924 flights weekly.
We use five hubs – Mumbai, Delhi, Chennai, Kolkata and Bangalore. We maintain engineering and maintenance
facilities at each of these hubs. The major hub of our operations is Mumbai followed by Delhi, Chennai, Kolkata and
Bangalore. The use of five hubs helps us originate flights from these cities.
The following table sets forth the cities we currently serve, the number of scheduled flights we operate per week
originating out of those cities and the date we commenced services from each city.
City
Frequency per week
out of each city
Month of introduction
Mumbai 504 May 1993
Delhi 290 May 1993
Bangalore 179 May 1993
Chennai 168 May 1993
Kolkata 108 June 1994
Hyderabad 84 May 1993
Cochin 42 May 1993
Goa 41 May 1993
Ahmedabad 39 May 1993
Guwahati 32 January 1995
Vadodara 29 July 1996
Pune 28 January 1997
Indore 27 December 1996
Udaipur 27 October 1999
Coimbatore 21 May 1993
Mangalore 21 May 1993
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Jaipur 21 July 1996
Bhopal 20 August 2001
Bagdogra 14 January 1995
Jammu 14 August 1996
Madurai 14 December 2001
Aurangabad 14 January 1997
Jodhpur 14 August 2001
Nagpur 14 September 2001
Rajkot 14 April 1998
Srinagar 14 August 1996
Varanasi 14 December 1998
Agartala 11 January 2004
Bhuj 7 April 1998
Bhavnagar 7 December 1999
Calicut 7 May 1993
Colombo 7 March 2004
Khajuraho 7 December 1998
Chandigarh 7 October 1999
Leh 7 June 2001
Port Blair 7 January 1999
Kathmandu 7 May 2004
Lucknow 7 November 1997
Patna 7 August 2004
Trivandrum 7 July 1996
Diu 6 December 1999
Imphal 6 December 1998
Porbandar 6 October 1999
Jorhat
4 September 1996
Total 1,924
We plan our flight timings based on customer convenience and optimal rotation of each aircraft. In this regard, we
offer direct flights between 32 city pairs. We also plan our schedules so that passengers can conveniently connect from
regional flights to major domestic and international routes.
We are required to comply with the Route Dispersal Guidelines, 1994 issued by the Government. For further details
regarding these guidelines, see the “Regulations and Policies” section at page 110 of this Draft Red Herring Prospectus.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively, pursuant to the Government of India permitting private sector domestic carriers to fly to
certain SAARC countries.
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The map below sets forth our current route structure:
43
In-flight Service
We have established a strong reputation for delivering quality in-flight service. We spend time and attention in hiring
our in-flight crew. Recruits go through a rigorous and carefully designed training program encompassing service
procedure, customer care, safety and grooming and are required to satisfactorily complete their training program to
qualify for permanent positions. Cabin crew are also required to go through refresher training courses each year.
We serve meals or heavy snacks on nearly all our flights depending on the length of the flight. We pay considerable
attention to the selection of our menu, which we regularly change. As a part of our continued efforts at product
enhancement, we periodically change the cutlery, crockery and other supplies as well as service procedure on our
flights. We have catering contracts with various catering services, including Oberoi Flight Services and Taj SATS Air
Caterers.
We pay particular attention to the maintenance and upkeep of our cabin interiors. We seek to ensure the immediate
repair or replacement of all fittings and fixtures when required, and we have a program to regularly replace upholstery
and carpeting.
Ground Handling Services
We endeavor to ensure that customer service on the ground, at embarkation and at disembarkation, is of a high
standard. We maintain sufficient counters at all airports and seek to ensure that the waiting time for check-in,
particularly at peak hours, is minimal. We offer special services to our club premier passengers and frequent flyers.
We carefully monitor the quality of ground handling services.
Our check-in system at nearly all airports is automated. We continually upgrade our systems, procedures, equipment
and facilities at all airports.
We have an in-house training program for all our ground staff. We conduct courses for the handling of dangerous
goods and for weight and balance of the aircraft which have been approved by the DGCA.
We provide our own ground handling services at all airports except Cochin airport and the airports at Colombo, Sri
Lanka and Kathmandu, Nepal.
Service Quality
We have developed systems to track various aspects of our services. On time performance and the reasons for delays
are analyzed every day. We receive and analyze over 57,000 service tracker questionnaires every month, where
passengers are asked to evaluate all our services on a four-point scale. We undertake quality audits of in-flight and
ground services by a dedicated services and product quality team. We endeavor to promptly respond to any customer
complaint.
We believe we are meeting and exceeding our customer service expectations. During the six months ended September
30, 2004, based on feedback from our customers:
• We were rated either “good” or “excellent” for overall services by approximately 95% of our passengers who
completed our questionnaires.
• Ratings for in-flight services and efficiency of our stations were 97% and 95%, respectively.
We have received numerous awards that recognize the quality of our service, including the following:
• Citibank Diners Club Blue Moon Award for Service Excellence in 1995.
• H&FS Best Domestic Airline of the year Award for Excellence in Hospitality for the years 1996, 1998, 1999
and 2001.
• Air Transport World Market Development Award for the year 2000.
• Financial Express Business Traveler Award (Domestic Airline Category) for Business Class, Economy Class
and Best Service (Airport and In flight) in 2003 and 2004.
• Best Domestic Airline of Asia by the Asian readers of Travel Trade Gazette for the years 2003 and 2004.
• The Businessworld award for the most respected company in the travel and hospitality sector in 2003 and
2004.
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We were also ranked by the Businessworld magazine publication in 2004 as one of the ten most respected companies in
India.
As part of our continued emphasis on the quality of our service, in August 2004 we launched a new program called
“Seamless Customer Care”, which involves the participation of employees at the 42 domestic airports we connect. The
objective of this program is to focus on customer care and enhance the overall passenger experience by seeking input
from our employees at the airports we connect. A committee of the heads of each operational department chaired by
our Chief Operating Officer oversees this program.
Marketing, Sales and Distribution
Our primary marketing strategy is to attract new customers and retain existing customers by widely communicating our
high-quality value proposition. We market our services through advertising and promotions in newspapers, magazines,
outdoor advertising such as bill boards, radio, and through targeted public relations and promotional efforts. We
believe that our brand is widely recognized in India as representing high value service. Our brand has been selected as
a “superbrand” by the Indian Superbrands Council in August 2003.
We estimate that in fiscal 2004 and the six months ended September 30, 2004 approximately 80% of our passengers
were business travelers. The remaining passengers were largely leisure travelers and travelers visiting friends and
relatives. We believe we have a leading loyalty program among those offered by domestic airlines in India. Our five-
tier frequent flyer program had 413,970 members as of November 30, 2004. We have a dedicated service centre in
Mumbai which manages this program and communicates with members. Members can also accumulate miles by using
the services of our partners such as airlines, domestic and international hotels and our co-branded credit card and car
rental companies. The miles earned and accumulated by our customers under this program can be redeemed for
upgrades and free tickets.
Our GSA for India is Jetair. Jetair was promoted by Mr. Naresh Goyal in 1974 and is a promoter group company. Jetair
has offices in approximately 69 locations and represent 15 international airlines in India. Our GSA agreement with
Jetair is valid for a period of four years commencing April 1, 2004. Such agreement with Jetair requires Government
approval under the Companies Act and we currently have received approval for such agreement for a period of three
years commencing April 1, 2004. We pay Jetair an overriding commission of 3% on all passenger sales and 2.5% on
all cargo sales. This commission is over and above sales commissions payable to sales and travel agents of 5% on
Rupee fares and cargo and 7% on foreign exchange fares. Our agreement with Jetair also provides for charge back of
certain expenses, including remuneration of certain employees (sales, reservation and service staff) who are rendering
services which should be rendered by Jetair as our GSA,, CRS costs (up to a maximum of 25% of such CRS costs) and
SITA communication charges, in amounts as determined by us. In fiscal 2004 and the six months ended September 30,
2004, commissions to Jetair constituted 2.5% and 3.1%, respectively, of our Total Expenses for such periods.
We are considering joining the Billing Settlement Plan system, or BSP system, an IATA sponsored standardized
ticketing and collection system. Under the BSP, neutral standard traffic documentation common to all airlines on the
BSP system is issued and there is centralized reporting, billing and analysis of sales for our domestic operations. We
will not incur any credit risk for default in payment by a travel agent that is accredited by IATA. If we migrate sales to
the BSP, we expect that our GSA agreement with Jetair may require modifications, which will require Government
approval under the Companies Act.
Our GSA agreements include agreements with the following overseas promoter group companies: Jet Airways LLC,
Dubai, UAE and its two subsidiaries Jet Airways of India Inc., USA (for USA and Canada) and India Jet Airways (Pty)
Ltd., South Africa (for South Africa). In fiscal 2004 and the six months ended September 30, 2004, commissions to
such GSAs constituted 0.5% and 0.4%, of our Total Expenses for such periods.
We currently have GSA representation in 74 countries to promote the sale and distribution of our tickets to
international in-bound passengers.
Our airline reservation system is hosted on SABRE. We offer 24-hour reservations services at Mumbai, Delhi, Kolkata
and Chennai. We also have agreements with major global distribution systems, or GDSs, including Abacus, Amadeus,
Galileo, Sabre GDS and Worldspan. These agreements require us to pay a fixed commission per booking made. The
average cost per reservation in fiscal 2004 was US$2.80 (Rs.129.08).
We introduced e-ticketing and direct internet booking in April 2004. We intend to encourage the use of direct bookings
by our customers because it is an efficient distribution channel. No sales commission is payable on direct e-ticketing
and therefore increased use of direct e-ticketing will reduce distribution costs. We pay an overriding commission of
3% to Jetair for all internet passenger bookings and 2.5% on all internet cargo bookings.
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We are already a part of BSP systems in North America, UK, France, Germany, Switzerland and other key locations.
Pricing and Revenue Management
We offer several fare options as set forth below:
• Economy and club premier fares;
• Discounted fares for senior citizens and defense personnel;
• Advance Passenger Excursion, or APEX fares;
• “One Fare” scheme that allows passengers to buy four or six coupons for a fixed fare and use them on any
sector;
• “Night saver” fares for night flights which we operate on certain routes;
• “Check fares” on certain flights with no requirement for advance booking; and
• U.S. Dollar fares and “Visit India” fares for overseas travelers.
Our APEX fares are subject to certain advance purchase and cancellation conditions.
Yield management and pricing form the backbone of our revenue generation strategy and are also strongly linked to our
route and schedule planning and our sales and distribution activities. Yield management involves the use of historical
data and statistical forecasting models to produce knowledge about our markets and maximize our operating revenues.
Our yield management practices enable us to respond to changes in the market and also to anticipate such market
changes.
The number of seats we offer at each fare level in each market results from a continual process of analysis and
forecasting. Past booking history, seasonality, the effects of competition and current booking trends are used to
forecast demand. Current fares and knowledge of upcoming events at destinations that will affect traffic volumes are
included in our forecasting model to arrive at optimal seat allocations for our fares on specific routes. We use a
combination of approaches, taking into account yields and flight load factors, depending on the characteristics of the
markets served, to arrive at a strategy for achieving the best possible revenue per available seat kilometer, balancing the
average fare charged against the corresponding effect on our load factors. For this purpose, we use a state-of-the-art
yield management system developed by SABRE.
Engineering and Maintenance
Our maintenance procedures are regulated by the DGCA. Regulations framed by the DGCA are based on ICAO
requirements. Our maintenance programs are based on manufacturers’ maintenance planning documents, or MPDs, that
are approved and certified by the DGCA.
The maintenance performed on our aircraft can be divided into three general categories: line maintenance, “C” or phase
10 checks (“C Checks”) and heavy maintenance or “D” checks (“D Checks”). Line maintenance consists of routine,
scheduled maintenance checks on our aircraft, including pre-flight, daily and overnight checks and any diagnostic and
routine repairs. For instance, C Checks for our Boeing aircraft are carried out after a maximum of 4,800 flight hours.
These checks take an average of eight days for our Boeing 737 aircraft, and may result in the loss of service of such
aircraft for a period of up to 10 days. Heavy maintenance or D Checks consist of more complex inspections and
servicing of aircraft that require a longer maintenance period. Heavy maintenance checks are performed following a
pre-scheduled agenda of major overhauls defined in an aircraft’s manual, which is based on the number of flights flown
by the aircraft or the age of the aircraft. A typical D Check would result in the loss of service of a Boeing 737 aircraft
for approximately 45 days.
Typically, all our line maintenance and C Checks are performed by our own experienced technicians. We have our
own maintenance hangar facility in New Delhi. In addition, we have leased a maintenance facility at Bangalore from
Hindustan Aeronautics Limited (“HAL”), for C Checks on our Boeing aircraft. We also utilize the workshops and
hangar facilities of Air India at Mumbai on an “as-needed” basis. D Checks of Boeing aircraft are presently carried out
at facilities approved by the U.S. Federal Aviation Administration (“FAA”), and the DGCA.
We have not as yet been required to conduct a D Check on our existing fleet. However, in fiscal 2006 and 2007, nine
and eight Boeing aircraft, respectively, are scheduled to undergo D Checks, resulting in approximately one aircraft
being unavailable for the entire duration of such fiscal years.
We are in the process of establishing a maintenance hangar complex with workshop and allied facilities at Mumbai that
is scheduled to be completed by March 31, 2005. The hangar is being constructed on land leased from the AAI and
will provide maintenance and overhaul facilities at Mumbai airport, which is the main base of our operations. The
46
estimated cost of construction of the maintenance hangar and related workshops and engineering training facilities is
U.S.$15 million (Rs.690 million). The hangar will be used for C checks, line checks, storage and minor rectification of
engines and workshops for composite structural repair and, in due course, D Checks. We expect that the construction
of the hangar will reduce our maintenance costs and improve our operational efficiency.
We have also entered into various contracts in connection with maintenance support for our Boeing 737 fleet, including
the following:
• “Power by the hour” (“PBTH”) contract with Lufthansa Technik for the repair and maintenance of spares for our
Boeing fleet.
• PBTH contract with Israel Aircraft Industries Limited- Bedek Aviation Group, Israel, for the maintenance of
auxiliary power units (“APUs”) in our Boeing 737-400 Classic aircraft.
• Contract with Honeywell International Inc., USA, for the repair and overhaul of the APUs in our Boeing 737 NG
aircraft.
• PBTH contract and technical services contract with MTU Maintenance Hanover GmbH, Germany, for
engineering services and engine condition monitoring services in connection with our CFM 56-7 engines in our
Boeing 737 NG aircraft.
We have a global maintenance agreement and an equipment lease agreement with ATR, the manufacturer of the ATR
aircraft, to provide technical support for our ATR 72-500 aircraft.
Our technical personnel have the capability and required approvals and licenses from the DGCA to carry out C Checks.
All technical personnel are trained by our in-house training programs (type courses and refresher courses) and also by
programs offered by aircraft and engine manufacturers. These programs have been approved by the DGCA.
We have a quality control division that oversees the compliance of all airworthiness requirements and coordinates with
the DGCA for various engineering activities. Our engineering technical services division implements modifications,
determines the work scope of repairs and maintenance and plans shop visits for engines and APUs. This division is
also responsible for the engine trend monitoring program. We have a reliability section that monitors components and
analyses defects of systems and components. We also have an engineering planning division to forecast long and short-
term maintenance activities. The division is also engaged in optimization of resources and the minimization of aircraft
on ground for maintenance.
Our technical dispatch reliability, which is the percentage of flights not being delayed for more than 15 minutes for
technical reasons, for the period January 1, 2004 through November 30, 2004, was over 99%.
Flight Operations
Procedures and policies regarding our flight operations are regulated by DGCA and are based on ICAO requirements.
We have over 400 experienced pilots. We have a ground training school at Mumbai for flying crew. This training
school is approved by the DGCA. We have a full flight simulator for a Boeing NG aircraft and a B737-Classic flight
training device. This equipment has also been approved by the DGCA. We can therefore meet all training
requirements to enable pilots to obtain endorsements to fly Boeing 737 NG aircraft.
Our pilots that are qualified to fly ATR 72-500 aircraft are sent to the manufacturers’ training centers at Toulouse or
Bangkok for both initial and refresher training.
We have an operations control centre, or OCC, that is responsible for flight operations from various airports in India.
This department comprises dispatchers and flight controllers. A dispatcher ensures that each flight complies with
applicable rules and regulations (such as, for example, load restrictions). A flight controller is responsible for the
departure, deployment and relocation of aircraft.
47
Air Safety
We are dedicated to ensuring the safety of our passengers and employees. We have taken numerous measures,
voluntarily and as required by regulatory authorities, to increase the safety of our operations. Our air safety department
is staffed by experienced pilots and other aviation professionals. As required by the DGCA, this department reports to
our Chief Executive Officer.
We comply with safety standards of the DGCA. We also maintain our aircraft in accordance with manufacturers’
specifications and all applicable safety regulations, and perform routine line maintenance every day. Our pilots have
extensive experience, with flight captains having an average of more than 4,000 hours of career flight time. We also
conduct ongoing courses, addressing the latest developments in safety issues.
We download and analyze the entire data from the digital flight data records of each aircraft. The results are discussed
with our flight operations department.
In addition to in-house audits, safety audits are carried out periodically by the DGCA, the Boeing Company and ATR.
Security
We pay particular attention to the security of our passengers and our aircraft.
We comply with the regulations and instructions issued by the (Indian) Bureau of Civil Aviation Security (the
“BCAS”), which is the regulatory authority responsible for airline security in India. These regulations and instructions
are in accordance with the standards and recommended practices specified by the ICAO.
We have developed an in-house training facility for security training. The training is structured on a self-enabling,
interactive computer based program with the ability to simulate live situations in the classroom. Our training program
has been recognized by BCAS.
We provide extensive training to ensure that our staff have appropriate skills to carry out responsibilities as specified in
our security training manuals. All crew and ground handling staff are required to undergo security awareness and
dangerous goods training to identify potentially dangerous goods and items that threaten the safety of the flight,
including inflammable liquids and containers that may explode under pressure.
We ensure compliance with international standard security measures, including the following:
• Installation of reinforced doors and review of policies and procedures on cockpit visits and occupying of jump
seats;
• Review of items allowed as cabin baggage;
• X-ray screening of registered baggage, cargo, courier, postal mail;
• Passenger/baggage reconciliation entailing removal of checked-in luggage from the aircraft when passenger
fails to board the aircraft;
• Appropriate security controls on catering services;
Cargo Services
While we are primarily a passenger airline, we also carry cargo on our Boeing flights. We generated approximately
4.9% of our Operating Revenues from the carriage of cargo in fiscal 2004.
We carry all types of cargo except cargo classified as dangerous goods by IATA. We have cargo warehouses for the
receipt and delivery of goods at all major stations. These are operated by our GSA, Jetair. For the carriage of bonded
international cargo on domestic routes, we have set up bonded warehouses at major locations in the country. We have
also entered into 39 cargo interline agreements with international airlines.
Our carriage of cargo has increased by 32.6% over the last three fiscal years, from 65,385 tons in fiscal 2002 to 86,749
tons in fiscal 2004.
We intend to introduce the automation of our cargo operations throughout our network by December 2005. We also
intend to maximize our revenues from carriage of cargo by focusing on high yield cargo.
48
Fuel
Costs of Aviation Turbine Fuel, or ATF, are a significant portion of our operating expenses. Significant increases in
fuel costs would have a material adverse effect on our operating results. The following chart summarizes our fuel
consumption and costs:
Year ended March 31 Six months ended September 30
2002 2003 2004 2003 2004
Liters consumed 311,630,964 336,697,650 363,936,616 180,668,509 192,299,410
Total cost (in Rupees, thousands) 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Average cost per liter (in Rupees) 16.98 19.32 20.38 19.67 24.51
Percentage of Total Expenses 19.9% 20.4% 21.9% 21.0% 26.1%
We are required to purchase ATF from three Government-controlled companies – IOC, BPCL and HPCL as they are
the only companies which have been permitted to have such facilities within airports. For the supply of ATF in India,
we have entered into contracts with these three companies. The price charged by these companies is uniform and is
revised every month based on the international price of crude oil. The components of the cost of ATF include central
excise duty (currently 8%) and applicable education cess, and sales tax that is levied by each state in India. Sales tax
on ATF is levied at all stations we currently service in India (except for Diu, Leh and Port Blair) and is currently
between 4% and 30.55%, with a weighted average of approximately 22.1% for the six month period ended September
30, 2004.
With regard to our operations in Kathmandu, Nepal and Colombo, Sri Lanka, we have entered into fuel supply
agreements with Nepal Oil Corporation Limited, a state run company, and AIR BP Limited, a UK company,
respectively.
Fuel prices have increased significantly in recent periods. Although we have been successful in increasing the price of
our fares, we experience significant price pressure as a result of increased competition in India. We cannot assure you
that we can continue to increase our fares in response to increases in fuel price.
Competition
We compete for our revenue passengers primarily on the basis of routes, fare levels, frequency of flights, reliability of
services, brand recognition, passenger amenities, such as frequent flyer programs, and customer service. We believe
our motivated workforce and proven management team, our focus on business travel, our young fleet comprising of
limited types of aircraft, our efficient aircraft utilization and our strong brand enable us to compete favorably in many
of these areas. We compete in the cargo services primarily on price and service capabilities.
Our market position will depend upon effective marketing initiatives and our ability to anticipate and respond to
various competitive factors affecting the industry, including pricing strategies by competitors. Any failure by us to
compete effectively, including in terms of pricing or providing innovative and high-quality services, could have a
material adverse effect on our results of operations.
Our principal competitors are currently Indian Airlines, including its subsidiary Alliance Air, and Air Sahara. Both
airlines are full-service carriers offering flights on domestic routes and certain international routes. Other competitors
include Air India, which carries domestic passengers on the domestic legs of its international flights and Air Deccan, a
“no frills” airline that commenced operations in August 2003. Certain of our competitors, including Government-
owned companies, may have significantly greater resources than those available to us.
According to published reports, additional new private carriers are contemplating entering the domestic aviation
market.
The airline industry is very competitive and we expect competition to continue in the future. We expect our
maintenance costs to increase as our fleet ages, and we may incur increased labor costs in the future.
The following table sets forth the historical market shares on domestic routes (in terms of passengers divided by seats),
based on revenue passenger kilometers, of the significant airlines in India for each of the periods indicated:
Year ended March 31
Market Share – Domestic 2002 2003
Jet Airways 45.3% 45.9%
Indian Airlines (including Alliance Air) 44.3% 39.6%
49
Air Sahara 4.8% 9.3%
Others
(1)
5.6% 5.2%
_________
(1) Consists of Air India and other air taxi operators, and since September 2003, also includes Air Deccan.
Source: DGCA
Our market share in fiscal 2004 and in the six months ended September 30, 2004, was 45.3% and 42.3%, respectively.
The Indian Railways is the largest transporter in India and in fiscal 2004, carried approximately 52 million premium
passengers, consisting of passengers traveling first class and air conditioned second class. We believe that the
discounted fares offered by us and other airlines will attract rail travelers to use air transportation services on certain
routes.
If we increase our international operations, the number of our competitors will increase and we will face competition
from airlines that are already established in these international markets and that participate in strategic alliances and
code sharing arrangements. These competitors may have longer operating histories, bigger fleets with experienced
pilots, crew and engineers and significantly greater resources than those available to us and may provide significant
competition to us.
People
We believe that our growth potential and the achievement of our strategy is directly linked to our ability to attract and
maintain the best professionals available in the airline business. We place great emphasis on the selection and training
of enthusiastic employees with the potential to add value to our business and who we believe fit in and contribute to our
business culture.
Employees in various departments and categories are as set out below:
As of March 31, As of September 30,
2003
2004
2004
Pilots 402 411 424
Cabin Attendants 735 769 980
Engineers 1,132 1,140 1,187
Customer service agents 1,974 1,866 1,902
Security 721 665 679
Marketing, sales and reservations 687 1,008 1,038
Others 891 844 849
Total 6,542 6,703 7,059
Less: Jetair Services
(1)
(1,075) (1,396) (1,464)
Total Available 5,467 5,307 5,595
______________
(1) These comprise employees whose salaries and related costs are charged back to Jetair under the terms of our GSA agreement with Jetair.
We provide extensive training for our pilots, AMEs and technicians, flight attendants and customer service
representatives. In addition to technical training, we offer in-house training in communication skills. We have an in-
house program to identify talented employees and train them to take positions of responsibility on a fast track.
Attrition rates (based on the average number of personnel at the beginning of such period and at the end of such period)
for our employees in fiscal 2002, 2003 and 2004 was 8.9%, 13.2% and 14.1% respectively and 11.0% (on an
annualized basis) in the six months ended September 30, 2004. In-flight crew attrition rates for such periods were
15.4%, 18.3%, 26.9% and 21.2% (on an annualized basis), respectively. In addition, attrition rates for airport services
staff for such periods were 10.6%, 18.3%, 15.9% and 13.6% (on an annualized basis), respectively. We continuously
recruit and train young candidates and train them in anticipation of such attrition. We also promote meritorious crew to
supervisory positions, positions in base management and as trainers in order to retain talent. In fiscal 2005 we have
implemented salary and wage revisions throughout the organization. We believe that this may reduce our attrition rates.
Employees are entitled to free or subsidized air transportation which is subject to space availability. The number of
such free tickets depends on the years of service with the Company.
We intend to reward our employees for their contributions to us and create employee ownership in us. by granting
Equity Shares in which eligible employees and directors of the Company and any other person permitted under
applicable law or regulation can participate, subject to such approvals as may be necessary. The criterion for selection
will be determined by our Board and approved by our shareholders. The ESPS or ESOP will comply with the SEBI
(Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares
50
pursuant thereto will be subject to compliance with all applicable laws and regulations. We propose to issue a
maximum of 0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur in fiscal 2006,
although there can be no assurance as to the timing of adoption of any such scheme, which may occur in fiscal 2006 or
thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss account equal to the
product of such number of Equity Shares issued and the difference between the applicable market price of our Equity
Shares and the price at which our employees and directors will purchase the Equity Shares. We have not as yet
determined the issue price at which Equity Shares will be sold, the number of Equity Shares proposed to be issued, the
identity of such eligible personsnd the timing of adoption of the ESPS scheme or the date of issue of Equity Shares
thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of the number of
Equity Shares proposed to be issued in accordance with the accounting principles used for determining such charge
using the fair value method or applicable market price of our Equity Shares. Such charge will be amortized over the
vesting period of the stock option. We have not as yet determined the number of stock options to be granted, the
exercise price or the number of Equity Shares to be issued, the identity of the eligible persons and the timing of the
ESOP scheme.
Approximately 11% of our workforce as of September 30, 2004 was unionized, consisting of certain categories of our
employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of settlements with the respective unions
at Mumbai, Delhi and Kolkata, which are valid from periods between 2005 and 2008. For certain of our non-unionized
staff such as pilots, cabin attendants and engineers, we have in consultation with such staff agreed to certain annual
compensation levels until 2007. These contemplate annual increases in fiscal years 2006 and 2007. Industrial action or
work stoppages by our employees could be disruptive to our operations and could harm our business and results of
operations. We have not experienced any material disruptions in our business and operations as a result of any work
stoppage, strike or employee unrest.
Insurance
We maintain passenger liability insurance in an amount consistent with airline industry practice and we insure our
aircraft against losses and damages on an “all risks” basis. We have obtained all insurance coverage required by the
terms of our aircraft lease and hire purchase agreements. We believe our insurance coverage is consistent with airline
industry standards and appropriate to protect us from material loss in light of the activities we conduct. No assurance
can be given, however, that the amount of insurance we carry will fully cover all material loss. See Risk Factors titled
“Insurance cover is unavailable for certain risks or may be inadequate” and “Insurance costs for airlines increased
substantially as a result of the September 11, 2001 terrorist attacks in the United States, and further increases would
harm our business” at page xxiii of this Draft Red Herring Prospectus.
Intellectual Property
There is significant goodwill in the “Jet Airways” name and trademark, which is a registered trademark in India. The
use of the “Jet Airways” trademark (together with certain variations thereof) has been licensed to us for use in India on
an exclusive, non-assignable basis by Jet Enterprises (a company substantially owned by Mr. Naresh Goyal) pursuant
to the Registered User Agreement with Jet Enterprises. Certain other variations of the “Jet Airways” trademark and
certain other related trademarks (for which Jet Enterprises has applied, or proposes to apply for, registration) have also
been licensed to us by Jet Enterprises on an exclusive, non-assignable basis for use in India pursuant to the Common
Law Agreement with Jet Enterprises.
Under the Registered User Agreement, we are required to pay Jet Enterprises license fees on a quarterly basis
calculated in the following manner:
• 0.20% of our revenue up to Rs.11,500 million;
• 0.15% of our revenue in excess of Rs.11,500 million up to Rs.23,000 million; and
• 0.10% of our revenue in excess of Rs.23,000 million.
For purposes of calculation of this license fee, revenues include passenger revenues, cargo revenues and other operating
revenues but exclude interest income and PSF handling fees. Under the Common Law Agreement, we are required to
pay a fixed annual license fee of Rs.0.1 million for each trademark licensed under the Common Law Agreement. The
Registered User Agreement and the Common Law Agreement are valid for a period of fifteen years, commencing
October 2000, and are renewable at the option of Jet Enterprises for a further period of ten years.
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Jet Enterprises has taken steps to register the “Jet Airways” mark and related trademarks outside India. The “Jet
Airways” trademark is currently registered in Hong Kong, Singapore, U.A.E., the U.K. and Mauritius and Jet
Enterprises is seeking to register this trademark in certain other jurisdictions outside India. Certain parties have raised
objections to the registration of the “Jet Airways” trademark in the U.K. and in the United States. For further
particulars, see litigation of promoter group companies beginning on page 128 of this Draft Red Herring Prospectus.
We intend to enter into additional trademark license agreements with Jet Enterprises for the use of the trademark in Sri
Lanka, Nepal and other countries. Pursuant to a letter dated December 15, 2004, Jet Enterprises has confirmed to us
that as long as we are not in default under any registered user agreements or common law agreements pursuant to
which Jet Enterprises has licensed trademarks to us, Jet Enterprises will license the use of the “Jet Airways” and related
trademarks to us for use in the other countries where Jet Enterprises has registered or applied for registration of the “Jet
Airways” trademark and where we seek to operate in the future. License fees will be payable to Jet Enterprises for the
use of these trademarks under such other license agreements that may be entered into by us with Jet Enterprises. We
cannot, however, provide any assurance that such licenses will be granted by Jet Enterprises to us or that the terms of
such licenses, including license fees payable under such agreements, will be favorable to us.
If the “Jet Airways” trademark and related trademarks become unavailable to us or we are required to pay a higher
license fee for use of these trademarks, our business, financial condition and results of operations could be materially
and adversely affected.
In addition, Article 3 of our Articles of Association specifies that Jet Enterprises has, pursuant to certain trademark
license agreements, granted the Company an exclusive, non-assignable license to use certain trademarks, including the
“Jet Airways” trademark, in accordance with the terms of such license agreements. Our Articles of Association further
contemplate that upon expiry or termination of such license agreements, we will discontinue the use of the name “Jet
Airways” and related trademarks, service marks, copyrights, domain names and designs, including any variations
thereof. In such event, we are also required to change our corporate name and assign all rights relating to the name “Jet
Airways” and related intellectual property rights to Jet Enterprises. Under our Articles, our shareholders are also
required, subject to applicable law, to exercise their voting rights to ensure that we comply with such terms.
We have also assigned to Jet Enterprises the copyright in the artistic work relating to the “Jet Airways” mark and
variations thereto.
Property
We have taken various premises in India on rent, lease or leave and licence basis that can be classified as:
• airport premises;
• commercial premises; and
• employee residential premises.
Airport Premises
We have leased premises and work spaces from the Airports Authority of India, or AAI, in 41 of the 42 airports where
we operate, except at the Cochin airport. These premises and work spaces include:
• check-in counters;
• ticketing counters;
• back-up offices; and
• areas on the ramp for equipment storage and related purposes.
In stations where we have more frequent operations, we also lease space for engineering and cargo operations. The
extent of space that we lease at each airport is determined by the current size and expected growth of our operations and
the extent of space that the airport can offer.
We have also leased a hangar at the New Delhi airport. We have leased land from AAI at the Mumbai airport where we
are constructing our own hangar complex.
The lease rentals payable are specified by AAI and vary according to the usage, the location of the airport and
amenities available at such premises. We are responsible for the renovation, furnishing and maintenance of such
premises, and for the payment of utilities. Agreements with AAI for such premises are typically for a period of one
year and, in certain cases, for three years. The agreement for the hangar at the New Delhi airport is for three years and
52
that for the land at the Mumbai airport is for 10 years. These agreements are typically renewed at the expiry of such
lease periods.
At Bangalore airport, charges for the use of open spaces on the ramp are paid to Hindustan Aeronautics Limited. The
Cochin airport is operated by Cochin International Airport Limited, or CIAL, and we have leased certain premises at
the Cochin airport from CIAL for back office operations and for ticketing offices.
Commercial Premises
Our registered offices and major departments are located at SM Centre, Andheri (East), Mumbai. Certain of our
departments are located near to our corporate offices. These premises have been taken by us on leave and licence basis
and such agreements are valid for periods ranging between three and five years. We have offices for sales and ticketing
in all cities in India where we operate except Madurai, Patna and Agartala. We also have regional management located
in our offices at New Delhi, Kolkata, Hyderabad, Bangalore and Chennai. All such premises are taken on rent, lease or
leave and licence basis for terms ranging between three and five years.
We have also taken premises on leave and licence basis in Mumbai that house our simulator and our pilot training and
safety training schools. Our central stores, where we store items required by in-flight, catering and airport services, are
located in Mumbai. We have leased a store in Delhi, to service the northern region.
We have cargo warehouses in Mumbai, Chennai, Bangalore, Coimbatore, Imphal, Indore, Pune, Rajkot, Agartala and
Guwahati where our customers can deposit and collect cargo. The warehouses are located in the vicinity of the
respective airports and are operated by Jetair Private Limited, our GSA in India. All these premises are either on lease
or leave and licence agreements.
Employee Residential Premises
We provide accommodation for certain of our personnel, and have taken on leave and licence or lease 48 residential
premises, most of which are located in Mumbai. The agreements for these residential premises vary between 22 and 33
months.
As at November 30, 2004, we paid aggregate monthly rentals of Rs. 23.75 million for all our premises.
International Operations
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively, pursuant to the Government of India permitting private sector domestic carriers to fly to
certain SAARC countries. The Government of India announced on December 29, 2004 that the Union Cabinet has
approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years continous
operations and at least 20 aircraft to provide services to other international destinations. These destinations exclude the
Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and
Indian Airlines for three years. However, these policy changes are not yet effective, and detailed guidelines will need
to be notified by the Ministry of Civil Aviation. As and when the changes in policy become effective, the Government
will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the respective
countries to which we desire to fly. The Government will also specify the frequency of flights that we will be entitled
to operate. There is no certainty when these policy changes will become effective and whether or when we will be
permitted to fly to destinations of our choice.
In anticipation of such changes to the Government policy, we are in the process of evaluating the feasibility of
commencing operations of regular scheduled services to a select number of international destinations, subject to
approvals required from the Government of India. Our ability to operate a regular scheduled service to any international
destination would be subject to other factors, such as our ability to obtain satisfactory flight slots from local airport
authorities or other carriers and, for long-haul destinations, our ability to procure new aircraft, pilots, flight staff and
engineers that are required to operate such flights.
We are evaluating destinations which can be serviced by aircraft types already in our fleet. Boeing 737 NG aircraft can
service destinations with a maximum flight duration of 5½ hours at full load. We believe we will achieve economies of
scale by using aircraft types already in our fleet with regard to engineering and maintenance costs and the utilization
and training of pilots and of AMEs. For longer haul destinations, we will be required to induct wide-bodied aircraft
with longer range. In such an event, we will be required to train our cockpit and inflight crew and our engineering staff
and obtain certificates from the DGCA. We will also be required to keep spares, rotables and spare engines with regard
to such aircraft.
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Our strategy will also be determined by:
• our estimate of demand;
• the profitability of each route;
• our ability to leverage our brand, our network, service standards and our relationships with other international
airlines;
• maintaining our operating efficiencies and our existing cost structure; and
• optimizing our existing human resources.
We believe that service to other select international destinations may be attractive primarily due to the significant
revenue growth potential and high yields that may be obtained, in view of increasing customer demand for flights
between India and other destinations. Our preliminary market studies and economic and technical analysis of the
alternative operating routes and suitable aircraft types indicate that several foreign destinations with high traffic
volumes to and from India would provide attractive opportunities for us. We believe that we are well placed to service
these markets due to our reputation for high-quality service and customer awareness of our brand in India and overseas.
We believe that our existing worldwide GSA representations, agreements with GDSs and our global marketing
initiatives will support such international operations. We believe that there is a significant demand from international
passengers who use our airline, particularly from persons of Indian origin, NRIs and business travelers who visit and
travel within India. There is also potential demand from resident Indians who travel overseas and who are familiar with
our airline.
We have made a preliminary assessment of the expenditures that we may incur for creating the required operational
capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases, acquisition of slot
positions at foreign airports, hiring of additional and suitably qualified personnel for the new aircraft types, handling
and catering agreements, acquisition of equipment, etc. before we can commence operations on such routes, if
permitted by the Government of India. Based on our preliminary assessment, we anticipate an outlay of Rs.3,000
million for such purposes.
If and when we receive Governmental permission to commence service to any of these new destinations, we plan to
proceed with commencement of service only if we believe that such service would be likely to benefit our business,
taking into account, among other things, the financial benefits of the permitted routes that could be flown and any new
aircraft type that may need to be operated, the potential risks and operating difficulties of any such new aircraft type,
and our ability to obtain debt or lease financing that may be needed to acquire new aircraft to service such destinations.
See “Risk Factors – If we commence services to additional international destinations, we will face different risks than
those associated with our domestic operations” on page xiii of this Draft Red Herring Prospectus.
Litigation
In the ordinary course of our business we are party to various legal actions that we believe are incidental to the
operation of our business. Except as disclosed in this Draft Red Herring Prospectus, as of the date hereof, we are not a
party to any proceeding that, if finally determined against us, would result in a material adverse effect on our business
and operating results. See also “Risk Factors – There are a number of legal proceedings against us, our directors, our
promoters and promoter group companies.” and the section “Outstanding Litigation” beginning at page 116 of this
Draft Red Herring Prospectus for a summary of litigation to which we are a party.
54
HISTORY AND CERTAIN CORPORATE MATTERS
Our History
Jet Airways was incorporated on April 1, 1992 as a private company with limited liability under the Companies Act.
We commenced operations as an Air Taxi Operator on May 5, 1993 with a fleet of four leased Boeing 737 aircraft. We
were granted scheduled airline status on January 14, 1995. Jet Airways became a deemed public company on July 1,
1996. On January 19, 2001, Jet Airways was reconverted into a private company. Jet Airways became a public
company on December 28, 2004.
At the time of incorporation of the Company, our shareholders were Mr. P.V.V. Chalam and Mrs. Anita Goyal. These
shares were transferred to Tail Winds on May 12, 1994, and Mr. Naresh Goyal holds them on behalf of Tail Winds in
terms of an RBI approval letter No. EC.BY.CO (S) 250/2251/TS/93/94 dated December 30, 1993.
Pursuant to an application dated March 12, 1993 made by our Company, the FIPB by its letter No. 267/FC/93/NRI
dated June 28, 1993 granted its approval to the foreign collaboration proposal for investment in Tail Winds in the
proportion of 60% by Mr. Naresh Goyal, 20% by Gulf Air and 20% by Kuwait Airways. Tail Winds in turn held 100%
of the Equity Share capital of our Company.
The MoCA by its letter dated April 17, 1997 directed the Company to take steps for disinvestment of Equity Shares
held, directly or indirectly, by foreign airlines pursuant to the Government of India’s policy on foreign equity and
NRI/OCB equity participation in the domestic air transport services sector. Consequently, with effect from October 15,
1997, Mr. Naresh Goyal acquired the 20% Equity Shares from each of Gulf Air and Kuwait Airways, respectively, and
became the 100% owner of Tail Winds which is an NRI/OCB and currently owns over 99.99% of our Equity Share
capital.
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India,
operating 1,924 flights weekly. Our aircraft fleet has grown from four aircraft in 1993 to currently 42 aircraft
comprising 34 Boeing 737 aircraft and eight ATR 72-500 aircraft.
Main Objects of the Company
Our main objects as contained in our Memorandum of Association are:
• To establish, maintain, operate and provide safe, efficient, adequate, economical and properly coordinated air
transport services and lines of aerial conveyance (including scheduled and chartered domestic and
international services) for the carriage of passengers, baggage, mail and freight.
• To purchase, take on lease and/or hire or otherwise acquire, own, employ, maintain, work, manage, control, let
on hire, charter, lease, demise all forms of aerial conveyance for the purpose of transporting or carrying
passengers, baggage, mail and freight, and merchandise of all and every kind and description, whether as
principals, agents or otherwise on national and international routes.
The main objects clause and the objects incidental or ancillary to the main objects of the Memorandum of Association
of our Company enable us to undertake our existing activities and the activities for which the funds are being raised
through this Offer.
Changes in Memorandum of Association
Since our incorporation, the following changes have been made to our Memorandum of Association:
Date of shareholder
approval Changes
January 6, 1993 Increase in authorized share capital from Rs.one million to Rs.300 million.
December 16, 1993 Increase in authorized share capital from Rs.300 million to Rs.330 million.
December 19, 1994 Increase in authorized share capital from Rs.330 million to Rs.950 million.
July 1, 1996 Change in name to Jet Airways (India) Limited to reflect deemed public
company status.
December 1, 2000 Increase in authorized share capital from Rs.950 million to Rs.2,000 million,
which was divided into equity share capital of Rs.1,000 million and
preference share capital of Rs.1,000 million.
January 19, 2001 Change in name to Jet Airways (India) Private Limited to reflect reconversion
55
to private company status.
December 20, 2004 Change of registered office of our Company.
December 28, 2004 Change in name to Jet Airways (India) Limited to reflect public company
status and to alter the Memorandum and Articles of Association.
December 28, 2004 Change to reflect reclassification of the authorized share capital of Rs.2,000
million into equity share capital of Rs.1,300 million and preference share
capital of Rs.700 million.
Change in Registered Office
With effect from December 20, 2004, our registered office was changed from 41/42, Maker Chambers III, Nariman
Point, Mumbai 400 021, India to SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India.
Some Key Events
The chronology of some key events since our Company was incorporated on April 1, 1992 is as follows:
Year
Events
April 1, 1992 Incorporated as a private limited company.
May 5, 1993 Commenced operations as an air taxi operator.
April 4, 1994 First airline in India to operate the Boeing 737-400 aircraft.
January 14, 1995 Granted scheduled airline status.
December 30, 1996 First private airline in India to execute purchase agreement for Boeing aircraft.
November 12, 1997 First private airline in India to acquire its own aircraft using US EXIM guarantee.
September 26, 1998 First private airline in India to fly Boeing 737 NG aircraft.
October 6, 1998 First private airline in India to fly ATR 72-500 aircraft.
July 1, 2000 Introduced “Jet Mobile”, an online system that provides flight schedule updates to
passengers on their mobile phones.
February 5, 2001 Won the prestigious Air Transport World’s Market Development Award.
April 22, 2002 30 million passengers flown since commencement of operations.
May 14, 2003 First airline in India to operate the Boeing 737-900 aircraft
March 23, 2004 Commenced operations to Colombo, Sri Lanka.
May 14, 2004 Commenced operations to Kathmandu, Nepal.
56
SELECTED FINANCIAL INFORMATION
SEBI Guidelines require us to include summary financial statements information as restated to reflect the retrospective
effect of the accounting policies adopted by the Company as of September 30, 2004. The following selected financial
information, other than for the six months ended September 30, 2003, has been extracted from the Summary Restated
Statements prepared in accordance with Indian GAAP, the Companies Act and SEBI Guidelines, included in the
section entitled “Financial Information”. The Summary Restated Statements have been examined as described in the
joint Auditors Report of Deloitte Haskins & Sells and Chaturvedi & Shah dated December 20, 2004, in the section
entitled “Financial Information”. The Auditors’ Report refers to the auditors’ reliance on the financial statements for
the years ended March 31, 2000, March 31, 2001, March 31, 2002, March 31, 2003 and March 31, 2004 audited by
C.C.Chokshi & Company.
This Draft Red Herring Prospectus also includes audited financial statements for the six months ended September 30,
2004, prepared in accordance with Indian GAAP and which have not been restated in accordance with SEBI
Guidelines (the “Interim Audited Financial Statements”). The Interim Audited Financial Statements have been audited
by Deloitte Haskins & Sells and Chaturvedi & Shah as described in their audit report dated December 20, 2004
included in the section entitled “Financial Information”. The selected financial statements given below for the six
months ended September 30, 2003 have not been restated in accordance with SEBI Guidelines, and have been
extracted from the audit report for such period prepared by Deloitte Haskins & Sells and Chaturvedi & Shah which
audit report is not included in this Draft Red Herring Prospectus.
You should read this summary information in conjunction with our Summary Restated Statements and Interim Audited
Financial Statements including the significant accounting policies and notes thereto and the reports thereon and also
the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in this Draft Red Herring Prospectus. Financial statements prepared in accordance with Indian GAAP differ
in certain significant respects from financial statements prepared under IFRS or U.S. GAAP. See the section entitled
“Summary of Significant Differences between Indian GAAP, IAS/IFRS and U.S. GAAP” on page 251 of this Draft Red
Herring Prospectus for more information.
Statement of Profits and Losses
Year ended March 31, Six months ended September
30,
2000 2001 2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating Revenues
Passenger 18,650,561 23,606,633 23,622,474 26,748,979 32,155,701 15,208,634 18,068,701
Excess Baggage 192,995 231,544 251,116 292,736 286,674 118,534 173,753
Cargo 819,755 970,668 1,190,326 1,454,345 1,720,288 849,374 886,128
Other 154,280 191,678 198,949 260,748 311,548 167,944 135,599
Operating Revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating Revenues 226,076 275,606 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
Expenditure
Employees Remuneration and
Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Other Operating Expenses
(including maintenance & airport
charges etc.) 6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,700,001 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenditure 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
Profit /(Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Provision for Taxation
Current Tax 24,746 12,000 420 500 150,330 270 122,410
Deferred Tax - - - (12,377) - - 166,101
Profit /(Loss) after taxation as
per audited accounts (A) 101,750 124,813 (134,313) (2,444,501) 1,631,095 (155,023) 1,293,597
57
Statement of Profit and Losses, as Restated
Year ended March 31,
Six months ended
September 30,
2000 2001 2002 2003 2004 2004
(Rs. thousands)
Profit (Loss) after taxation as per
audited accounts 101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in accounting policies
Capitalization of Software
Purchased 30,369 2,648 1,081 2,285 - -
Depreciation (16,257) (21,341) (14,764) (7,371) (2,181) (577)
Frequent flyer expenses 7,147 42,001 (19,815) (58,896)
Reversal of Provisions as per AS-
29 (Net) 313,976 318,273 27,489 393,512 511,631 -
Deferred Tax (249,223) (274,327) 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior
Period Items (69,858) (4,762) 61,100 70,147 (60,201) (9,179)
Other adjustments 115,495 174,263 (318,163) (3,642) 13,509 -
Total of adjustments 131,649 236,755 (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments 41,601 43,275 - - 21,257 2,184
Net Profit/ (Loss), as restated 191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
_________
Statement of Assets and Liabilities, as Restated
As of March 31,
2000 2001 2002 2003 2004
As of September
30, 2004
(Rs. thousands)
A Fixed Assets
Gross Block 18,734,789 21,949,941 36,641,155 50,169,299 51,689,718 52,084,594
Less: Accumulated Depreciation 4,179,443 6,823,320 8,706,665 15,325,550 20,534,834 23,316,800
Net Block 14,555,346 15,126,621 27,934,490 34,843,749 31,154,884 28,767,794
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Net Block after adjustment for
Revaluation Reserve 14,555,346 15,126,621 20,634,824 29,435,052 27,279,199 25,756,214
Add: Capital Work In Progress 790,537 1,989,481 13,015,464 3,007,865 151,901 124,904
Total 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
B Investments - - - 597,000 2,334,164 5,008,292
C Current Assets, Loans and
Advances
a) Inventories 1,363,980 2,329,059 3,021,375 3,409,999 3,474,355 3,420,493
b) Sundry Debtors 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
c) Cash and Bank Balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
d) Loans and Advances 1,697,754 2,029,875 1,464,613 1,711,503 1,803,409 1,947,005
Total 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
D Liabilities & Provisions
a) Current Liabilities & Provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
b) Deferred Tax (Asset)/Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
c) Secured Loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
d) Unsecured Loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Total 21,089,315 23,168,579 39,881,962 41,598,215 35,841,619 36,629,682
E Subordinated Debt - - 2,640,000 2,840,733 3,080,775 3,341,100
F Net Worth (A + B + C – D -
E) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Net Worth Represented by
G Share Capital 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
H Reserves and Surplus
Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Contingency Reserve - 7,200 59,308 59,308 59,308 59,308
General Reserve 54,670 54,670 54,670 54,670 54,670 54,670
58
Profit & Loss Account 575,019 801,226 333,178 (860,599) 631,266 1,315,181
Total 629,689 863,096 7,746,822 4,662,076 4,620,929 4,440,739
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Total (Net of Revaluation
Reserves) 629,689 863,096 447,156 (746,621) 745,244 1,429,159
I Net Worth (G + H) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
59
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations together with our restated
Indian GAAP financial statements for the fiscal years ended March 31, 2002, 2003 and 2004, and for the six months
ended September 30, 2004, including the significant accounting policies and notes thereto and reports thereon which
appear elsewhere in this Draft Red Herring Prospectus. Indian GAAP differs in certain significant respects from IFRS
and U.S. GAAP. For more information on these differences, see “Summary of Significant Differences between Indian
GAAP, IFRS and U.S. GAAP on page 251 of this Draft Red Herring Prospectus.
Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month
period ended March 31 of that year.
Certain industry, technical and financial terms with initial capitals used in this discussion shall have the meanings
ascribed to such terms in the section titled “Glossary of Certain Industry, Technical and Financial Terms” beginning
on page vi of this Draft Red Herring Prospectus.
Overview
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We began transporting passengers in May 1993 with a fleet of four Boeing 737-300 aircraft
and are currently operating 42 aircraft (comprising 34 Boeing 737 aircraft and eight ATR72-500 aircraft), serving 42
cities in India and two destinations outside India. In addition, we have also leased two Boeing 737-400 aircraft, which
have been subleased by us to Skynet Asia Airways, an airline in Japan, for a period of five years ending 2008. We
have entered into agreements to lease seven more Boeing 737-800 aircraft with CFM engines, which are expected to be
delivered to us in 2005, for lease terms varying between approximately six years and seven years. In December 2004
we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with CFM56-7B24
engines. The expected date of delivery of such aircraft is between January 2006 and October 2007. Definitive
purchase agreements will need to be negotiated and entered into on or prior to January 31, 2005, unless otherwise
extended. If the purchase agreements are entered into, then closer to the delivery dates of each aircraft we will
determine the financing arrangements under which these aircraft will be obtained. The entry into such purchase
agreement and financial arrangements in connection therewith is also subject to the Company obtaining board approval
and such necessary regulatory approvals as may be required.
As of November 30, 2004 we have flown over 48 million revenue passengers (defined as fare paying passengers flown
on all flight segments) since beginning operations in 1993. We flew approximately 5.82 million revenue passengers in
fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers in fiscal 2004 and 3.78
million revenue passengers in the six months ended September 30, 2004.
We have steadily increased our fleet size and flight frequencies and the following table demonstrates the growth of our
operations since fiscal 2002:
As of and for period ended Cities Served
(3)
Number of epartures
(4)
Operating Aircraft
(3)
March 31, 2002 44 80,031 38
March 31, 2003 40 87,114 41
March 31, 2004 41 +1
(1)
90,649 41
September 30, 2004 42 +2
(1)
47,326 41
(2)
(1) International destinations.
(2) We have taken delivery of one Boeing 737-800 aircraft subsequent to September 30, 2004.
(3) As of March 31, 2002, 2003 and 2004 and September 30, 2004, respectively.
(4) For the year ended March 31, 2002, 2003 and 2004 and for the six months ended September 30, 2004.
We believe that our focus on providing high-quality reliable air transport services has enabled us to become a preferred
airline for travelers in India which is demonstrated by the growth in the number of our revenue passengers and our
leading market share in India.
The following table sets forth certain information relating to the number of revenue passengers and our domestic
market share for the periods indicated:
Revenue Passengers
(in millions)
Percentage Growth over Prior
Period in Revenue Passengers (%)
Domestic Market Share
(%)
Year ended
March 31, 2002 5.82 - 45.3%
March 31, 2003 6.41 10.1% 45.9%
60
March 31, 2004 6.91 7.8% 45.3%
Six months ended
September 30, 2003 3.27 - -
September 30, 2004 3.78 15.6% 42.3%
Source: Derived from DGCA data, based on revenue passengers carried by scheduled airlines on domestic routes in India.
It is our strategy to assess and exploit growth opportunities by increasing the frequency of flights to our existing high-
demand markets and adding new routes. We also intend to pursue opportunities to operate additional international
services, once there is a change in the existing policy of the Government of India and necessary Government approvals
are received.
Factors Affecting Our Results of Operations
Our financial condition and results of operations are affected by numerous factors and the following are of particular
importance:
• General economic and business conditions. As a company with its principal operations in India, we are
affected by general economic conditions in the country and in particular economic factors that affect business
travel and travel of international passengers to India. India’s gross domestic product, or GDP, has been and
will continue to be of importance in determining our operating results and future growth.
• Ability to sustain Passenger Load Factors and maximize revenues: Our business depends on passenger traffic
and the fares we charge our passengers. Through our Yield Management System, we endeavor to maximize
seat occupancy and revenue per flight. However, trends in passenger fares and demand for air travel will affect
the results of our operations.
The airline industry is characterized generally by low profit margins and high fixed cost obligations, primarily
for hire purchase charges, engineering and maintenance charges, aircraft fuel, interest and debt service and
rent. The expenses of an aircraft flight do not vary significantly with the number of passengers and tonnage of
cargo carried and, as a result, a relatively small change in the number of passengers or in pricing could have a
disproportionate effect on an airline’s operating and financial results. Accordingly, a minor shortfall in
expected revenue levels could harm our business.
• Price of Aviation Turbine Fuel. Our operating results are affected by changes in the price of ATF, which
constitutes a significant portion of our expenses.
Historically, our fuel expenditure has been subject to wide price fluctuations in ATF, which is based primarily
on the international price of crude oil, which in turn is influenced by geopolitical issues, government
regulation and various supply and demand factors. The price of ATF in India is also dependent on other
factors which include the following:
o Limited competition in India: ATF is currently available at airports from only three Government-
controlled companies, IOC, BPCL and HPCL;
o Periodic variations in the ex-refinery price of ATF: ATF prices are fixed every month and are based
on the Arab Persian Gulf Platt ATF prices and the cost of crude oil;
o Fluctuations in the exchange rate: Since India imports a major part of its crude oil, which is paid for
in foreign currency, the U.S. Dollar to Rupee exchange parity will influence these prices;
o Indirect taxes: Sales tax on ATF is levied at all stations we currently operate to in India (except for
Diu, Leh and Port Blair), and is currently between 4% and 30.55%; during the six months ended
September 30, 2004, the average sales tax paid by us was 22.1%. Excise duty payable on ATF is
currently 8% (in addition, applicable education cess is also required to be paid).
o Inability to enter into hedging arrangements relating to fuel price: Government regulations do not
permit domestic airlines such as us to enter into hedging arrangements relating to the price of ATF.
• Competition. Our results of operations are affected by competition in the airline industry in India. We expect
competition to intensify due to possible new entrants in the market, existing competitors further expanding
their operations and our entry into new markets where we may compete with well established airlines.
Increased competition could affect our market share and/or the Yield (which is defined as Net Passenger
Revenues earned per kilometer flown).
61
At present, our principal competitors are Indian Airlines (including its wholly-owned subsidiary, Alliance
Air), a Government-owned company, and Air Sahara, a privately owned company. Air Deccan, a privately-
owned company which started operations in August 2003 as a “no frills” airline, and other potential new
entrants, could become increasingly significant competitors in the future. There is significant price
competition with these airlines and we expect this to continue, especially as new competitors enter the market.
According to published reports, additional new private carriers are contemplating entering the domestic
aviation market.
• Composition of our fleet. The size, age and composition of our fleet have a significant impact on our financial
condition and results of operations. We currently have 42 aircraft, and expect to take delivery of seven Boeing
737 aircraft in 2005. We believe that these additions to our fleet are required to meet the estimated growth in
passenger traffic and to service additional routes where we propose to operate. An increase in the size of our
fleet without commensurate increase in passenger traffic can adversely affect our results of operations. We
have a relatively young fleet with a current average age of 4.5 years, and have therefore experienced lower
maintenance costs and higher reliability in our operations. We rely on limited types of aircraft and equipment,
and the availability of these aircraft and equipment is important to our business operations.
In fiscal 2006 and 2007, nine and eight Boeing 737 aircraft of our existing fleet, respectively, are scheduled
for D Checks. These are heavy maintenance checks that result in non-availability of aircraft for a period of
approximately 45 days. One of the Boeing 737-800 aircraft that will be delivered to us in the first half of
calendar 2005 will be utilized primarily as a replacement aircraft in fiscal 2006 and 2007. Each D Check is
currently estimated to cost approximately U.S.$1.2 million (Rs.55.2 million). However, a substantial portion
of such maintenance cost has already been provided for in our financial statements.
If we expand our international operations, we will be required to lease or acquire wide-bodied aircraft or refit
existing aircraft, depending upon the destinations we are permitted to operate in.
• Airport infrastructure. There are currently 127 airports in India, comprising 12 international airports, 89
domestic airports and 26 civil enclaves. Most of the airports are under the administration of the Airports
Authority of India, or AAI. The international airport at Cochin has been privatized, and two other
international airports, at Bangalore and Hyderabad, are currently being developed with private sector
participation. The Government has also announced plans in February 2004 to restructure and modernize the
New Delhi and Mumbai airports.
We are dependent on airport infrastructure to meet expected growth in the number of passengers and to
continue to provide high-quality reliable service. Although the Government is taking steps to improve the
condition of airports in India, there may be constraints relating to availability and cost of terminal space, slots
and aircraft parking, and adequacy of ground and maintenance facilities.
• Fluctuations in currency exchange rates. The results of our operations are affected by currency fluctuations,
since expenses such as aircraft and engine maintenance services, aircraft lease payments, CRS costs and
aircraft insurance are paid for or based on U.S. Dollars. As discussed earlier, the price of ATF is linked to
fluctuations in global crude prices and is also affected by fluctuations in currency exchange rates. In addition,
32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004 is foreign currency
denominated.
Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our exchange
rate risks. In fiscal 2004 and the six months ended September 30, 2004, we derived 13.4% and 11.7%,
respectively, of our revenues in U.S. Dollars. Additionally, we enter into forward contracts from time to time
to protect against adverse fluctuations in currency exchange rates.
• Seasonality. Seasonal variations in traffic affect our results of operations. We generally experience lower
Passenger Load Factors (defined as the percentage of Revenue Passenger Kilometers to Available Seat
Kilometers) during the first half of each fiscal in comparison to that experienced during the remainder of the
year. In addition, some of our areas of operations in North and East India experience bad weather conditions
in winter, resulting in additional expenditure caused by delayed and cancelled flights and providing
accommodation to passengers. Given our high proportion of fixed cost obligations, these seasonal factors are
likely to cause our results of operations to vary from quarter to quarter during a particular financial year.
• Extensive laws and regulations. We are extensively regulated by the Government through the MoCA, the
DGCA and the AAI as well as through the Ministry of Finance (“MoF”), the RBI and the Central Board of
Direct Taxes (“CBDT”). The MoCA is the approving authority for the lease or acquisition of additional
aircraft by private airlines in India. The DGCA also requires domestic airlines in India to compulsorily fly on
62
certain designated routes, typically to remote regions in India, pursuant to its Route Dispersal Guidelines. We
are required to fly certain designated capacity on these routes. The AICs, CARs and other guidelines issued
by the DGCA stipulate various restrictions and conditions that are applicable to our business operations. See
“Risk Factors – External Risk Factors – The airline industry in India is subject to extensive regulation” on
page xxi of this Draft Red Herring Prospectus.
We are required to obtain approvals from Indian regulatory and fiscal authorities to incur certain foreign
currency indebtedness and for the remittance outside India of aircraft lease rentals and hire purchase
payments.
In addition, the industrial policy of the Government of India limits foreign direct investment in domestic
airlines to 49% and prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. Also, foreign financial institutions and other entities that invest in us are not permitted to
have any foreign airline as a shareholder. This limits our access to foreign equity capital.
• International Operations. The Government of India announced on December 29, 2004 that the Union Cabinet
has approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years
continous operations and at least 20 aircraft to provide services to other international destinations. These
destinations exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which
would be reserved for Air India and Indian Airlines for three years. We are accordingly considering the
feasibility of flying to other international destinations, although it is uncertain when this policy change will
become effective and which destinations we may be permitted to service.
If we commence services to additional international destinations, we will be required to operate bigger, wide-
bodied aircraft than the types that we currently operate. We will also need to acquire flight slots from local
airport authorities or carriers. These expanded activities would require us to make significant capital
expenditure and/or incur substantial indebtedness. In addition, the operation of such larger aircraft over long
routes would involve additional complexities, including securing the services of qualified pilots, flight staff
and engineers with international experience.
We have made a preliminary assessment of the expenditures that we may incur for creating the required
operational capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases,
acquisition of slot positions at foreign airports, hiring of additional and suitably qualified personnel for the
new aircraft types, handling and catering agreements and acquisition of equipment before we can commence
operations on such routes, if permitted by the Government of India. Based on our preliminary assessment, we
anticipate an outlay of Rs.3,000 million for such purposes.
• Others. We believe that the following developments may also impact our financial condition and results of
operations:
(i) Billing Settlement Plan for ticketing. We are considering joining the Billing Settlement Plan System,
or BSP, an IATA sponsored standardized ticketing and collection system for airlines and agents that
provide standard traffic documentation common to all airlines on the BSP system and centralized
reporting, billing and analysis of sales for our domestic operations. Under the BSP system, we will
not incur any credit risk for default in payment by a travel agent that is accredited by IATA. While
we already are a part of BSP systems in certain countries outside India, there cannot be any assurance
that we will join the BSP system in India.
(ii) Employee Costs.
Approximately 11% of our workforce as of September 30, 2004 was unionized, consisting of certain
categories of our employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of
settlements with the respective unions at Mumbai, Delhi and Kolkata, which are valid from periods
between 2005 and 2008. For certain of our non-unionized staff such as pilots, cabin attendants and
engineers, we have in consultation with such staff agreed to certain annual compensation levels until
2007. These contemplate annual increases in fiscal years 2006 and 2007.
After the listing of our Equity Shares in this Offer, we intend to adopt either an ESPS scheme or an
ESOP scheme in which eligible employees and directors of the Company and any other person
permitted under applicable law or regulation can participate, subject to such approvals as may be
necessary. The criterion for selection will be determined by our Board and approved by our
shareholders. The ESPS or ESOP will comply with the SEBI (Employee Stock Option and Employee
Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares pursuant thereto will be
63
subject to compliance with all applicable laws and regulations. We propose to issue a maximum of
0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur
in fiscal 2006, although there can be no assurance as to the timing of adoption of any such scheme,
which may occur in fiscal 2006 or thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss
account equal to the product of such number of Equity Shares issued and the difference between the
applicable market price of our Equity Shares and the price at which our employees and directors will
purchase the Equity Shares. We have not as yet determined the issue price at which Equity Shares
will be sold, the number of Equity Shares proposed to be issued, the identity of such eligible
personsnd the timing of adoption of the ESPS scheme or the date of issue of Equity Shares
thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of
the number of Equity Shares proposed to be issued in accordance with the accounting principles used
for determining such charge using the fair value method or applicable market price of our Equity
Shares. Such charge will be amortized over the vesting period of the stock option. We have not as
yet determined the number of stock options to be granted, the exercise price or the number of Equity
Shares to be issued, the identity of the eligible persons and the timing of the ESOP scheme.
Our Significant Accounting Policies
Our financial statements prepared in accordance with Indian GAAP and the accompanying notes thereto included in
this Draft Red Herring Prospectus include information that is relevant to this discussion and analysis of our financial
condition and results of operations. The preparation of our financial statements in conformity with Indian GAAP
requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenditures, and the related disclosure of cash flows and contingent liabilities, among others. Certain
key accounting policies relevant to our business and operations have been described below. For a detailed description
of our significant accounting policies, see Annexure IV of the restated financial statements under Indian GAAP
included in this Draft Red Herring Prospectus.
(i) Passenger Revenue. Passenger ticket sales (net of refunds) are initially credited to a forward sales account.
Revenue is recognized when transportation is provided or when no claim for refund has been made on an
unused ticket for a period of two years from the date of issuance of such ticket. Such revenue recognition
reduces the balance in the forward sales account and the remaining amount is shown in our balance sheet
under current liabilities at the end of each accounting period.
(ii) Commission. The basic commission on sales is normally directly deducted by a travel agent when a ticket is
sold. However the commission is recognized in our financial statements only when the transportation is
provided to a passenger or when no claim for refund has been made by a passenger on an unused ticket for a
period of two years from the date of issuance of such ticket. Commission payable to a general sales agent, or
GSA, is recognized on a similar basis.
(iii) Fixed Assets. Fixed assets are stated at cost, and include amounts added on revaluation, less accumulated
depreciation and impairment loss, if any. All costs relating to acquisition and installation of fixed assets up to
the time the assets are ready for their intended use, costs of improvements to leased properties and customs
duties and modifications costs incurred on aircraft taken on lease are capitalized.
(iv) Hire Purchase and Finance Lease Agreements. We currently have 23 hire purchase agreements and one
finance lease agreement relating to our existing fleet of aircraft. The remaining aircraft are under operating
leases. The lower of the fair value of the assets and the present value of the principal repayments under our
hire purchase and finance lease arrangements is capitalized as fixed assets with corresponding amount shown
as lease liability under “Outstanding Hire Purchase Installments”. The principal amounts of the hire purchase
and finance lease payments are adjusted against this lease liability and interest payable thereon is charged to
the profit and loss account.
(v) Operating Lease Rentals. These are expensed with reference to the lease term and other considerations.
(vi) Depreciation. Depreciation is provided on fixed assets using the written down value method at the rates and
in the manner prescribed under Schedule XIV to the Companies Act. In the case of improvements to and
64
expenditure incurred on assets acquired on operating lease, depreciation is written off evenly over the balance
period of the lease.
(vii) Inventories. Inventories include tickets and airway bills stock, unutilized in flight service amenities,
expendable aircraft spares, aircraft fuel in the aircraft and rotables, galley equipment and tooling. Inventories
are valued at cost or net realizable value, whichever is lower. Cost of inventories includes customs duties,
taxes, freight and other charges as applicable and is determined using the weighted average formula. With
respect to reusable items such as rotables, galley equipment and tooling, net realizable value takes into
consideration provision for obsolescence and wear and tear based on the estimated useful life of aircraft
derived from Schedule XIV to the Companies Act, and also includes provisioning for non-moving or slow
moving items.
(viii) Redelivery Expenses. Aircraft redelivery expenses under our operating leases are provided for in proportion to
the expired lease period.
(ix) Aircraft Maintenance Costs. Aircraft maintenance, Auxiliary Power Unit (APU) and engine maintenance and repair
costs are expensed as incurred except where such overhaul cost in respect of engines/ APU are covered by third party
maintenance agreements and accounted in accordance therewith. Commencing fiscal 2005, we have been required
to follow Accounting Standard 29 (“AS-29”) for the treatment of contingent liabilities and estimates, which
specifies standards for Provisions, Contingent Liabilities and Contingent Assets. Under AS-29:
• a “provision” is a liability which can be measured only by using a substantial degree of estimation; and
• a “liability” is a present obligation of the enterprise arising from past events, the settlement of which is
expected to result in an outflow from the enterprise of resources embodying economic benefits.
As a result, all the costs associated with aircraft heavy maintenance checks, for example, D Checks, and
engines not covered by any third party maintenance contracts which prior to April 1, 2004 were provided for
in our financial statements at a predetermined rate are being expensed when incurred.
(x) Frequent Flyer Expenses. The cost of allowing free travel to members of our frequent flyer program is
accounted on the basis of the members’ accumulated mileage.
(xi) Foreign Exchange Transactions.
• Sales and other transactions in foreign currency are recorded at the current rate of exchange in force at
the time the transaction is effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that relating to fixed assets, is adjusted in the profit and loss account.
• Monetary assets and liabilities relating to foreign exchange transactions not settled as at the year end are
translated at the rates prevalent on that date, and profits or losses, if any, on such transactions are
recognized in the profit and loss account.
• Exchange difference on settlement or translation of long term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
• Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in the
carrying amount of fixed assets over the life of the contract.
(xii) Derivatives Transactions. Gain or loss on derivative contracts entered into to hedge exposures to interest rate
and currency fluctuations are recognized when the underlying transactions are settled. Accordingly,
proportionate amounts are accrued or provided for the period between the last settlement date and the year
end.
(xiii) Taxation: Provision for current tax is made after taking into consideration benefits admissible under the
provisions of the Income Tax Act, 1961 (“I.T. Act”).
Deferred tax arises from timing differences between accounting profits and taxable profits that originates in
one period and is capable of reversal in one or more subsequent periods, and is measured using tax rates and
laws that have been enacted or substantively enacted as on the date of the balance sheet. The deferred tax is
recognized and carried forward only to the extent that there is a reasonable/virtual certainty that the asset will
be realized in the future.
65
Contingent Liabilities
Our contingent liabilities, as of September 30, 2004, were Rs.4,039 million. These comprised the following:
(Rs. millions)
Unprovided income tax demands which are disputed in appeals 37
Unprovided claims against the Company, pending civil and consumer suits 79
Unprovided claims for octroi duty on aircraft by the Municipal Corporation of Greater Mumbai not accepted by the
Company
290
Disputed claims against the Company towards landing and navigation charges made by the AAI 197
Disputed claims against the Company towards ground handling charges levied at Cochin International Airport. 235
Letters of credit outstanding 1,629
Bank guarantees outstanding 1,572
Total 4,039
Note: In addition to the aforesaid contingent liabilities, we will be required to pay arrears of cumulative dividends aggregating Rs.88 million in
respect of the CCRPS issued to IFC.
Revenues
We derive our revenues primarily from transportation of passengers on our aircraft. In addition we also earn revenues
from carriage of cargo which consists of courier, postal mail and commercial cargo. Passenger Revenues are dependant
on Passenger Load Factors and fare levels and are measured by the following:
• Capacity measured in terms of Available Seat Kilometers, or ASKMs (defined as the aircraft seating capacity
multiplied by the number of kilometers the seats are flown);
• Utilization measured in terms of Revenue Passenger Kilometers, or RPKMs (defined as the number of
kilometers flown by revenue passengers);
• Passenger Load Factor, or the percentage of our capacity that is actually used by revenue customers, (defined
as Revenue Passenger Kilometers expressed as a percentage of Available Seat Kilometers).
• Net Passenger Revenues, representing Passenger Revenues less commissions paid to GSAs and travel agents;
• Yield, derived by dividing Net Passenger Revenues by Revenue Passenger Kilometers; and
• Break Even Load Factor (defined as the Passenger Load Factor that will result in Net Passenger Revenues
being equal to Total Expenses less cargo and Non-operating Revenues).
The following table sets forth certain information relating to our Passenger Revenues:
Year ended March 31,
Six months ended September 30,
2002
2003
2004
2003
2004
Capacity ASKMs (millions) 7,780 8,496 9,162 4,542 4,796
Utilization RPKMs
(millions)
4,777 5,291 5,852 2,771 3,245
Passenger Load Factor (%) 61.4% 62.3% 63.9% 61.0% 67.7%
No. of passengers (Millions) 5.82 6.41 6.91 3.27 3.78
Gross average revenue per
passenger (Rs.)
4,057 4,173 4,655 4,650 4,785
Growth in average revenue
per passenger (%)
- 2.8% 11.5% - 2.9%
Yield (Rs.)
4.36 4.52 5.01 5.02 5.05
Growth in yield (%)
- 3.7 % 10.8 % - 0.6 %
The following table sets forth certain information relating to our Operating Revenues and Non-operating Revenues for
the periods indicated:
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating Revenues
Passenger 23,622,474 26,748,979 32,155,701 15,208,634 18,068,701
Excess Baggage 251,116 292,736 286,674 118,534 173,753
Cargo 1,190,326 1,454,345 1,720,288 849,374 886,128
Other 198,949 260,748 311,548 167,944 135,599
66
Operating Revenues 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating Revenues 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
___________
Our Passenger Revenues have increased as a result of increases in our capacity (in terms of fleet size and number of
flights), our high aircraft utilization, as well as higher Passenger Load factors and Yield.
We also derive revenue from carriage of cargo by optimizing the use of available cargo space on our passenger flights.
Other revenues consist of handling charges on account of collection of passenger service fees and cancellation charges
on tickets. We also derive Non-operating Revenue from interest income gains due to currency exchange fluctuations
and the sale of assets.
The following table sets forth our revenue composition (as a percentage of Total Revenues) for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002
(%)
2003
(%)
2004
(%)
2003
(%)
2004
(%)
Income
Operating Revenues
Passenger
89.2 90.9 90.2 90.5 91.9
Excess Baggage
0.9 1.0 0.8 0.7 0.9
Cargo
4.5 4.9 4.8 5.1 4.5
Other
0.8 0.9 0.9 1.0 0.7
Operating Revenues
95.3 97.7 96.7 97.3 98.0
Non-operating Revenues
4.7 2.3 3.3 2.7 2.0
Total Revenues
100.0 100.0 100.0 100.0 100.0
Expenses
The main components of our expenses include employee remuneration and benefits, aircraft fuel, maintenance and
repair, landing, navigation and other airport charges, insurance and general and administrative expenses, selling and
distribution costs (which include commissions), aircraft rentals, depreciation and interest.
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Expenses
Aircraft fuel 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Other Operating Expenses (including
maintenance and airport charges)
7,152,294
8,514,217
9,062,341
4,700,001
4,575,707
Employees remuneration and benefits
2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Selling and Distribution Expenses
3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Aircraft rentals
2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation
3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest
1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenses
26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
The following table sets forth our expenses (as a percentage of our Total Revenues) for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002
(%)
2003
(%)
2004
(%)
2003
(%)
2004
(%)
Expenses (as a percentage of our Total
Revenues)
Aircraft fuel 20.0 22.1 20.8 21.2 24.0
Other Operating Expenses (including
maintenance and airport charges etc) 27.0 28.9 25.4 28.0 23.3
Employees remuneration and benefits 8.7 9.0 7.9 8.3 8.8
Selling and Distribution Expenses 14.1 14.1 12.0 11.8 12.9
Aircraft rentals 11.2 9.4 6.4 7.2 5.1
Depreciation 13.2 16.1 14.4 15.2 11.6
67
Interest 6.4 8.7 8.1 9.3 6.3
Total Expenses (as a percentage of our
Total Revenues) 100.5 108.3 95.0 100.9 92.0
Aircraft fuel
Aircraft fuel is the single largest component of our expenditure. Aircraft fuel costs are derived on the basis of
consumption and fuel prices. As discussed earlier, fluctuations in aircraft fuel prices are beyond our control. The
historical relationship of aircraft fuel costs to revenues has, however, remained relatively consistent, demonstrating that
fare revisions have largely succeeded in offsetting increases in aircraft fuel prices.
Other Operating Expenses
Other Operating Expenses include the following:
• Maintenance and repairs
As an operator of aircraft we are required to and are responsible for maintaining and repairing the aircraft.
Our maintenance and repair expenses consist of scheduled and unscheduled maintenance for our aircraft,
engines and other parts. In order to optimize and control maintenance costs, we have entered into long-term
and medium-term maintenance contracts, including “PBTH” contracts for components, APUs and engines for
our Boeing aircraft and a global maintenance contract with ATR for components for our ATR72-500 aircraft.
Our aircraft currently require a lower level of maintenance relative to airlines with older fleets of aircraft
because the average age of the aircraft in our fleet is currently 4.5 years, and many of the parts on our aircraft
are under multi-year warranties. If the age of our fleet increases and our warranties expire, our maintenance
expenses will increase.
• Variable rentals
We have acquired 18 aircraft on operating lease arrangements, and are required to pay certain fixed and
variable lease rentals under such arrangements. The variable operating lease rentals are required to be paid at
a pre-determined rate on the basis of actual hours flown by the relevant aircraft. In certain cases such pre-
determined rates are subject to annual escalation.
The fixed operating lease rentals payable under our operating lease arrangements are separately reflected in
our financial statements as “Aircraft rentals”.
• Landing, navigation and other airport charges
These costs include landing charges, route navigation facility charges, terminal navigation landing charges,
parking charges and X-ray charges. These are generally payable to the AAI. In At certain civil enclaves that
are operated by the defense services, we pay certain of these charges to the defense services. At Cochin
International Airport we pay certain of these charges to CIAL the private sector operator of the airport.
Landing charges vary depending upon the aircraft weight and the type of airport (international, domestic or
civil enclave); navigation charges vary depending upon the distance traveled to the landing destination and the
maximum take off weight, or MTOW, of the aircraft; terminal navigation landing charges vary depending
upon the MTOW and the type of the airport; parking charges vary depending upon the type of airport and
whether or not the aircraft is parked overnight or beyond three hours; and X-ray charges are currently fixed at
approximately Rs.700 per flight for our Boeing 737 aircraft and Rs.450 per flight for our ATR aircraft.
• Insurance
We insure our aircraft against various risks and exigencies. In addition we also procure various third party
liability covers and related insurance covers for our operations. This insurance cover is provided by various
Indian insurance companies with reinsurance placements outside India.
• General and administrative
These expenses include communication costs, including payments to SITA, travel, rent, repair and
maintenance of office premises, utilities and other miscellaneous expenses.
Employees Remuneration and Benefits
68
The employee remuneration and benefits consists of salaries, statutory contributions, retirement benefits and the cost of
training provided to employees.
Increase in employee costs are due to additions in manpower and revisions in salaries made from time to time. We
have wage settlement agreements in force with the unions that represent certain of our employees.
Our employee remuneration and benefits are presented net of applicable charge back to Jetair pursuant to our GSA
agreement. For more information, see “Business – Marketing, Sales and Distribution” on page 44 of this Draft Red
Herring Prospectus.
Selling and Distribution Expenses
Our selling and distribution expenses include commissions paid to travel agents and GSAs, payments to our GDS and
CRS service providers, fees paid to credit card companies and expenses relating to advertising and sales promotion
activities.
We operate substantially through our GSA network in India. Jetair, a Promoter group company, is our exclusive GSA
in India.
Our commission structure is as follows:
• A sales commission of 5% on Rupee fares and cargo and 7% on foreign exchange fares is payable either to the
travel agents or to Jetair for tickets issued by them;
• Jetair receives an overriding commission of 3% for all passenger sales in India (irrespective of whether the
tickets have been sold through a travel agent, the internet or by Jetair itself) and 2.5% for all cargo sales in
India.
In fiscal 2004 and the six months ended September 30, 2004, commissions to Jetair constituted 2.5% and 3.1%,
respectively, of our Total Expenses for such periods, and commissions to the other GSAs that are Promoter group
companies constituted 0.5% and 0.4% of the Total Expenses for such periods.
Jetair provides us with GSA services including ticketing, reconciliation of billing statements and issuance of tickets at
the airport and at various city locations. In this connection, pursuant to the terms of our GSA agreement with Jetair, we
are entitled to charge back certain expenses, including remuneration of certain employees, CRS costs (up to a
maximum of 25% of such CRS costs) and SITA communication charges, in amounts as determined by us.
We have various GSAs in other countries. These include Jet Airways LLC, Dubai, UAE and its two subsidiaries Jet
Airways of India Inc., for USA and Canada, and India Jet Airways (Pty) Ltd. for South Africa, all of which are
Promoter group companies.
Aircraft rentals
We have 18 aircraft in our fleet on operating lease arrangements. The key features of which are:
• Monthly rent is paid in the form of fixed rent and variable rents;
• Variable lease rents are paid on a pre-determined rate payable on the basis of actual flying hours. In certain
cases such pre-determined rate is subject to annual escalation;
• We do not have an option to buy back nor do we generally have an option to renew the lease;
• The leases are not cancelable; if we terminate the lease prior to the expiry of the lease term, we may be liable
to pay the rental amounts for the unexpired period of the lease;
• In the event of a default, the lessor is entitled to repossession of the aircraft , and we may be liable for
damages, including liquidated damages.
• We are responsible for maintaining and insuring the aircraft; and
• In the event of delayed payment, we may be liable to pay penal charges.
The fixed operating lease rentals payable under our operating lease arrangements are reflected in our financial
statements as aircraft rentals, while the variable operating lease rentals payable under these arrangements is included in
our “Other Operating Expenses”.
69
In addition to the above 18 aircraft, we have leased two aircraft which have been further sub-leased to Skynet Asia
Airways. The lease rentals paid by us in respect of these two aircraft are reflected in our financial statements as net of
the lease rentals received from Skynet Asia Airways.
Depreciation
We have a policy of providing for depreciation on the basis of the written down value of assets. The rates of
depreciation are as per Schedule XIV of the Companies Act.
Interest
Interest includes the rentals we pay under our hire purchase and finance lease. We have in our fleet 23 aircraft on hire
purchase agreements and one on a finance lease. Certain key features of our hire purchase arrangements and finance
lease are:
• We have an option to purchase the aircraft either during the term of the hire purchase on payment of the
outstanding principal amount or at the end of the hire purchase term on payment of a nominal option price;
• In the event of a default, we are liable for payment of all costs of the owner including financing cost and other
associated costs. Further, the owner/ lessor has a right of repossession; and
• We are responsible for maintaining and insuring the aircraft.
Our other interest bearing liabilities include, among others, certain subordinated debt, a fixed term loan with regard to
our flight simulator and certain bank overdrafts.
Our aircraft rent expenses and hire purchase finance charges with regard to part of our fleet are incurred in U.S.
Dollars. Our exposure to the U.S. Dollar has increased as we have expanded our operations. We enter into forward
contracts to hedge against currency rate risks relating to our lease and hire purchase finance payment obligations. In
addition, payment obligations under nine of our aircraft on hire purchase agreements and one aircraft under a finance
lease are based on floating rates (LIBOR). We use derivative contracts to hedge against adverse variations in LIBOR.
Taxes
Corporate Tax
In fiscal 2004, we were liable to pay taxes under the Minimum Alternate Tax (“MAT”) provisions (as defined under
Section 115JB of the I.T. Act) primarily because of certain unabsorbed depreciation. MAT is a tax on book profits that
was introduced by the Government starting in fiscal 1997. MAT is applicable only if the tax payable under the MAT
provisions is greater than the tax on taxable income calculated at the normal rates. The provision for tax is therefore
calculated at the rate of 7.5% plus applicable surcharge on our book profits.
Deferred Tax
Deferred tax arises from timing differences between book profits and taxable (accounting) profits that originates in one
period and is capable of reversal in one or more subsequent periods, and is measured using tax rates and laws that have
been enacted or substantively enacted as on the date of the balance sheet.
We provide for deferred tax liability on such timing differences, subject to prudent considerations in respect of deferred
tax assets. The significant timing differences include the difference in depreciation charged to the profit and loss
account and the depreciation claimed under the I.T. Act, and the items of expenditure covered under section 43B of the
I.T. Act.
Results of Operations
The following tables set forth certain information with respect to our results of operations for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating revenue:
Passenger 23,622,474 26,748,979 32,155,701
15,208,634 18,068,701
70
Excess baggage 251,116 292,736 286,674
118,534 173,753
Cargo 1,190,326 1,454,345 1,720,288
849,374 886,128
Other revenue 198,949 260,748 311,548
167,944 135,599
Total operating revenue 25,262,865 28,756,808 34,474,211
16,344,486 19,264,181
Non-operating Revenue 1,234,156 664,184 1,183,183
457,026 402,545
Total revenue 26,497,021 29,420,992 35,657,394
16,801,512 19,666,726
Expenditure
Aircraft fuel 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Maintenance and repairs 1,400,143 2,414,530 3,063,626 1,668,434 1,391,828
Variable rentals 1,093,185 1,060,108 1,023,475 550,799 334,924
Landing, navigation and other airport
charges 2,185,779 2,226,292 2,084,838 1,036,243 1,091,812
Insurance 242,159 371,373 352,133 179,129 199,409
General and administrative 2,231,028 2,441,914 2,538,269 1,265,396 1,557,734
Employees remuneration and benefits 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Selling & Distribution Expenses
3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Aircraft rentals 2,965,100 2,780,264 2,266,428
1,205,254
1,006,666
Depreciation 3,488,334 4,732,715 5,151,543
2,545,562
2,290,861
Interest 1,708,712 2,561,344 2,891,401
1,568,238
1,232,231
Total expenses 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
Profit / (loss) before taxation (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Provision for Taxation:
Current tax 420 500 150,330 270 122,410
Deferred tax - 12,377 - - 166,101
Profit/(loss) after taxation as per statutory
accounts
(134,313) (2,444,501) 1,631,095
(155,023)
1,293,597
Year ended March 31,
Six months ended
September 30
2002 2003 2004 2004
(Rs. thousands)
Profit / (Loss) after taxation as per audited
accounts (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in
accounting policies
Capitalization of Software Purchased 1,081 2,285 - -
Depreciation (14,764) (7,371) (2,181) (577)
Frequent flyer expenses (19,815) (58,896) - -
Reversal of Provisions as per AS-29 (Net) 27,489 393,512 511,631 -
Deferred Tax 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior Period
Items 61,100 70,147 (60,201) (9,179)
Other adjustments (318,163) (3,642) 13,509 -
Total of adjustments (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments - - 21,257 2,184
Net Profit/ (Loss), as restated (311,048) (1,195,463) 1,491,865 683,915
Adjustments
The financial information for fiscal 2002, 2003 and 2004 and the six months ended September 30, 2004 has been
restated in compliance with SEBI Guidelines. In accordance with Indian GAAP, the effects of restatement are shown
as a cumulative effect on our adjusted profit after tax rather than as restatements of individual line items in our income
statement. Consistent with this presentation, in the comparison of our results of operations from fiscal period to fiscal
period, we have provided a discussion of the effects of the restatement on our adjusted profit at the end of each such
fiscal period to fiscal period comparison. The financial information for the six months ended September 30, 2003 has
not been restated.
71
The principal adjustments to our financial statements, including on account of changes in accounting policies and
estimates, are described below:
• Accounting Standard 26 (AS-26) on Intangible Assets issued by the Institute of Chartered Accountants of India
(“ICAI”) to capitalize software, which results in future benefits to be amortized over a 36-month period on a
straight line basis. We have accordingly followed AS-26 with effect from April 1, 2003, and our restated financial
statements have given effect to AS-26 for financial years prior to fiscal 2004, where such expenditure was treated
as revenue expenditure.
• We have computed frequent flyer expenses on the basis of incremental cost as set out in the Airline Accounting
Guidelines issued by IATA with effect from April 1, 2002. In prior fiscal years, the cost was computed on the
basis of the average cost for a free seat. Our restated financial statements have given effect to these guidelines
followed from fiscal 2003 for the previous financial years.
• AS-29 on “Provisions, Contingent Liabilities and Contingent Assets” issued by ICAI came into effect from April
1, 2004. Under AS-29:
– a “provision” is a liability which can be measured only by using a substantial degree of estimation; and
– a “liability” is a present obligation of the enterprise arising from past events, the settlement of which is
expected as a result of an outflow from the enterprise of resources embodying economic benefits.
We have followed AS-29 with effect from April 1, 2004 and accordingly certain aircraft maintenance expenditure
(not covered by any third party maintenance contract) are being accounted for an “as incurred basis”. In prior
years such expenditure was being provided for on pre-determined rates, and in the case of engines, on the basis of
hours flown. Our restated (adjusted) financial statements give effect to AS-29 for financial years prior to fiscal
2004.
• We adopted Accounting Standard 22 (AS-22) on “Accounting for Taxes and Income” issued by the ICAI in
preparing financial statements for fiscal 2003 onwards. Accordingly, the deferred tax/asset liability has been
recognized in the respective years of origination, considering the adjustment on account of changes in accounting
policy and other changes with the corresponding effect to the statement of profit, as restated.
• In our financial statements for fiscal 2004 and for the six months ended September 30, 2004, we had recognized /
charged off certain amounts of our income and expenditure for prior periods. In our restated financial statements,
such income and expenditure amounts have been appropriately adjusted in the years that these relate to.
o During fiscal 2004, we have revised the estimated useful life of our galley equipment, which form a
part of our engineering inventory. In our related financial statements, provision for obsolescence on
such inventory has been adjusted on the straight line method basis over its balance useful life as
estimated by our management. Accordingly, the provision for obsolescence on such inventory has
been adjusted against the profits in our restated financial statements for fiscal years up to fiscal 2003.
o Following the terrorist attacks in New York on September 11, 2001, we renegotiated certain aircraft
maintenance contracts in fiscal 2002 with retrospective effect. In our restated financials, the impact
has been adjusted against profits for fiscal years up to fiscal 2001.
Six Months Ended September 30, 2004 Compared to Six Months Ended September 30, 2003
An overview of trends and developments and a comparison of significant items of income and expenditure for the six
months ended September 30, 2003 and the six months ended September 30, 2004 are provided as follows:
• In the six months ended September 30, 2004, while revenues were significantly higher than the period ending
September 30, 2003 we incurred a substantial increase in fuel costs as compared to the previous period;
• In May 2004, we commenced scheduled operations to Kathmandu, Nepal;
• The first six months of each fiscal is generally lower in terms of traffic volumes as compared to the second six
months and this trend continued in fiscal 2004; and
• In August 2003, Air Deccan, a no frills airline, commenced operations, thereby increasing competition in the
domestic market.
72
Revenues
Our total revenues increased by 17.1% from Rs.16,802 million in the six months ended September 30, 2003 to
Rs.19,667 million in six months ended September 30, 2004. This increase was primarily due to an increase in
Passenger Revenues.
Passenger Revenues
Passenger revenues increased by 18.8% from Rs.15,209 million in the six months ended September 30, 2003 to
Rs.18,069 million in the six months ended September 30, 2004. This increase was due to a 15.6% increase in revenue
passengers as well as increased yield due to a fare revision effective June 21, 2004.
Revenues from Excess Baggage
Revenues from excess baggage increased by 46.2% from Rs.119 million in the six months ended September 30, 2003
to Rs.174 million in the six months ended September 30, 2004, primarily due to an increase in the number of revenue
passengers.
Revenues from Cargo
Revenues from carriage of cargo increased by 4.4% from Rs.849 million in the six months ended September 30, 2003
to Rs.886 million in the six months ended September 30, 2004. This increase was primarily due to increased tonnage
carried in the six months ended September 30, 2004 compared to the prior period. During the six months ended
September 30, 2004, we improved infrastructure including the addition of bonded cargo warehouses that enabled us to
carry more cargo for imports and exports on domestic routes.
Other Revenues
Other revenues decreased by 19.0% from Rs.168 million in the six months ended September 30, 2003 to Rs.136 million
in the six months ended September 30, 2004. This decrease was primarily on account of the discontinuation of the
Inland Air Travel Tax with effect from January 2004, resulting in our losing revenues from the 5% handling charges
that we were entitled to retain as compensation for the collection of tax on behalf of the Government.
Non-Operating Revenues
Non-operating Revenues decreased by 11.8 % from Rs.457 million in the six months ended September 30, 2003 to
Rs.403 million in the six months ended September 30, 2004. The variation in Non-operating Revenues for the two
periods is primarily due to the following:
• Gain from foreign exchange of Rs.157 million in the six months ended September 30, 2003;
• Profit on sale and hire purchase of engines of Rs.85 million in the six months ended September 30, 2003; and
• Write back of certain provisions in an amount of Rs.182 million in the six months ended September 30, 2004.
Expenses
Aircraft Fuel
Fuel costs increased by 32.6% from Rs.3,554 million in the six months ended September 30, 2003 to Rs.4,713 million
in the six months ended September 30, 2004. This increase was due to a 4.8% increase in block hours from 70,429
hours to 73,814 hours and an increase in the weighted average cost of fuel from Rs.19.67 per liter in the six months
ended September 30, 2003 to Rs.24.51 per liter in the six months ended September 30, 2004 viz. an increase of 24.6%.
Other Operating Expenses
Variations in Other Operating Expenses for the six months ended September 30, 2003 and 2004 were:
Six months ended Six months ended
Increase/
(Decrease)
September 30, 2003 September 30, 2004
(Rs. thousands) (Rs. thousands)
(%)
Maintenance and repairs 1,668,434 1,391,828 (16.6)
73
Variable rentals 550,799 334,924 (39.2)
Landing, navigation and other airport charges 1,036,243 1,091,812 5.4
Insurance 179,129 199,409 11.3
General and administrative 1,265,396 1,557,734 23.1
Total
4,700,001
4,575,707 (2.6)
Other Operating Expenses decreased by 2.6% from Rs.4,700 million in the six months ended September 30, 2003 to
Rs.4,576 million in the six months ended September 30, 2004 due to various factors as discussed below:
• Maintenance and repair costs decreased by 16.6% from Rs.1,668 million in the six months ended September 30,
2003 to Rs.1,391 million in the six months ended September 30, 2004. This decrease in maintenance and repair
costs was primarily due to the introduction of the new accounting standard, AS-29 and the discontinuation of the
accrual of certain provisions effective April 1, 2004. Under AS-29, certain maintenance costs which were
previously accrued on the basis of hours flown are now accounted for on an as incurred basis. For more
information on AS-29, please see paragraph (ix) of “Our Significant Accounting Policies” on page 64 of this Draft
Red Herring Prospectus.
• Variable rentals decreased by 39.2% from Rs.551 million in the six months ended September 30, 2003 to Rs.335
million in the six months ended September 30, 2004. This reduction was principally because of the
discontinuation of the accrual of certain provisions in accordance with AS-29, effective April 1, 2004.
• Landing, navigation and other airport charges increased by 5.4% from Rs.1,036 million in the six months ended
September 30, 2003 to Rs.1,092 million in the six months ended September 30, 2004. This increase was primarily
due to an increase in the number of flights operated during the six months ended September 30, 2004 as compared
to the number of flights operated during the six months ended September 30, 2003.
• Insurance costs increased by 11.3% from Rs.179 million in the six months ended September 30, 2003 to Rs.199
million in the six months ended September 30, 2004. This increase was due to an increase in the fleet value
because of the induction of two new Boeing 737-900 aircraft and one Boeing 737-400 aircraft as replacement for
two Boeing 737-400 aircraft in fiscal 2004 (resulting in an increase in fleet size by one aircraft).
• General and administrative costs increased by 23.1% from Rs.1,265 million in the six months ended September 30,
2003 to Rs.1,558 million in the six months ended September 30, 2004. This increase was primarily due to
exchange rate differences as a result of weakening of the Rupee compared to the U.S. Dollar amounting to Rs.149
million and a loss on scrapping of fixed assets amounting to Rs.31 million in the six months ended September 30,
2004.
Employee Remuneration and Benefits
Employee remuneration and benefits expenses increased by 24.3% from Rs.1,399 million in the six months ended
September 30, 2003 to Rs.1,739 million in the six months ended September 30, 2004 due to a significant increase in
salaries with effect from April 1, 2004 and due to an increase in the net number of employees (viz. excluding
employees whose remuneration and benefits are charged back to Jetair pursuant to our GSA agreement with Jetair)
from 5,307 as of September 30, 2003 to 5,595 as of September 30, 2004.
Selling and Distribution Costs
Selling and distribution costs increased by 27.4% from Rs.1,983 million for the six months ended September 30, 2003
to Rs 2,527 million for the six months ended September 30, 2004. This increase in selling and distribution costs
resulted from:
• An increase of 17.2% in CRS and GDS costs from Rs.438 million in the six months ended September 30,
2003 to Rs.513 million in the six months ended September 30, 2004 due to an increase in number of
passengers;
• An increase of 28.7% in commission costs payable to our GSAs and travel agents from Rs.1,426 million in the
six months ended September 30, 2003 to Rs.1,835 million in the six months ended September 30, 2004 due to
an increase in Passenger Revenues; and
• An increase in advertisement expenses incurred in the six months ended September 30, 2004, which was in
part due to the launch of our international operations to Kathmandu, Nepal.
74
Aircraft Rentals
Aircraft rentals decreased by 16.4% from Rs.1,205 million in the six months ended September 30, 2003 to Rs.1,007
million in the six months ended September 30, 2004, primarily due to a reduction in aircraft lease rentals that we
negotiated with the lessors of two of our Boeing 737 aircraft and five of our ATR72-500 aircraft which were effective
from the second half of fiscal 2003.
Depreciation
We recorded a decrease in depreciation costs of 10% from Rs.2,546 million in the six months ended September 30,
2003 to Rs.2,291 million in the six months ended September 30, 2004 due to a reduction in the written down value of
aircraft and other assets being depreciated.
Interest Expense
Interest expenses decreased by 21.4% from Rs.1,568 million in the six months ended September 30, 2003 to Rs.1,232
million in the six months ended September 30, 2004 due to a reduction in effective interest rates and a decrease in our
indebtedness.
Profit/(Loss) before Taxation
We incurred loss before taxation of Rs.155 million in the six months ended September 30, 2003 as compared to profit
before taxation of Rs.1,582 million in the six months ended September 30, 2004 primarily. due to a 17.1% increase in
Total Revenues in comparison to a 6.7% increase in our Total Expenses.
Profit/(Loss) after Taxation
For the reasons stated above, we had a loss of Rs.155 million in the six months ended September 30, 2003 as compared
to a profit of Rs.1,294 million in the six months ended September 30, 2004.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated profit for the six months ended
September 30, 2004 was Rs.684 million. The main adjustment for the six months ended September 30, 2004 was due to
an additional charge of Rs.598 million for deferred taxation, arising as a result of adoption of AS-22 for the prior fiscal
year periods.
We have not restated the profit after tax for the six months ended September 30, 2003 for purposes of comparison.
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Fiscal 2004 Compared to Fiscal 2003
An overview of trends and developments and a comparison of significant items of income and expenditure for fiscal
2004 compared to fiscal 2003 are provided as follows:
• Buoyant economic trends resulted in significant traffic growth in fiscal 2004 over fiscal 2003;
• The extension of the APEX fare schemes, first introduced in fiscal 2003, and the introduction of other pricing
schemes in fiscal 2004 also contributed to increased passenger traffic in fiscal 2004 compared to 2003;
• In August 2003, Air Deccan, a no frills airline, commenced operations, thereby increasing competition in the
domestic market;
• In November 2003, the first part of the Naresh Chandra Committee Report was presented to the Government
of India. The report made recommendations for development of the Indian civil aviation sector. Certain of
these recommendations have been implemented by the Government of India.
• During fiscal 2004, we increased our seat capacity by adding two Boeing 737-900 aircraft (each with a 170
seat capacity) to our fleet on hire purchase arrangements and one Boeing 737-400 on an operating lease.
However, there were no net additions to our fleet as we subleased two Boeing 737-400 aircraft (each with a
136 seat capacity) to Skynet Asia Airways and we sold one Boeing 737-400.
75
Revenues
Our total revenues increased by 21.2% from Rs.29,421 million in fiscal 2003 to Rs.35,657 million in fiscal 2004. This
increase was primarily due to increased Passenger Revenues.
Passenger Revenues
Passenger Revenues increased by 20.2% from Rs.26,749 million in fiscal 2003 to Rs. 32,156 million in fiscal 2004
primarily due to:
• An increase in ASKMs from 8,496 million in fiscal 2003 to 9,162 in fiscal 2004 and;
• An increase of 7.8% in the total number of revenue passengers in fiscal 2004 as compared to fiscal 2003,
resulting in an improvement in Passenger Load Factors from 62.3% in fiscal 2003 to 63.9% in fiscal 2004;
and
• An increase in Rupee passenger fares of 10% in November 2002 and 15% in March 2003, the full impact of
which was reflected in fiscal 2004.
We experienced a significant increase in passenger revenue earnings in foreign currency and from passengers traveling
on APEX fares. We also experienced an overall improvement in Yield in spite of a marginal decline in the number of
full fare paying passengers.
Revenues from Excess Baggage
Revenues from excess baggage decreased by 2% from Rs.293 million in fiscal 2003 to Rs.287 million in fiscal 2004.
Revenues from Cargo
Revenues from carriage of cargo increased by 18.3% from Rs.1,454 million in fiscal 2003 to Rs.1,720 million in fiscal
2004. Increased revenue from carriage of cargo resulted from a 16.2% increase in cargo volumes from 74,657 tons in
fiscal 2003 to 86,749 tons in fiscal 2004.
Other Revenues
Other revenues increased by 19.5% from Rs.261 million in fiscal 2003 to Rs.312 million in fiscal 2004, primarily due
to an increase in the number of passengers.
Non-Operating Revenues
Non-operating revenues increased by 78.2% from Rs.664 million in fiscal 2003 to Rs.1,183 million in fiscal 2004,
primarily due to:
• Gains on foreign exchange because of the appreciation of the Rupee against the U.S. Dollar in fiscal 2004,
amounting to Rs.335 million;
• Profit on the sale of one Boeing 737-400 aircraft in October 2003, amounting to Rs.266 million.
Expenses
Aircraft Fuel
Expenditure on fuel increased by 14.1% from Rs.6,504 million in fiscal 2003 to Rs.7,418 million in fiscal 2004. This
increase was primarily due to a 5.4% increase in block hours from 133,686 hours in fiscal 2003 to 140,908 hours in
fiscal 2004, and an increase of 5.5% in the weighted average cost per liter of ATF from Rs.19.32 per liter in fiscal 2003
to Rs.20.38 per liter in fiscal 2004.
Other Operating Expenses
Variations in Other Operating Expenses for such periods are indicated below:
Year Ended March 31, Increase / (Decrease)
76
2003 2004
%
(Rs. thousands)
Maintenance and repairs 2,414,530 3,063,626 26.9%
Variable rentals 1,060,108 1,023,475 (3.5%)
Landing, navigation and other airport charges 2,226,292 2,084,838 (6.4%)
Insurance 371,373 352,133 (5.2%)
General and administrative 2,441,914 2,538,269
3.9%
Total 8,514,217 9,062,341 6.4%
• Maintenance and repairs costs increased by 26.9% from Rs.2,415 million in fiscal 2003 to Rs.3,064 million in
fiscal 2004 primarily due to a 5.4% increase in Block hours and an increase in the age of certain aircraft in our
fleet, which resulted in increased maintenance costs relating to certain of our older aircraft and an increased
frequency of higher maintenance checks for such aircraft to meet contractual redelivery obligations. In fiscal 2004,
we conducted three C Checks at facilities outside India (which are substantially more expensive than C Checks that
we typically conduct in India on our own) to meet redelivery conditions, which contributed to increased
maintenance costs. Changes to the rates of obsolescence of certain rotables also contributed to an increase in
maintenance costs.
• Variable rentals decreased by 3.5% from Rs.1,060 million in fiscal 2003 to Rs.1,023 million in fiscal 2004 because
the full impact of the reduction in the number of leased aircraft.
• Landing, navigation and other airport charges decreased by 6.4% from Rs.2,226 million in fiscal 2003 to Rs.2,085
million in fiscal 2004 primarily due to the following:
o a 25% reduction in landing and terminal navigation landing charges for the Northeastern region;
o the application of domestic airport rates to Goa, Hyderabad, Ahmedabad and Guwahati (which are
international airports and where international airport charges earlier applied);
o a 15% reduction in landing charges at all airports (excluding civil enclaves, and Cochin airport)
effective February 12, 2004 ; and
o Exemption on landing charges applicable for aircraft with less than 80 seats, except at civil enclaves
and at the Cochin airport, which resulted in reduced costs for our ATR operations.
• Insurance costs decreased by 5.2% from Rs.371 million in fiscal 2003 to Rs.352 million in fiscal 2004, because of
lower insurance premium rates negotiated by us.
• General and administrative costs increased by 3.9% from Rs.2,442 million in fiscal 2003 to Rs.2,538 million in
fiscal 2004 primarily due to a high level of operations viz. an increase in the number of flights flown, increase in
block hours and an increase in the number of passengers.
Employee Remuneration and Benefits
Employee remuneration and benefits increased by 7.1% from Rs.2,634 million in fiscal 2003 to Rs.2,822 million in
fiscal 2004 primarily due to salary increases given to our employees in fiscal 2004. The total number of net employees
as of March 31, 2003 was 5,467, as compared to 5,307 employees as of March 31, 2004.
Selling and Distribution Costs
Selling and distribution costs increased by 2.7% from Rs.4,150 million in fiscal 2003 to Rs.4,264 million in fiscal 2004.
This increase resulted from:
• An increase in CRS and GDS costs of 3.8 % from Rs.859 million in fiscal 2003 to Rs.892 million in fiscal
2004 primarily due to an increase in number of passengers;
• This was partly offset by a decrease in commissions of 1.3% from Rs.3,104 million in fiscal 2003 to Rs.3,063
million in fiscal 2004 due to a reduction in the commission rates paid to travel agents for Rupee fares, which
decreased from 6% on the gross fare to 5% on the basic fare (excluding taxes and insurance charges) effective
July 15, 2002. This reduction was achieved in spite of an increase in Passenger Revenues and revenues from
carriage of cargo.
77
Aircraft Rentals
Aircraft lease rentals decreased by 18.5% from Rs.2,780 million in fiscal 2003 to Rs.2,266 million in fiscal 2004
primarily due to;
• Reduction in net charge of lease rentals on two Boeing 737-400 aircraft since these aircraft were subleased to
Skynet Asia Airways; and
• Reduction in aircraft lease rentals that we negotiated with the lessors of two of our Boeing 737 aircraft and
five of our ATR72-500 aircraft.
Depreciation
Depreciation increased by 8.9% from Rs.4,733 million in fiscal 2003 to Rs.5,152 million in fiscal 2004 primarily due to
the increased proportion of owned aircraft in our fleet. The increase in depreciation was also due to the full year impact
of the four and two Boeing 737 aircraft acquired in fiscal 2003 and fiscal 2004, respectively, under hire purchase
agreements.
Interest Expense
Interest expense increased by 12.9 % from Rs.2,561 million in fiscal 2003 to Rs.2,891 million in fiscal 2004 primarily
due to the increased indebtedness to finance the new aircraft acquired in fiscal 2004 under hire purchase agreements.
Profit/(Loss) before Taxation
We recorded profit before taxation of Rs.1,781 million in fiscal 2004 compared to a loss before taxation of Rs.2,456
million in fiscal 2003.
Profit/(Loss) after Taxation
Profit after taxation was Rs.1,631 million in fiscal 2004 compared to a loss of Rs.2,445 million in fiscal 2003.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated loss for fiscal 2003 was
Rs.1,195 million, as compared to our restated profit for fiscal 2004 of Rs.1,492 million. The main adjustments for
fiscal 2004 are described below:
• Reversal of maintenance provisions as per AS-29 in an amount of Rs.512 million;
• Deferred tax charge as a result of application of AS-22 in an amount of Rs.581 million; and
• Charge on account of prior period items in an amount of Rs.60 million.
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Fiscal 2003 Compared to Fiscal 2002
An overview of trends and developments and a comparison of significant items of income and expenditure for fiscal
2003 in comparison to fiscal 2002 are provided as follows:
• Our revenues in fiscal 2002 and fiscal 2003 were affected by general economic and other conditions affecting
travel in India, including a slowdown following the terrorist strikes in the United States on September 11,
2001, the sectarian violence in Gujarat in fiscal 2003 and an economic slowdown affecting India and other
countries during such periods;
• There were significant capacity additions in fiscal 2002 and fiscal 2003:
• In fiscal 2002, we leased three ATR 72-500s and entered into hire purchase arrangements for
four Boeing-737 NG aircraft; we also returned one Boeing 737-400 upon expiry of the lease.
78
• In fiscal 2003, we added four Boeing 737-NG on hire purchase and returned one Boeing 737-400
upon the expiry of the lease;
• In fiscal 2003, we entered into hire purchase agreements for four Boeing 737-700 aircraft which
were earlier on leases from another party;
• In June 2002, we introduced the advanced purchase excursion fares, or APEX fares, on select routes in India in
order to encourage increases in passenger traffic on these routes.
Revenues
Our revenues increased by 11.0% from Rs.26,497 million in fiscal 2002 to Rs.29,421 million in fiscal 2003. This
increase was primarily due to increased Passenger Revenues.
Passenger Revenues
Passenger Revenues increased by 13.2% from Rs.23,622 million in fiscal 2002 to Rs.26,749 million in fiscal 2003 due
to:
• An increase in ASKMs by 9.2% from 7,780 million in fiscal 2002 to 8,496 million in fiscal 2003;
• An increase in RPKMs by 10.8% from 4,777 million in fiscal 2002 to 5,291 million in fiscal 2003 and an
increase in Passenger Load Factors from 61.4% to 62.3%;
• An increase in the number of revenue passengers by 10.1% in fiscal 2003 as compared to fiscal 2002;
• An increase in passenger fares by 10.0% effective November 2002, the full year impact of which was reflected
in a 2.9% increase in the average revenue per passenger in fiscal 2003 compared to that in fiscal 2002;
• An increase in the number of passengers, which was partly due to the introduction of APEX fares on certain
routes;
• Following the terrorist attacks in the United States on September 11, 2001, insurance costs increased
significantly. To meet this increase, we and other airlines in India introduced a surcharge of US$5.00 and
Rs.250 for foreign exchange fare passengers and Rupee fare passengers, respectively.
Revenues from Excess Baggage
Revenues from excess baggage increased by 16.7% from Rs.251 million in fiscal 2002 to Rs.293 million in fiscal 2003.
This increase resulted from an increase in the number of revenue passengers flown.
Revenues from Cargo
Revenues from carriage of cargo increased by 22.2% from Rs.1,190 million in fiscal 2002 to Rs.1,454 million in fiscal
2003. This increased resulted from a 14.2% increase in cargo tonnage from 65,385 tons in fiscal 2002 to 74,657 tons in
fiscal 2003 due to the aggressive marketing of our cargo services.
Other Revenues
Other revenues increased by 31.1% from Rs.199 million in fiscal 2002 to Rs.261 million in fiscal 2003. This increase
was primarily due to an increase in the amount of handling fees retained by us for collection of IATT, due to an
increase in Passenger Revenue and from the corresponding amount of PSF collected, due to an increase in the number
of passengers. In addition, we introduced cancellation charges on tickets purchased on APEX fares (which are
significantly higher than cancellation charges on normal fare tickets).
Non-operating Revenues
Non-operating Revenues decreased by 46.2% from Rs.1,235 million in fiscal 2002 to Rs.664 million in fiscal 2003.
This decrease was primarily due to a Rs.846 million profit on the sale of two aircraft in fiscal 2002 and there being no
comparable profit in fiscal 2003. These aircraft were simultaneously leased back by us.
Expenses
79
Aircraft Fuel
Fuel expenditure increased by 23% from Rs.5,290 million in fiscal 2002 to Rs.6,504 million in fiscal 2003 due to an
increase of 8.4% in block hours from 123,340 to 133,686 and an increase of 14.3% in the weighted average cost of fuel
from Rs.16.98 per liter in fiscal 2002 to Rs.19.32 per liter in fiscal 2003. After September 2001, the price of ATF
increased significantly and we experienced the full year effect of such increase in fiscal 2003. This was offset in part
by the introduction of new aircraft in our fleet which were more fuel-efficient than the aircraft they replaced.
Other Operating Expenses
Other Operating Expenses increased by 19% from Rs.7,152 million in fiscal 2002 to Rs.8,514 million in fiscal 2003.
The variations in our Other Operating Expenses for such periods were as follows:
Year ended March 31,
Increase (Decrease)
2002 2003
%
Maintenance and repairs 1,400,143 2,414,530 72.4%
Variable rentals 1,093,185 1,060,108 (3.0%)
Landing, navigation and other airport charges 2,185,779 2,226,292 1.9%
Insurance 242,159 371,373 53.4%
General and administrative 2,231,028 2,441,914 9.5%
Total 7,152,294 8,514,217 19.0%
• Maintenance and repairs costs increased by 72.4% from Rs.1,400 million in fiscal 2002 to Rs.2,415 million in
fiscal 2003 primarily due to an increase of 8.4% in block hours. A negotiated credit of Rs.759 million given to
us by an engine maintenance service provider also lowered our maintenance costs for fiscal 2002.
• Variable rentals under our operating leases decreased by 3% from Rs.1,093 million in fiscal 2002 to Rs.1,060
million in fiscal 2003. This decrease was because of the lower number of leased aircraft in our fleet in fiscal
2003 compared to that in fiscal 2002.
• Landing, navigation and other airport charges increased marginally by 1.9% from Rs.2,186 million in fiscal
2002 to Rs.2,226 million in fiscal 2003. Although there was an increase of 8.9% in the number of flights
from 80,031 in fiscal 2002 to 87,114 in fiscal 2003, this was substantially offset by significant reductions in
the route navigation charges with effect from October 2002, as a result of which such charges were levied on
the basis of the MTOW of the aircraft as well as the distance flown, as compared to the earlier method of
determining such charges based only on the MTOW of the aircraft.
• Insurance costs increased significantly by 53.4% from Rs.242 million in fiscal 2002 to Rs.371 million in fiscal
2003 as a result of the increase in insurance premiums following the terrorist attacks in the United States in
September 2001 as well as an increase in the fleet value because of the induction of four new Boeing 737
aircraft in fiscal 2003. In addition, in fiscal 2003 we experienced the full year impact of the induction of seven
new aircraft in fiscal 2002.
• General and administrative costs increased by 9.5% from Rs.2,231 million in fiscal 2002 to Rs.2,442 million
in fiscal 2003 due to the increased scale of our operations.
Employee Remuneration and Benefits
Employee remuneration and benefits increased by 14.6% from Rs.2,299 million in fiscal 2002 to Rs.2,634 million in
fiscal 2003 mainly due to an increase in the average number of employees during fiscal 2003 as compared to that in
fiscal 2002; however, the net number of employees (viz. excluding employees whose salaries are charged back to Jetair
pursuant to our GSA agreement with Jetair) as of March 31, 2003 of 5,467 was lower than the net number of employees
as of March 31, 2002 of 5,537. In addition, due to the increase in our fleet size, we were required to recruit more pilots
and in-flight crew, which resulted in an increase in the mix of employees with higher remuneration packages. Further,
marginal salary increases were given to employees in fiscal 2003.
Selling and Distribution Costs
80
Selling and distribution costs increased by 11.4% from Rs.3,727 million in fiscal 2002 to Rs.4,150 million in fiscal
2003. The increase in costs can be attributed to:
• An increase in CRS and GDS costs by 20.1% from Rs.715 million to Rs.859 million due to an increase in
passenger numbers and an increase in GDS rates levied by certain of our GDS service providers; and
• An increase in commission payments to GSAs and travel agents by 8.8% from Rs.2,852 million to Rs.3,104
million due to increased Passenger Revenues and revenues from carriage of cargo.
Aircraft Rentals
Aircraft lease rentals decreased by 6.2% from Rs.2,965 million in fiscal 2002 to Rs.2,780 million in fiscal 2003
primarily due to the reduction in the number of leased aircraft in our fleet as compared to fiscal 2003. During fiscal
2003, we reduced the number of aircraft under lease arrangements in our fleet by five.
Depreciation
Depreciation increased by 35.7% from Rs.3,488 million in fiscal 2002 to Rs.4,733 million in fiscal 2003 primarily due
to the addition of eight aircraft under hire purchase agreements in fiscal 2003.
Interest Expense
Interest expense increased by 49.8% from Rs.1,709 million in fiscal 2002 to 2,561 million in fiscal 2003 primarily due
to the addition of eight aircraft under hire purchase agreements in fiscal 2003.
Profit/(Loss) before Taxation
We had a loss before taxation of Rs.2,456 million in fiscal 2003 compared to a loss before taxation of Rs.134 million in
fiscal 2002.
Profit/(Loss) after Taxation
Loss after taxation in fiscal 2003 was Rs.2,445 million compared to a loss after taxation of Rs.134 million in fiscal
2002.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated loss for fiscal 2002 was Rs.311
million, as compared to our restated loss for fiscal 2003 of Rs.1,195 million.
The main adjustments for fiscal 2003 are described below:
• Charge to our frequent flyer expenses due to computation on incremental cost basis pursuant to the Airline
Accounting Guidelines issued by IATA with effect from April 1, 2002 in an amount of Rs.58.90 million;
• Reversal of provisions as per AS 29 in an amount of Rs 393.51 million;
• Deferred tax credit as a result of application of AS-22 in an amount of Rs 853 million; and
• Credit on account of prior period items in an amount of Rs.70.15 million.
The main adjustments for fiscal 2002 are described below:
• Charge to our frequent flyer expenses due to computation on incremental cost basis pursuant to the Airline
Accounting Guidelines issued by IATA with effect from April 1, 2002 in an amount of Rs.19.81 million;
• Reversal of provisions as per AS-29 in an amount of Rs 27.49 million;
• Deferred tax credit as a result of application of AS-22 in an amount of Rs.86.34 million;
• Credit on account of prior period items in an amount of Rs.61.10 million; and
• Other adjustments (debits) in an amount of Rs.318.16 million relating to:
• revision of the estimated useful life of certain equipment and related provisions for obsolesence; and
• the retrospective effect of renegotiation of a maintenance contract in fiscal 2002.
81
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Liquidity and Capital Resources
Liquidity
Historically, our primary liquidity requirements have been to finance our working capital requirements for our
operations and our capital expenditures. We have met these requirements from cash flows from operations as well as
from borrowings. We seek to maintain at least two months of operating expenses as cash and cash equivalents, and we
also have working capital facilities extended by various banks.
Cash flows
The table below summarizes our cash flows, as restated, for the periods indicated:
Fiscal 2002
Fiscal 2003
Fiscal 2004
Six months ended
September 30, 2004
(Rs. thousands)
Net cash from
operating activities 2,572,665 4,294,029 10,371,166 6,220,385
Net cash from (used)
investing activities (6,917,206) (12,920,421) (3,973,465) (3,472,207)
Net cash from (used)
financing activities 5,132,445 8,096,688 (6,709,517) (2,033,874)
Net increase (decrease)
in cash and cash equivalents 787,904 (529,704) (311,816) 714,303
Operating Activities
Our cash flow from operating activities depends essentially on our net profits. We have in fiscal 2002, 2003, 2004 and
the six months ended September 30, 2004, generated sufficient cash flow from our operations to meet employee
remuneration and benefits, aircraft fuel, aircraft rentals, interest and Other Operating Expenses.
Our net cash flow from operating activities increased by 141.5% from Rs.4,294 million in fiscal 2003 to Rs.10,371
million in fiscal 2004, primarily due to robust growth in Operating Revenues and net profit.
Investing Activities
Our net cash flow used in investing activities is determined by our aircraft and other capital asset acquisition program.
Beginning fiscal 2001, we had scheduled deliveries of ten Boeing 737 aircraft through May 2003. Of these ten aircraft,
four each were delivered in fiscal 2002 and fiscal 2003 and one aircraft was delivered in fiscal 2004. All of these
aircraft have been acquired on a hire purchase basis and have been financed to the extent of 85% of the aircraft value
through term loans guaranteed by the US EXIM Bank. In each case, we were required to arrange financing for the
remaining 15% of the aircraft value.
In fiscal 2003, the Company also took 4 aircraft on hire purchase from GE Capital Services India Limited. These
aircraft were previously available to us on an operating lease from another lessor. In such cases, we were required to
arrange financing for 10% of the aircraft value.
In addition, we took delivery of two Boeing 737-900s in fiscal 2004 – one in May 2003 (on hire purchase) and one in
October 2003 (on finance lease). These were also supported by US Exim Bank guarantees and we were required to
arrange financing for 15% of the aircraft value. We also sold one of our Boeing 737-400 aircraft in fiscal 2004, after
terminating the hire purchase agreement for this aircraft.
Our net cash used in investing activities decreased from Rs.12,920 million in fiscal 2003 to Rs.3,973 million in fiscal
2004, primarily due to a higher number of aircraft that we acquired in fiscal 2003 as compared to fiscal 2004 and
because of the termination of the hire purchase agreement relating to one Boeing 737 aircraft.
Financing Activities
82
Our net cash flow from financing activities is determined by the level of principal and interest payments on our
outstanding debt, the incurrence of new indebtedness and the issuance of new capital stock, interest and dividend
payments thereon and currency exchange rates. There has been no issuance of any class of shares since February 2001,
when we issued 69,828,750 cumulative convertible redeemable preference shares to International Finance Corporation,
or IFC.
Our net cash from financing activities in fiscal 2003 was Rs.8,097 million, our net cash used in financing activities was
Rs.6,710 million in fiscal 2004.
Historical and Planned Capital Expenditures
The following table sets forth, for the periods indicated, certain information related to our capital expenditures:
Year ended March 31,
Six months ended September 30,
2002
(Rs. thousands)
2003
(Rs. thousands)
2004
(Rs. thousands)
2003
(Rs. thousands)
2004
(Rs. thousands)
Ground support equipment and vehicles 146,390 38,060 15,724 6,627 28,920
Aircraft and engines 16,419,488
(1)
13,423,697 3,501,909 1,868,299 688,561
Simulator 513,755 - - - -
IT and office equipment(including software) 116,185 35,192 110,426 30,172 106,256
Others 149,267 35,026 21,673 13,166 19,875
Total 17,345,085 13,531,975 3,649,732 1,918,264 843,612
Note: Work in progress for fiscal 2002, 2003 and 2004 was Rs.13,015.46 million, Rs.3,007.87 million and Rs.151.90 million, respectively.
(1) In fiscal 2002 aircraft owned by us were revalued and the revaluation reserve on 31 March, 2002 was Rs.7,299.67 million.
We procure our aircraft under operating leases, hire purchase agreements and finance leases. Although we believe that
operating lease financings and/or hire purchase finance will be available for our future aircraft deliveries, we cannot
assure you that we will be able to secure financings on terms attractive to us, if at all. To the extent we cannot secure
financing, we may be required to modify our aircraft acquisition plans or incur higher than anticipated financing costs.
However, we expect to meet our operating obligations as they become due through available cash and internally
generated funds, supplemented as necessary by short-term credit lines.
We currently operate 42 aircraft. We have entered into agreements to lease seven additional Boeing 737-800 aircraft
which are expected to be delivered in 2005. In December 2004 we paid Boeing a refundable security deposit to acquire
ten additional Boeing 737-800 aircraft with CFM56-7B24 engines. The expected date of delivery of such aircraft is
between January 2006 and October 2007. Definitive purchase agreements will need to be negotiated and entered into
on or prior to January 31, 2005, unless otherwise extended. If the purchase agreements are entered into, then closer to
the delivery dates of each aircraft we will determine the financing arrangements under which these aircraft will be
obtained. The entry into such purchase agreement and financial arrangements in connection therewith is also subject to
the Company obtaining board approval and such necessary regulatory approvals as may be required.
Our expected capital expenditures for fiscal 2005 and for fiscal 2006 are as follows:
Fiscal 2005
(Rs. thousands)
Fiscal 2006
(Rs. thousands)
Aircraft Engines 1,150,000*
Simulator 690,000*
Ground Support Equipment & Vehicles 198,797 690,000*
IT & Office Equipment 227,522 200,000
Maintenance Hangar related workshops 690,000*
Training Centre 460,000*
Others (including furniture, fixtures and electrical fittings) 541,181 300,000
Total 967,500 4,180,000
* from the proceeds of the Offer
The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20
aircraft to provide services to other international destinations. These destinations exclude the Gulf countries of UAE,
Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three
years. We are accordingly considering the feasibility of flying to other international destinations, although it is
uncertain when this policy change will become effective and which destinations we may be permitted to serviceWe
have made a preliminary assessment of the expenditures that we may incur for creating the required operational
capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases, acquisition of slot
positions at foreign airports, hiring of additional and suitably qualified personnel for the new aircraft types, handling
83
and catering agreements and acquisition of equipment before we can commence operations on such routes, if permitted
by the Government of India. Based on our preliminary assessment, we anticipate an outlay of Rs.3,000 million to
acquire equipment, create necessary infrastructure and recruit and train personnel.
We expect to meet the above capital expenditures through a combination of means, including the net proceeds of the
Fresh Issue, funds generated from operations, bank financing and credit arrangements with export credit agencies, debt
or other securities offerings and/or vendor financings.
Contractual Obligations
The following table summarizes our significant contractual obligations as of September 30, 2004:
As of September
30, 2004
Less than One Year
One to Five Years
More than Five Years
(Rs. thousands) (Rs. thousands) (Rs. thousands) (Rs. thousands)
Aircraft and engine operating leases 5,562,277 1,968,518 3,593,759 -
Hire purchase and finance obligations
Aircraft 27,523,603 2,781,812 11,960,993 12,780,798
Vehicles 16,187 7,740 8,447 -
Secured Loans 600,000 200,000 400,000 -
Indebtedness
The following table summarizes our secured and unsecured long-term indebtedness and subordinated debt obligations
as of September 30, 2004. We had no short-term indebtedness as of September 30, 2004.
As of September 30, 2004
Secured
HDFC Limited
(Secured by hypothecation of simulator and other accessories
thereto)
600
Unsecured
Hire Purchase/Finance Lease installments for aircraft 27,524
Hire Purchase/Finance Lease installments for vehicles 16
Subordinated Debt from IDFC
(collateral in the form of a bank guarantee to the extent of 35% of
the outstanding loan)
3,341
Total 31,481
Under the U.S. Exim-guaranteed hire purchase finance agreements relating to 19 of our aircraft, we are required to
comply with certain financial covenants. Pursuant to agreements relating to nine of the aircraft, at the end of each fiscal
quarter our ratio of EBITDAR to fixed charges must be at least 1.1:1 and we may not pay cash dividends in excess of
US$1.70 million. The covenants relating to the other 10 aircraft require that, at the end of each fiscal year, we have a
fixed charge ratio of at least 1.1:1 and a ratio of total liabilities to tangible net worth of not more than 3:1. In all cases,
financial ratios are calculated on the basis of particular terms defined in the agreements, and not on the basis of Indian
GAAP or IFRS.
The subordinated debt facility has been availed from IDFC and is subordinated to all present and future indebtedness of
our Company whether secured or unsecured. Under our IDFC subordinated debt agreement, we are required to
maintain a certain EBITDA to debt ratio, debt to equity ratio, net profit margin and closing cash balance for each fiscal
year. Our inability to comply with any of the required financial covenants could result in default under our hire
purchase or debt agreements. As of November 30, 2004, we were in compliance with the covenants of all of our hire
purchase and debt agreements.
Off-Balance Sheet Arrangements
None of our operating lease obligations are reflected on our balance sheet. We are responsible for all maintenance,
insurance and other costs associated with operating these aircraft; however, we have not made any residual value or
other guarantees to our lessors.
Quantitative and Qualitative Disclosures about Market Risk
Aircraft Fuel
84
Under existing policies of the Government, domestic airlines such as us are not permitted to enter into hedging
transactions to mitigate increases in the price of ATF. Accordingly, we are dependent upon three Government-
controlled companies for our fuel requirements and are subject to variations in the price of ATF at rates fixed by such
companies. For a discussion on various factors that may affect the price of ATF, see “Factors affecting our Results of
Operations - Price of Aviation Turbine Fuel” on page 60 of this Draft Red Herring Prospectus.
Exchange Rate Risk
We face exchange rate risk to the extent that our expenses and debt repayments are denominated in currencies other
than Indian rupees. Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our
exchange rate risk.
In fiscal 2004, approximately 15% of our Total Revenues, which are derived from tickets sold in foreign currencies and
25% of our Total Expenses, such as aircraft and engine maintenance services, aircraft lease payments, computer
reservation systems costs and aircraft insurance, were in currencies other than Indian Rupees, predominantly U.S.
Dollars. In addition, 32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004 is foreign
currency denominated.
To manage exchange rate risk, we enter into derivative contracts with various counterparties to protect ourselves
against a depreciation of the Rupee in relation to the U.S. Dollar. As of September 30, 2004, there were no foreign
currency forward contracts outstanding.
While we believe that our forward contracts, together with our U.S. dollar denominated revenue, protect us against
certain short-term swings in the Rupee and U.S. Dollar exchange rate, there can be no assurance that they will fully
mitigate any adverse changes in exchange rates.
Interest Rate Risk
Our financial results are subject to changes in interest rates, which may affect our debt service obligations and our
access to funds. As of September 30, 2004, an outstanding amount of Rs.10,134 million, or approximately 32.2% of our
total indebtedness (including subordinated debt) is on a floating rate basis and linked to LIBOR.
Our floating rate loans are linked to three month and six month LIBOR. Any increase in LIBOR could increase our
interest costs on these loans. For example, a 1% increase in LIBOR will result in an additional interest cost of
approximately Rs.100 million in fiscal 2005, based on our existing debt as of September 30, 2004, not considering our
derivative contracts. We use derivative instruments to hedge against adverse movements in interest rates with the
objective of reducing the cost of debt. The underlying notional amounts covered as of September 30, 2004 was
Rs.21,267 million, which represents approximately 75% of the total exposure (excluding subordinated debt). The value
of these derivative instruments are subject to movements in the interest rates and may result in a negative carry from
time to time.
Inflation
In recent years, India has not experienced significant inflation, and accordingly inflation has not had any material
impact on our business and results of operations. According to CMIE inflation in India was approximately 3.7%, 3.4%,
5.4% in fiscal 2002, 2003 and 2004, respectively. However, over the past few months, inflation rates have increased
significantly. According to the Office of the Economic Advisor, Department of Industrial Policy and Promotion, the
annual rate of inflation, calculated on a point to point basis, was provisionally 6.73% for the week ended December 11,
2004 compared to an inflation rate of 5.80% for the corresponding week in 2003. Although the Government has
initiated several economic measures to curb the rise in inflation rates, it is unclear at this stage whether these measures
will have the desired effect. This sharp rise in inflation rates in recent months may adversely affect growth in the
Indian economy and our results of operations.
Unusual or Infrequent Events or Transactions
Except as described elsewhere in this Draft Red Herring Prospectus, there have been no events or transactions to our
knowledge which may be described as “unusual” or “infrequent”.
Significant economic/regulatory changes
Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by persons
resident outside India requires the prior approval of the FIPB. However, the Ministry of Civil Aviation, Government of
India, pursuant to a Notification No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette
85
of India on November 13, 2004) has permitted foreign direct investment in the “Air Transport Services (Domestic
Airlines)” sector up to 49% through the “automatic route” (i.e. without the prior approval of the FIPB). The November
10, 2004 notification also permits investment by an NRI up to 100% in an Indian domestic airline company under the
“automatic route”. The notification also clarifies that no direct or indirect equity participation by foreign airlines is
permitted in a domestic airline. Amendments to the FEMA Regulations to reflect the policy changes notified in the
November 10, 2004 notification are awaited.
The Government of India has recently announced that the Union Cabinet has approved a policy change to allow private
domestic air carriers to fly to additional international destinations. This policy is not yet effective. Any delay or
inability to obtain permissions and approvals from relevant regulatory authorities could have a material adverse effect
on our international expansion strategy and results of operations.
The Indian aviation regulatory framework is undergoing changes. We cannot yet assess how the evolving regulatory
framework will affect our business and results of operations. No assurance can be given that these or other changes in
the Indian airline industry regulations will not have a material adverse effect on our business and results of operations.
Known trends or uncertainties
Other than as described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, to our knowledge
there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on
revenues or income of our Company from continuing operations.
Future relationship between costs and income
Other than as described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, to our knowledge
there are no known factors which will have a material adverse impact on the operation and finances of our Company.
New product or business segment
Other than as described in this Draft Red Herring Prospectus, to our knowledge, there are no new products or business
segments.
Seasonality of business
Seasonal variations in traffic affect our results of operations. We generally experience lower Passenger Load Factors
(defined as the percentage of aircraft seating capacity that is actually utilized) during the first half of each fiscal in
comparison to that experienced during the remainder of the year. In addition, some of our areas of operations in North
and East India experience bad weather conditions in winter, resulting in additional expenditure caused by delayed and
cancelled flights and providing accommodation to passengers. Given our high proportion of fixed cost obligations,
these seasonal factors are likely to cause our results of operations to vary from quarter to quarter during a particular
financial year.
Competitive conditions
The Company expects competition to intensify from existing and potential airlines in India. For further details please
refer to the discussions of our competition in the sections entitled “Risk Factors” and “Business” beginning on pages xi
and 36 in this Draft Red Herring Prospectus.
Significant developments after September 30, 2004 that may affect our future results of operations
Except as stated elsewhere in this Draft Red Herring Prospectus, to our knowledge no circumstances have arisen since
the date of the last financial statements as disclosed in this Draft Red Herring Prospectus which materially and
adversely affects or is likely to affect, the operations or profitability of our Company, or the value of our assets or our
ability to pay our material liabilities within the next twelve months.
Except as stated elsewhere in this Draft Red Herring Prospectus, there is no subsequent development after the date of
the Auditor’s Report which we believe is expected to have a material impact on the reserves, profits, earnings per share
and book value of our Company.
86
New Accounting Standards
Other than the impact of AS-29, as discussed elsewhere in this Draft Red Herring Prospectus, our management does not
believe that there will be a material impact on our financial statements on account of changes in accounting policies
under Indian Accounting Standards as announced by Institute of Chartered Accountants of India.
87
MANAGEMENT
Board of Directors
As per our Articles of Association, we cannot have less than 3 nor more than 15 Directors. We currently have 12
Directors.
The following table sets forth details regarding our Board of Directors as of the date of this Draft Red Herring
Prospectus:
Name, Designation, Father’s Name,
Address, Occupation and Term
National of
Age
(years)
Other Directorships
Mr. Naresh Goyal
Chairman
(S/o Mr. Jagdish Rai Goyal)
72, Jupiter Apartment, Anstey Road
Off Altamount Road
Mumbai 400 026, India
Term: Non-retiring Director
India 55 Jetair Private Limited (Chairman)
Tail Winds Limited
International Cargo Carriers Private Limited
Jet Enterprises Private Limited
Vimpal Holdings Private Limited
Jetair Tours Private Limited
Jet Aviation Private Limited
UPS Jetair Express Private Limited
UPS Jetair Logistics Private Limited
Jet Airways LLC
Jetair Worldwide AG
Mr. Ali Ismail Ghandour
Director
(S/o Mr. Ismail Ghandour)
PO Box 3371
Amman 11181
Jordan
Term: Until next Annual General Meeting
Jordan 73 Aram International Investments (Chairman)
Jordan Tourism Investments (Chairman)
Tail Winds Limited
Annhar Media
New TV
Mr. J.R. Gagrat
Director
(S/o Mr. Rustam Ardeshir Gagrat)
Buena Vista, Pochkhanwala Road
New Worli
Mumbai 400 025, India
Term: Until next Annual General Meeting
India 72 Phil Corporation Limited
Hindustan Thompson Associates Private Limited
Tail Winds Limited
Indo-Aden Salt Manufacturing and Trading Company Private
Limited
Potash Fertilisers (India) Private Limited
Bombay Incorporated Law Society
The Cricket Club of India Limited
Mr. Victoriano P. Dungca
Director
(S/o Placido P. Dungca)
27675 Vista Bahia Way
Hayward, California 94542
USA
Term: Until next Annual General Meeting
USA 68 Aviorealco LLC
UPS Jetair Express Private Limited
Tail Winds Limited
UPS Jetair Logistics Private Limited
Jet Airways of India, Inc.
Jetair Business Solutions Private Limited
Mr. Javed Akhtar
Independent Director
(S/o Mr. Jannisar Akhtar)
702, Sagar Samrat, Green Field
Near Juhu Post Office
Mumbai 400 049, India
Term: Until next Annual General Meeting
India 59
Mr. I.M. Kadri
Director
(S/o Mr. Mustafa Hasan B. Kadri)
4A, Shiv Sagar Estates
Dr. AB Road, Worli
Mumbai 400 018, India
Term: Until next Annual General Meeting
India 74 Indian Resort Hotels Limited
Kadri Consultants Private Limited
Kadri Consultants LLC
The Cricket Club of India Limited
Mr. Charles A. Adams
Director
(S/o Mr. Charles Harold Adams)
115, Nayatt Road
Barrington, Rhode Island 02806
USA
Term: Until next Annual General Meeting
USA 64 Jetair Business Solutions Private Limited
88
Mr. P.R.S. Oberoi
Director
(S/o Rai Bahadur M.S. Oberoi)
Villa Ashiana, Kapashera
Bijwasan
New Delhi – 110 037
Term: Until next Annual General Meeting
India 75 EIH Limited (Chairman)
Oberoi Hotels Private Limited (Chairman)
EIH Associated Hotels Limited (Chairman)
Island Resort Limited
Indus Hotels Corporation Limited
Nandi Hills Hotels & Resorts Limited
Mashobra Resort Limited
Mercury Car Rentals Limited
Mercury Travels Limited
Mumtaz Hotels Limited
Island Hotel Maharaj Limited
Oberoi Camarco Limited
Oberoi Kerala Hotels & Resorts Limited
Rajgarh Palace Hotels & Resorts Limited
Aravali Polymers Private Limited
Balamurie Island Resorts Private Limited
Bombay Plaza Private Limited
ETA Engineering Private Limited
Oberoi Buildings & Investments Private Limited
Oberoi Holdings Private Limited
Oberoi Investments Private Limited
Oberoi Properties Private Limited
Oberoi Plaza Private Limited
Oberoi Leasing & Finance Company Private Limited
CCA Leisure Services Private Limited
Mercury Himalayan Explorations Private Limited
EIH Holdings Limited
EIH International Limited
Hungaria Oberoi Rt.
Oberoi Corporation Limited
Oberoi Holdings Hong Kong Limited
Oberoi Investment Limited
Oberoi Mauritius Limited
Oberoi Services Pte. Ltd.
Saudi Oberoi Company Limited
EIH Marrakesh Limited
Mr. Aman Mehta
Independent Director
(S/o Mr. Som Raj Mehta)
4/7, Shanti Niketan
New Delhi 110 021, India
Term: Until next Annual General Meeting
India 58 PCCW Limited
Raffles Holdings Limited
Wockhardt Limited
Tata Consultancy Services Limited
Vedanta Resources Plc.
Dr. Vijay Laxman Kelkar
Independent Director
(S/o Mr. Laxman Vishnu Kelkar)
CI/11, South End Road
Lodhi Gardens
New Delhi 110 003
Term: Until next Annual General Meeting
India 62 IDFC Asset Management Company Limited
Tata Chemicals Limited
Mr. Satyan G. Pitroda
Independent Director
(S/o Mr. Gangaram T. Pitroda)
301, Trinity Lane, Oak Brook
Illinois 60523, USA
Term: Until next Annual General Meeting
India 62 WorldTel Limited (Chairman)
M.T.I. International
C- Sam Inc.
Mr. Saroj K. Datta
Executive Director
(S/o Mr. Sailendra Prasad Datta)
2102, A/B/C, Odyssey
Hiranandani Gardens, Powai
Mumbai 400 076, India
Term: Until next Annual General Meeting
India 68 Jetair Private Limited
International Cargo Carriers Private Limited
Jetair Tours Private Limited
Jet Hotels Private Limited
Jet Aviation Private Limited
France Air Private Limited
World Air Private Limited
India Capitol Resource Services Private Limited
Jet Enterprises Private Limited
Vimpal Holdings Private Limited
Brief Biographies
Mr. Naresh Goyal, 55, a non-resident Indian national, is the chairman of the Company. He is the chairman of the
Board of Directors. Mr. Goyal holds a commerce degree and after completing his education in 1967, joined the travel
89
business and underwent extensive practical training with several foreign airlines. Mr. Goyal has over 37 years of
experience in the civil aviation industry.
In May 1974, Mr. Goyal established Jetair Private Limited, which is a leading GSA in India presently representing 15
international airlines and our Company. Mr. Goyal has been involved in developing studies of traffic patterns, route
structures, operational economies and flight scheduling, all of which have made him an authority in the world of
aviation and travel.
In 1992, as part of the ongoing diversification of his business interests, Mr. Goyal caused to be promoted our Company
for operating scheduled air services in India.
In recognition of his achievements, Mr. Goyal has been the recipient of several national and international awards. In
2000, he received the ‘Entrepreneur of the Year Award’ for Services from Ernst & Young and the ‘Distinguished
Alumni Award’ for distinguished performance as an entrepreneur. Other awards conferred on Mr. Goyal include the
‘Outstanding Asian Indian’ award for leadership and contribution to the global community given by the Indian
American Centre for Political Awareness in 2003, the Qimpro Gold Standard Award in 2002 and the Aerospace
Laurels Award for outstanding achievement in the field of commercial air transport, which has been awarded to him
twice, in April 2000 and February 2004. Mr. Goyal has also been recently elected to the Board of Governors of IATA
in June 2004.
Mr. Ali Ghandour, 73, a Jordanian national, has been a Director of the Company since February 1998. Mr. Ghandour
is a qualified aeronautical engineer from New York University, U.S.A. Mr. Ghandour has over 50 years of experience
in the civil aviation industry. He was an advisor to the late King Hussein of Jordan and was earlier the Chairman of the
Royal Jordanian Airlines. He has also been associated with the development of a number of airlines in the Middle East
Mr. Jehangir R. Gagrat, 72, an Indian national, has been a Director of the Company since March 1994. Mr. Gagrat
holds a law degree from Bombay University and has also qualified as a Solicitor of the Bombay High Court and as a
Solicitor of the Supreme Court of England. He is also an Advocate of the Supreme Court of India and a Notary of the
Union of India. Mr. Gagrat is a Partner in the law firms of Gagrat & Co. in India, and Gagrat & Gardi in Dubai. A
former President of the Bombay Incorporated Law Society, he has also served as a director of various financial
institutions, banks, public and private limited companies and he is also a trustee of various public and private trusts.
Between 1995 and 2002, Mr. Gagrat was a member of the committee constituted to review the SEBI (Substantial
Acquisition of Shares & Takeovers) Regulations, 1994. Mr. Gagrat has also been a member of the Rules Committee of
the Bombay High Court, an Honorary Secretary of the International Law Association (India Branch), Bombay Centre
and the Chairman of the Indirect Taxation Committee of the Indian Merchants Chambers.
Mr. Victoriano P. Dungca, 68, an American national, has been a Director of the Company since January 1999. Mr.
Dungca holds an MBA from Cornell University, U.S.A and is a Certified Public Accountant from the U.S.A. Mr.
Dungca has had a long and distinguished career with Philippine Airlines and retired as its Executive Vice President. He
is currently a financial advisor based in California, USA.
Mr. Javed Akhtar, 59, an Indian national has been a Director of the Company since March 1993. Mr. Akhtar holds a
Bachelor of Arts degree. Mr. Akhtar is a well-known poet, lyricist, screenplay and scriptwriter and is a famous media
personality. Mr. Akhtar has won the Filmfare Award thirteen times, and is a five-time National Award winner for the
best lyricist.
Mr. Iftikar M. Kadri, 74, an Indian national, has been a Director of the Company since February 2000. Mr. Kadri
holds a Bachelors degree in Engineering from Pune University. He is a member of the Council of Architecture, New
Delhi and a Fellow of the Indian Institute of Architects and a fellow of the Indian Institute of Interior Design. Mr.
Kadri set up his practice as an architect in 1960 and is actively involved with the problems relating to rebuilding of
dilapidated buildings in Mumbai and exploring technological solutions for mass housing schemes. He was also a
member of the Steering Committee appointed by the Government of Maharashtra to suggest strategies for solving the
housing problems of Mumbai. Mr. Kadri was awarded a citation in 1993 as an Outstanding Architectural Engineer by
the Institution of Engineers in India. He is also the general secretary of the prestigious Nehru Centre in Mumbai.
Mr. Charles Arthur Adams, 64, an American national, has been a Director of the Company since September 2003.
Mr. Adams hold a Bachelors of Science degree in Marketing from the University of Hartford, U.S.A. and has 40 years
of experience in the aviation industry. After a distinguished career in the United States Army, Mr. Adams joined Trans
World Airlines, or TWA, in 1965 and held numerous management positions with TWA in the USA, Europe and Asia.
He retired from TWA in 1991 and subsequently then joined United Parcel Service, or UPS, as the Executive Vice
President for UPS Yamato Japan. He retired from UPS in 2003 as President, Asia Pacific.
90
Mr. P.R.S. Oberoi, 75, an Indian national, has been a Director of the Company since March 2004. He is a graduate in
Hotel Management from Lausanne, Switzerland. He is the Chairman and Chief Executive Officer of EIH Limited and
he is also the Chairman of Oberoi Hotels Private Limited and the major shareholder of EIH Limited. Besides providing
leadership for the management of Oberoi hotels across six countries, Mr. Oberoi has been instrumental in pioneering
the development of new Oberoi hotels and resorts. Mr. Oberoi is credited with placing India on the international luxury
traveller’s map and redefining architectural and design standards in luxury hospitality.
Mr. Aman Mehta, 58, an Indian national, has been a Director of the Company since September 2004. Mr. Mehta
holds a Bachelors degree in Economics from Delhi University. He joined the HSBC group in 1968. He subsequently
held several senior positions with the HongKong Shanghai Banking Corporation and was appointed Chief Executive
Officer of HSBC Asia Pacific in January 1999, a position he held until his retirement in December 2003. Mr. Mehta is
also a member of the governing board of the Indian School of Business, Hyderabad, and of the Indian Council for
Research and International Economic Relations, New Delhi. Mr. Mehta serves as an independent director on the
boards of several companies in India as well as in the UK, Hong Kong and Singapore.
Dr. Vijay Kelkar, 62, an Indian national, was appointed as a Director of the Company in November 2004. Mr. Kelkar
holds a Ph.D. from the University of California, Berkeley, USA. He was a senior faculty member of the Administrative
Staff College of India at Hyderabad. Dr. Kelkar joined the Planning Commission in 1973 and was Economic Advisor
in the Ministry of Commerce in 1977. He was Secretary to the Economic Advisory Council to the Prime Minister
between 1985 to 1988 and Director-International Trade, UNCTAD, Geneva between 1991 to 1994. He was
subsequently Petroleum Secretary between 1994 to 1997 and Finance Secretary between 1998 to 1999.
Dr. Kelkar has been an Executive Director of the International Monetary Fund, overseeing its operations in India and
South Asia between 1999 to 2002. He was also the Chairman of the Tariff Commission and an Advisor to the Finance
Minister , holding the rank of a Minister of State in the Government of India.
Mr. Satyan G. Pitroda, 62, an Indian national, was appointed a Director of the Company on December 21,2004. Mr.
Pitroda holds a Masters degree in Physics from India and a Masters degree in Electrical Engineering from the Illinois
Institute of Technology, Chicago, USA. Mr. Pitroda began his illustrious career at GTE and formed Wescom Switching
Inc. In 1980 Wescom was acquired by Rockwell International where Mr. Pitroda became Vice President, overseeing
Rockwell’s telecom business worldwide. He held this position until 1983.
In 1984, Mr. Pitroda returned to India and founded the Centre for Development of Telematics. In 1987 he became an
advisor to the Prime Minister of India, with the rank of a Minister, on national technology missions relating to drinking
water, literacy, immunization, oil seeds, milk and telecom. Mr. Pitroda was the founding Chairman of the Telecom
Commission in India, responsible for national and international telecommunication operations, policies and
administration, with over 500,000 employees. As the Chairman of the Commission, Mr. Pitroda revolutionized
telecommunications in India and was successful in getting it accepted as a fundamental component of modernization of
India.
In 2000, Mr. Pitroda was invited by the UN Secretary General to join a special Advisory Committee on Information
and Communications Technology. Mr. Pitroda has recently been appointed a member of the National Advisory
Council, in the Prime Minister’s Office in India under the chairmanship of Ms. Sonia Gandhi. Currently, Mr. Pitroda is
the Chairman of WorldTel Limited. He is also the Chairman and Founder of several high-technology start-up
companies in the US, Europe and India. Mr. Pitroda is also the founding Chairman of a non-profit Foundation for
“Revitalization of Local Health Traditions in India.” Mr. Pitroda holds over 50 worldwide patents.
Mr. Saroj K. Datta, 68, an Indian national, has been a Director of the Company since March 1993. Mr. Datta holds a
Masters degree in Economics from Delhi University. Mr. Datta has over 40 years of experience in civil aviation in
India and abroad. He joined Air India in 1962 and rose to the position of Deputy Director, Planning and International
Relations in 1977. In 1987, he left Air India to join in a senior position in Kuwait Airways. He has been involved with
the Company since its inception and is currently the only Executive Director of the Company. His gross compensation
during fiscal 2004 was Rs.3,713,371.
Shareholding of Our Directors in our Company
Mr. Naresh Goyal holds 9,995 Equity Shares as a nominee of Tail Winds. Mr. Saroj K. Datta holds one (1) Equity
Share of our Company. Our Articles of Association do not require our Directors to hold any qualification shares in our
Company.
Term of Office
91
Mr. Naresh Goyal is currently the only non-retiring Director of the Company and, in accordance with our Articles, Mr.
Goyal is entitled to continue as the non-retiring chairman of the Board for as long as he is willing to continue as a
director and the Chairman of the Company.
All the other Directors currently hold office until the next Annual General Meeting of the Company. Mr. Saroj K.
Datta is an Executive Director of the Company and his appointment is subject to the Articles of Association of the
Company and also governed by a contract between him and the Company.
Mr. Naresh Goyal has the right to appoint one third of our Directors who will be non-retiring Directors under our
Articles. See “Main Provisions of Articles of Association” on page 171 of this Draft Red Herring Prospectus.
Compensation of Our Directors
For details of the compensation of Mr. Saroj K. Datta, our Executive Director, please refer to the section “Statutory and
Other Information” on page 165 of this Draft Red Herring Prospectus. Our other Directors on the Board are entitled to
sitting fees as is permissible under the Companies Act, and actual travel, boarding and lodging expenses for attending
the Board/ Committee meetings. Our other directors may also be paid commission and any other amounts as may be
decided by the Board in accordance with the provisions of our Articles, the Companies Act and any other applicable
Indian laws and regulations.
Interest of Directors
All our directors, including independent directors, may be deemed to be interested to the extent of fees, if any, payable
to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration and
reimbursement of expenses payable to them under our Articles of Association. The Executive Director will be
interested to the extent of remuneration paid to him for services rendered as an officer or employee of the Company.
All our directors, including independent directors, may also be deemed to be interested to the extent of Equity Shares, if
any, already held by them or that may be subscribed for and allotted to them, out of the present Offer in terms of the
Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the said Equity
Shares.
Our directors, including independent directors, may also be regarded as interested in the Equity Shares, if any, held by
or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors,
members, partners or trustees.
Changes in Our Board of Directors during the Last Three Years
Name Date of
Appointment
Date of Cessation Reason
Sir Harry Tirvengadum December 9, 2001 Resigned
Mr. Shatrughan Sinha June 28, 2002 Did not seek reappointment
HH Maharaja Gaj Singh II of Jodhpur July 22, 2002 Resigned
Mr. Gert van der Veer September 20, 2003 Did not seek reappointment
Mr. Dipankar Basu September 29, 2004 Did not seek reappointment
Mr. T.N.V. Ayyar September 29, 2004 Did not seek reappointment
Mr. Charles A. Adams
September 20, 2003 Appointed Director until next Annual
General Meeting
Mr. P.R.S. Oberoi
March 29, 2004 Appointed Director until next Annual
General Meeting
Mr. Aman Mehta
September 29, 2004 Appointed Director until next Annual
General Meeting
Dr. Vijay Kelkar
November 18, 2004 Appointed Director until next Annual
General Meeting
Mr. Satyan G. Pitroda
December 24, 2004 Appointed Director until next Annual
General Meeting
Corporate Governance
The provisions of the listing agreements to be entered into with the Stock Exchanges with respect to corporate
governance become applicable to us at the time of seeking in-principle approval of the Stock Exchanges. We have
complied with such provisions, including with respect to the appointment of independent Directors to our Board and
the constitution of the following committees of the Board: the Audit Committee, the Remuneration Committee and the
Investors’ Grievances Committee. We undertake to take all necessary steps to comply with all the requirements of the
guidelines on corporate governance and adopt the Corporate Governance Code as per Clause 49 of the listing
agreement to be entered into with the Stock Exchanges, as would be applicable to the Company upon listing of its
Equity Shares.
92
Committees of the Board
Audit Committee
The terms of reference of Audit Committee comply with the requirements of Clause 49 of the listing agreement to be
entered into with the Stock Exchanges. The Committee consists of all non-executive directors, with the majority being
independent directors. The Audit Committee currently comprises of Mr. Aman Mehta as Chairman, Dr. Vijay Kelkar
and Mr. Victoriano P. Dungca.
The Audit Committee provides directions to and reviews functions of the Company’s audit department. The Committee
evaluates internal audit policies, plans, procedures and performance and reviews the other functions through various
internal audit reports and other year-end certificates issued by the statutory auditors. Quarterly and annual accounts will
be placed before the Audit Committee, prior to being presented to the Board along with the recommendations of the
Audit Committee.
Remuneration Committee
The Remuneration Committee consists of non-executive directors, with the Chairman being an independent director.
This committee currently comprises of Dr. Vijay Kelkar as the Chairman, Mr Victoriano P. Dungca and Mr. Charles A.
Adams. The Renumeration Committee performs the functions of a renumeration committee as recommended in the
listing agreement to be entered into with the Stock Exchanges. It will determine the Company’s compensation policy
and other benefits for executive directors.
Investors’ Grievances Committee
The Investors’ Grievances Committee looks into redressal of shareholder and investor complaints, issue of
duplicate/split/consolidated share certificates, allotment and listing of shares and review of cases for refusal of
transfer/transmission of shares and debentures and reference to statutory and regulatory authorities. The Investors’
Grievances Committee currently comprises of Mr. I.M. Kadri as the Chairman, Mr. Charles A. Adams and Mr. Saroj K.
Datta.
Key Managerial Personnel
Mr. Saroj K. Datta, 68, is an Executive Director; please refer to page 90 of this Draft Red Herring Prospectus under
the Section “Brief Biographies” of the Directors.
Mr. Wolfgang Prock-Schauer, 48, an Austrian national, joined the Company as Chief Executive Officer in June 2003,
and is responsible for the operations of the airline. He has Masters Degree in Economics and Business Administration
from the University of Vienna. Mr. Prock-Schauer has been associated with the airline industry for over 23 years.
Prior to joining the Company, he was Executive Vice President, Alliance and Long Term Planning with Austrian
Airlines. He has also served as Chairman of the Star Alliance Management Board. Within the Company, air safety,
finance, financial controls, planning, network and alliances and all staff functions report to him. His gross
compensation after his appointment during fiscal 2004 was Rs.13,888,207.
Mr. Peter Luethi, 60, a Swiss national, joined the Company as its Chief Operating Officer in May 2003. He has a
Diploma in Commerce and has completed a Senior Management program at Harvard University. He has also
participated in various international aviation courses and seminars. Mr. Luethi has over 35 years experience in the
airline industry. His last position as Chief Operating Officer was with Swissair, Zurich, Switzerland. During these
years, he has held senior positions in marketing, sales, operations, external relations and general administration, both in
and outside Switzerland. He is directly responsible for all the operating departments of the Company, including
engineering and maintenance, in-flight, airport services, support services, service and product quality, information
technology, sales, marketing and customer care. His gross compensation after his appointment during fiscal 2004 was
Rs.13,063,259.
Lt. Gen. (Retd.) Inder Kumar Varma, 63, an Indian national, joined the Company in March 2002 as Executive Vice
President. Lt. Gen. Varma has served in the Indian Army for 40 years. He has completed his Masters in Science in
Defense Studies from Madras University. He held various positions in the Indian Army, including Military Secretary -
Army Headquarters, General Officer – Commanding, Director - General Military Operations and Commandant, Indian
Military Academy. He has headed delegations on matters relating to national security and provided support in key
areas such as training, human resource development and relief management in the Indian Army. Lt. Gen. Varma has
been presented with the country’s highest military awards in recognition of his services, including the PVSM. Within
93
the Company, he is directly responsible for the functions of human resources, flight operations, security and corporate
affairs. His gross compensation in fiscal 2004 was Rs.3,456,149.
Mr. Carl Saldanha, 53, an Indian national, joined the Company in January 2004 as Executive Vice President in charge
of Finance, Treasury and Strategy. Mr. Saldanha holds a Bachelor of Technology degree from the Indian Institute of
Technology in Mumbai and a Master’s degree in Business Administration from the Asian Institute of Management in
the Philippines. Mr. Saldanha worked for 15 years with the Chase Manhattan Bank in Hong Kong and Mumbai, and
was the Country Head for South Asia. Before joining the Company, Mr. Saldanha was the Director in charge of
corporate banking for Deutsche Bank in India for five years. His gross compensation after his appointment during
fiscal 2004 was Rs. 1,069,358.
Mr. Purushotham Baliga, Vice President - Support Services, 71, an Indian national, is a qualified aircraft
maintenance engineer from the Civil Aviation Training Centre, Allahabad and was associated with Air India for 37
years. At the time of his retirement from Air India, he held the position of Director, Engineering. As a member of the
start up team, Mr. Baliga has been with Jet Airways since 1992 and carries with him over 50 years of experience in
aviation. He is responsible for the Property and Facilities Department and also for providing support services to
various departments in obtaining regulatory clearances. He is also a fellow of the Aeronautical Society of India. His
gross compensation in fiscal 2004 was Rs.3,256,800.
Mr. Sitham Nadarajah, Vice President – Technical, 58, a Malaysian national, has over 35 years experience in the
aviation industry. Mr. Nadarajah completed his mechanical engineering from Singapore Polytechnic and had undergone
various executive management programs and has attended a large number of aviation courses overseas. He also holds
UK and Malaysian aircraft maintenance engineer’s licenses. He started his career as a Line Engineer with Malaysia
Singapore Airlines in 1969 and was with Malaysia Airlines from 1972. His last position with Malaysian Airline
Systems was as Vice President, Aerospace Division. He joined Jet Airways in January 2001 and is responsible for the
overall engineering and maintenance activities of the Company. His gross compensation in fiscal 2004 was Rs.
11,064,595.
Capt. K. Mohan, Vice President - Flight Operations, 63, an Indian national, joined the Company in September 2002,
after a long and distinguished period of service with the Indian Air Force and with Air India. He is responsible for the
overall co-ordination of Pilots activities and the Flight Despatch Department. He retired from Air India as Director
Operations. He is a qualified examiner on B737-400/B747-200 and B707 airplanes with 18,000 hours of flying
experience. He has been a member of the IATA regional coordinating group, Asia-Pacific region. He has graduated
from the Air Force Academy, Hyderabad. His gross compensation in fiscal 2004 was Rs.1,865,000.
Mr. P. K. Sinha, Vice President – Passenger & Cargo Sales, 57, an Indian national, joined the Company in January
2004. He has an Honors Degree from Patna University. He comes to Jet Airways from Air India with a wealth of
experience of nearly 34 years. He has worked both in India and abroad in various capacities with Air India. His last
position with Air India was as its resident director - Delhi. His areas of expertise are sales and marketing. He is
currently in charge of passenger and cargo sales. His gross compensation after his appointment during the fiscal 2004
was Rs.696,260.
Dato K. Jeyakanthan, Vice President - Engineering and Maintenance, 57, a Malaysian national, is an Honors
graduate in Aeronautical Engineering from Hatfield University, London. He joined Malaysian Airline Systems in 1971
in the Technical Services department. In a career spanning over 27 years, he has had wide ranging experience in quality
assurance and sales and marketing with Malaysian Airlines. He is a Fellow of the Royal Aeronautical Society of the
U.K. and a chartered engineer of U.K. His last position with Malaysian Airlines System before joining the Company in
March 1998 was Manager - Engineering Marketing and Sales. He is in charge of the aircraft projects and engineering
support services department. He was bestowed the title of Dato by his Royal Highness Sultan of Pahang, Malaysia in
2001. His gross compensation in fiscal 2004 was Rs.12,525,034.
Capt. N. Malkani, Vice President - Flight Operations, Training & Line Support Services, 56, an Indian national,
has been with the Company since its inception. He has a general certificate of education “A” level from Cambridge
University, England. He joined Jet Airways as a Senior Commander for the Boeing 737s. Prior to joining Jet Airways,
he was with Indian Airlines as a flight instructor. He has been promoted in the Company to the position of an examiner
and to the post of Vice President. He is responsible for the training and development of pilots. His gross compensation
in fiscal 2004 was Rs.5,802,428.
Mr. Prasun Sengupta, Vice President - Corporate Administration, 52, an Indian national, started his career with
the Tata Administrative Service in 1972 after finishing his MBA from The Indian Institute of Management, Kolkatta.
He was seconded to the Indian Hotels Co. Ltd. in 1973. His areas of work included corporate strategy, acquisitions,
international administration and structured finance. Mr. Sengupta was closely associated with the growth of the Taj
Group into one of the largest hotel and hospitality chains in Asia (outside Japan) and he has served on the board of
94
directors of Taj Group companies in India and abroad. He joined Jet Airways in May 1998 and is incharge of Corporate
Administration besides providing assistance and support to the Chairman’s office. His gross compensation in fiscal
2004 was Rs.2,472,228.
Ms. Nandini Verma, Vice President - Corporate Communications and Public Relations, 50, an Indian national,
has 30 years of work experience of which 15 years have been in the hotel industry with international hotel chains such
as Hyatt and Intercontinental. She has received her Bachelor of Honors degree in Arts from Delhi University. She has
specialization in the areas of marketing and sales, marketing communications including advertising, corporate
communications and public relations and corporate affairs. She joined Jetair Limited to start its tourism and travel
division and after 11 years she joined Jet Airways in her present capacity. She is in charge of corporate communication
and public relations function of the organization. She represents Jet Airways on the tourism and aviation committees of
various chambers of commerce and industry and also the World Travel and Tourism Council. Her gross compensation
in fiscal 2004 was Rs.2,145,379.
Mr. Rajesh Verma, Vice President – Customer Services & Inflight, 46, an Indian national, was with the ITC
Welcome Group for 13 years where the last position he held was Resident Manager - Windsor Manor, Bangalore. He
joined the Company in March 1996 and is in charge of the airport services, inflight functions of the Company. He has a
graduate degree in Economics and a Diploma in Business Management. His gross compensation in fiscal 2004 was
Rs.3,548,634.
Mr. Rajesh Sharma, Vice President – Controller, 42, an Indian national, is a qualified Chartered Accountant and
joined the company in August 1995 as Head of Internal Audit. During his association he has also been in charge of
purchase and financial control functions of the Company. In May 2004, he has been appointed as the Vice President –
Controller and is directly responsible for commercial and revenue accounting, MIS and budgeting as well as financial
control functions and administration. Mr. Sharma has wide experience in various functional areas and is more focused
on cost controls and cost reduction measures in the Company. Prior to joining the Company, he worked with M/s.
Bayer (India) Ltd., a German multinational company for a period of 8 years as head of its internal audit. He has also
been associated as a qualified examiner with the Indian Merchant of Chambers for the Ramkrishna Bajaj National
Quality Awards. His gross compensation in fiscal 2004 was Rs.2,398,816.
Mr. Ashok Barimar, General Counsel & Vice President – Legal, 53, an Indian national, joined the Company in June
1999. He is totally responsible for all legal matters and litigation cases involving the Company. He holds a LLB
Degree as also a Diploma in Business Management. He has been a practicing advocate and has worked with several
reputed business houses such as the Birlas and the Hindujas. His last assignment was with Satyam Computers. His
gross compensation in fiscal 2004 was Rs.2,753,133.
Ms. Ragini Chopra, Vice President – North India, 51, an Indian national, is a management graduate from the Oberoi
School of Hotel Management. Ms. Chopra has spent 28 years with the Oberoi Hotels and Resorts in various functions
ranging from operations, sales and marketing, business development and corporate communications. She has wide
exposure in the fields of travel hospitality and tourism. She joined the Company in June 2004 as its Vice President –
North India. In her current assignment she oversees all major activities of the Company in North India and is part of the
senior management team involved with the organizations constant quest to services and revenues. Her remuneration
after her appointment upto November 2004 is Rs.1,140,333.
Mr. Gaurang Shetty, Vice President – Marketing, 48, an Indian national, has been with the Company since 1996. He
is a Science Graduate from Bombay University. Prior to joining the Company, he was with British Airways, as its
Marketing Manager-South Asia. He has had over 16 years experience with British Airways in the areas of customer
service, cargo and marketing. In the Company, he is responsible for marketing including the Yield Management
Systems, and Jet Privilege program, distribution, advertising and product/web initiatives. His gross compensation in
fiscal 2004 was Rs.1,475,198.
Ms. Sonu Kripalani, Vice President – Passenger Sales, India, 45, a graduate in Psychology from Elphinstone
College in Mumbai. She completed a Diploma in Travel and Tourism Management from KC College of Management
Studies, Mumbai. She has over 23 years experience in the travel field in domestic and international sales, reservation
and ticketing gained through reputed travel agencies. She gathered wide experience in airline sales with Jetair. She
joined the Company in February 1993 and currently heads the Passenger Sales department in the capacity of Vice
President – Passenger Sales, India. The position entails monitoring and delivering passenger, yield and revenue
performance, initiating pricing policies, setting up procedures for the sales department. Her role involves close co-
ordination with service delivery departments like airport services, in-flight, catering in order to ensure maintenance of
standards of customer service. She is also actively involved in the development of the strategic vision of the company,
ensuring growth and profitability of the organisation. Her gross compensation in fiscal 2004 was Rs.979,535.
95
Mr. Sarat Chandran, Vice President – Human Resources, 37, an Indian national, joined Jet Airways in October
2003. He has a Post Graduate Diploma in Management from National Institute of Personnel Management, Kolkata. He
comes to Jet Airways from the Oberoi group of hotels with whom he worked for a span of 10 years. His areas of
expertise are in setting up progressive Human Resources processes and systems, compensation management,
performance management systems, recruitment and selection, training and development, oversee legal compliances and
facilitate the building of a work culture which enhances employee engagement to deliver business results. He is
responsible for human resources functions in the organization. His gross compensation after his appointment during
fiscal 2004 was Rs.1,291,871.
Mr. A. R. Rajaram, Company Secretary, 46, an Indian national, joined the Company in July 2004. He is a Fellow of
the Institute of Company Secretaries of India, received his LLB degree from Bangalore University and has over 25
years of experience in the legal and corporate secretarial field. Prior to joining Jet Airways he was Corporate Legal
Counsel and Company Secretary of BPL Ltd. His remuneration after his appointment up to November 30, 2004 is
Rs.825,602.
All our key management personnel are permanent employees of our Company.
Shareholding of Key Managerial Personnel
As of the date of this Draft Red Herring Prospectus, Mr. Saroj K. Datta, Mr. Carl Saldanha and Mr. Prasun Sengupta
each holds one Equity Share.
None of our other key managerial personnel hold any Equity Shares as of the date of this Draft Red Herring Prospectus
Bonus or Profit Sharing Plan for Key Managerial Personnel
There is no bonus or profit sharing plan for Key Managerial Personnel as of date of this Draft Red Herring Prospectus.
We intend to reward our employees for their contributions to us and create employee ownership in us. After the listing
of our Equity Shares in this Offer, we intend to adopt either an ESPS scheme or an ESOP scheme in which employees
and directors of the Company and Tail Winds can participate, subject to such approvals as may be necessary. The
criterion for selection will be determined by our Board and approved by our shareholders. The ESPS or ESOP scheme
will comply with the SEBI (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the
issuance of Equity Shares pursuant thereto will be subject to compliance with all applicable laws and regulations. We
propose to issue a maximum of 0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes. The
issue of Equity Shares pursuant to the ESPS or the adoption of the ESOP is likely to occur in fiscal 2006, although
there can be no assurance as to the timing of adoption of any such scheme which may occur in fiscal 2006 or thereafter.
Changes in our Key Managerial Personnel during the Last Three Years
Changes in our key managerial personnel in the last three years have been given below:
Name of Employee Designation Date of Appointment Date of Cessation Reason
Mrs. Anita Goyal Vice President – Sales and Marketing May 4, 1998 October 31, 2004 Resigned
Mr. Raman Kaicker Vice President – Finance December 1, 2003 April 30, 2004 Resigned
Mr. Bram Steller Executive Vice President – Commercial January 28, 2002 October 9, 2003 Resigned
Mr. Ananth Iyer Vice President – Finance April 1, 1995 August 31, 2003 Resigned
Capt. Roland Thomas Vice President – Operations January 1, 1998 June 30, 2003 Resigned
Mr. Vijay Wadagbalkar Company Secretary March 16, 1998 June 30, 2003 Resigned
Mr. N. Hariharan Vice President – Resource Management &
Development
April 1, 1999 January 2, 2003 Resigned
Mr. Stefano Forte Chief Executive Officer February 1, 2000 November 30, 2002 Resigned
Mr. Stephen Jaganathan Vice President – Technical Services September 16, 1999 October 31, 2001 Resigned
Mr. A.R. Rajaram Company Secretary July 5, 2004 Appointed
Ms. Ragini Chopra Vice President – North India June 15, 2004 Appointed
Mr. P.K. Sinha Vice President – Passenger & Cargo Sales January 15, 2004 Appointed
Mr. Carl Saldanha Executive Vice President – Finance January 12, 2004 Appointed
Mr. Sarat Chandran Vice President – Human Resources October 22, 2003 Appointed
Mr. Wolfgang Prock-Schauer Chief Executive Officer June 5, 2003 Appointed
Mr. Peter Luethi Chief Operating Officer May 1, 2003 Appointed
Capt. Krishna Mohan Vice President – Flight Operations September 25, 2002 Appointed
Lt. Gen. (Retd.) Inder K
Varma
Executive Vice President March 19, 2002 Appointed
96
OUR PROMOTERS AND GROUP COMPANIES
The Company was incorporated in 1992, by Mr. P.V.Venkatachalam and Mrs. Anita Goyal. The present promoters of
the Company are Tail Winds Limited and Mr. Naresh Goyal.
Mr. Naresh Goyal, 55 years, (Voter I.D. No.: Not available; Driving License No.:
Not applicable) a non-resident Indian national, is the chairman of the Company.
He is the chairman of our Board of Directors. Mr. Goyal holds a Bachelors of
Commerce degree and after completing his education in 1967, Mr. Goyal joined the
travel business and underwent extensive practical training with several foreign
airlines. Mr. Goyal has over 37 years of experience in the civil aviation industry.
In May, 1974, Mr. Goyal established Jetair Private Limited, which is a leading GSA
in India. Jetair Private Limited represents 15 international airlines and our Company.
Mr. Goyal has been involved in developing studies of traffic patterns, route
structures, operational economies and flight scheduling, all of which have made him
an authority in the world of aviation and travel.
In 1992, as part of the ongoing diversification of his business interests, Mr. Goyal caused to be promoted our Company
for operating scheduled air services in India.
In recognition of his achievements, Mr. Goyal has been the recipient of several national and international awards. In
2000, he received the ‘Entrepreneur of the Year Award’ for Services from Ernst & Young and the ‘Distinguished
Alumni Award’ for distinguished performance as an entrepreneur. Other awards conferred on Mr. Goyal include the
‘Outstanding Asian Indian’ award for leadership and contribution to the global community given by the Indian
American Centre for Political Awareness in 2003, the Qimpro Gold Standard Award in 2002 and the Aerospace
Laurels Award for outstanding achievement in the field of commercial air transport, which has been awarded to him
twice, in April 2000 and February 2004. Mr. Goyal has also been recently elected to the Board of Governors of IATA
in June 2004.
We confirm that the Permanent Account Number, Bank Account Number and Passport Number of Mr. Naresh Goyal
will be submitted to the NSE and the BSE at the time of filing of this Draft Red Herring Prospectus with them.
Tail Winds Limited
Tail Winds Limited is a private company limited by shares, incorporated in the Isle of Man on November 13, 1991
under the Companies Act 1931 to 1986 of the Isle of Man with registered number 56352C.
Tail Winds owns more than 99.99% of our Company. Tail Winds has its registered office at 1
st
Floor, 28 Victoria
Street, Douglas, Isle of Man, JM1 2LE. The total authorized share capital of Tail Winds is US$30 million and British
Pounds 100 (£100), comprising of 300,000 ordinary shares of U.S.$100 each and 1,000 “A” shares of British Pounds
one (£1.00) each. The total issued and paid-up capital of Tail Winds is US$20 million, consisting of 200,000 ordinary
shares of US$100 each and 100 non-voting deferred shares of British Pounds one (£1.00) each. The principal business
of Tail Winds is that of investment in our Company.
Shareholding Pattern
Mr. Naresh Goyal owns 100% of the share capital of Tail Winds Limited.
Board of Directors
The Board of Directors of Tail Winds Limited as of November 30, 2004 consists of Mr. Naresh Goyal, Mr. Peter Lai,
Mr. Ali Ghandour, Mr. J.R. Gagrat and Mr. Victoriano P. Dungca.
Financial Performance
The unconsolidated financial results of Tail Winds Limited for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
97
( in thousands, except share data)
Year ended March 31,
2002 2002
(1)
2003 2003
(1)
2004 2004
(1)
US$ Rs. US$ Rs. US$ Rs.
Total income 1,393.18 64,100.40 50.84 2,339.29 1.34 61.61
Profit/ (Loss) after tax 480.67 22,115.40 (615.86) (28,335.90) (984.42) (45,293.16)
Equity capital 20,000.15 920,207.04 20,000.15 920,207.04 20,000.15 920,207.04
Reserves and Surplus
(2)
896.82 41,262.60 (719.05) (33,083.31) (1,703.47) (78,376.47)
Earnings per share
(3)
2.40 110.58 (3.08) (141.68) (4.92) (226.47)
Book value per share
(3)
108.57 4,995.01 102.99 4,738.51 100.57 4,627.13
________________
(1) Solely for convenience translation, at an exchange rate of Rs.46.01 = U.S.$1.00 (the Interbank market mid rates as taken from Bloomberg rate as
of September 29, 2004).
(2) Net of miscellaneous expenditure not written off
(3) Face value of each equity share is U.S.$ 100.00, except for 1,000 ‘A’ shares of £1 each.
Promoter Group Companies and other Entities in India
• Jetair Private Limited
• International Cargo Carriers Private Limited
• France Air Private Limited
• Jet Hotels Private Limited
• Jetair Tours Private Limited
• Jet Enterprises Private Limited
• India Capitol Resource Services Private Limited
• Vimpal Holdings Private Limited
• Jet Aviation Private Limited
• Transmodal Services Private Limited
• SILO Trading Company Private Limited
• UPS Jetair Express Private Limited
• UPS Jetair Logistics Private Limited
• National Travel Service (partnership firm)
Jetair Private Limited
Jetair Private Limited was incorporated on July 19, 1974. The registered office is at Jetair House, 13, Community
Centre, Yusuf Sarai, New Delhi 110 049. The company is a GSA for 15 international airlines in India and for Jet
Airways.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mrs. Kumkum Singh
Mr. Naresh Goyal
Mr. Surinder Goyal
Mrs. Nirmala Goyal
International Cargo Carriers Private Limited
France Air Private Limited
Jet Enterprises Private Limited
Mr. Naresh Goyal as partner of National Travel Service
Mr. Surinder Goyal as partner of National Travel Service
20
18,000
10,200
200
50,200
50,000
26,200
133,180
10,800
0.01
6.02
3.41
0.07
16.80
16.73
8.77
44.58
3.61
98
Board of Directors
The board of directors of Jetair Private Limited consists of Mr. Naresh Goyal, Mr. Surinder Goyal and Mr. Saroj K.
Datta.
Financial Performance
The financial results of Jetair Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set forth
below:
(Rs. million, except share data)
Year ended March 31,
2002 2003 2004
Total income 1,032.24 977.81 1,128.70
Profit after tax 18.34 38.49 33.20
Equity capital 29.88 29.88 29.88
Reserves and Surplus
(1)
175.43 196.85 246.22
Earnings per share (Rs.)
(2)
59.57 125.04 110.27
Book value per share (Rs.)
(2)
687.12 758.82 924.04
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
International Cargo Carriers Private Limited
International Cargo Carriers Private Limited was incorporated on August 22, 1974. It is a GSA for Kuwait Airways
with regard to cargo services for Mumbai. The registered office is at Jetair House 13, Community Centre, Yusuf Sarai,
New Delhi 110 049.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mrs. Kumkum Singh
Mr. Naresh Goyal
Mr. Surinder Goyal
Jetair Private Limited
Jet Enterprises Private Limited
1
350
150
399
100
0.01
35.0
15.0
40.0
10.0
Board of Directors
The board of directors of International Cargo Carriers Private Limited consists of Mr. Naresh Goyal, Mr. Surinder
Goyal and Mr. Saroj K. Datta.
Financial Performance
The financial results of International Cargo Carriers Private Limited as at and for the years ended March 31, 2002, 2003
and 2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 6.04 7.02 6.45
Profit/ (Loss) after tax (3.52) (1.37) 0.43
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(5.38) (6.75) (6.32)
Earnings/ (Loss) per share (Rs.)
(2)
(3,521.0) (1,365.0) 428.0
Book value per share (Rs.)
(2)
(5,280.0) (6,645.0) (6,217.0)
________________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
99
France Air Private Limited
France Air Private Limited was incorporated on February 2, 1985. It is the GSA for Air France for passenger services.
The registered office is at Jetair House 13, Community Centre, Yusuf Sarai, New Delhi 110 049.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Surinder Goyal
Jetair Private Limited
International Cargo Carriers Private Limited
150
400
450
15.00
40.00
45.00
Board of Directors
The board of directors of France Air Private Limited consists of Mr. Surinder Goyal, Mr. Mahiyar Sadri and Mr. Saroj
K. Datta.
Financial Performance
The financial results of France Air Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 24.73 22.43 20.33
Profit after tax 0.94 0.20 0.26
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
4.36 5.46 5.73
Earnings per share (Rs.)
(2)
790.36 (140.00) 271.00
Book value per share (Rs.)
(2)
4,457.93 5,557.76 5,828.63
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
Jet Hotels Private Limited
Jet Hotels Private Limited was incorporated on September 29, 1981 as Ras Hotels Private Limited. Subsequently, the
name of the company was changed to Jet Hotels Private Limited. The principal activity of Jet Hotels Private Limited is
to own immovable property located at Mumbai. The registered office is at 26, Telli Galli, Andheri (East), Mumbai 400
069.
Shareholding
Names of Shareholders
No. of Shares
% holding
Jetair Private Limited
Mrs. Anita Goyal
9,900
100
99.00
1.00
Board of Directors
The board of directors of Jet Hotels Private Limited consists of Mrs. Anita Goyal and Mr. Saroj K. Datta.
Financial Performance
The financial results of Jet Hotels Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
100
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 0.00 0.12 0.11
Profit after tax (0.15) 0.01 0.003
Equity capital 1.00 1.00 1.00
Reserves and Surplus
(1)
(2.16) (2.15) (2.15)
Earnings per share (Rs.)
(2)
(15.00) 0.98 0.30
Book value per share (Rs.)
(2)
(116.11) (115.22) (114.91)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
Jetair Tours Private Limited
Jetair Tours Private Limited was incorporated on December 17, 1990 and is an inbound and outbound tour operator.
The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Jetair Private Limited
Mr. Surinder Goyal jointly with Jetair Private Limited
9,999
1
99.99
0.01
Board of Directors
The board of directors of Jetair Tours Private Limited consists of Mr. Surinder Goyal, Mr. Naresh Goyal, Mr. Saroj K.
Datta, Mr. Anupam Kher and Mr. Shekhar Kapoor.
Financial Performance
The financial results of Jetair Tours Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 113.75 99.76 139.19
Profit/ (Loss) after tax (8.43) (7.80) 3.26
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(14.42) (22.22) (18.96)
Earnings/ (Loss) per share (Rs.)
(2)
(864.33) (780.06) 325.81
Book value per share (Rs.)
(2)
(1,431.79) (2,211.84) (1,886.04)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
Jet Enterprises Private Limited
Jet Enterprises Private Limited was incorporated on December 4, 1990 as Jetair Investments Private Limited.
Subsequently, on December 8, 2000, the name of the Company was changed to Jet Enterprises Private Limited. Jet
Enterprises Private Limited owns trademarks and trade names which are licensed to our Company and other group
companies. The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Naresh Goyal
Mr. Hasmukh D. Gardi jointly with Mr. Naresh Goyal
4,90,000
5,10,000
49.00
51.00
101
Board of Directors
The board of directors of Jet Enterprises Private Limited consists of Mr. Naresh Goyal, Mr. Saroj K. Datta and Mr.
Hasmukh D. Gardi.
Financial Performance
The financial results of Jet Enterprises Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 43.63 82.89 70.89
Profit after tax 14.66 20.35 23.85
Equity capital 10.00 10.00 10.00
Reserves and Surplus
(1)
19.67 51.40 74.11
Earnings per share (Rs.)
(2)
174.06 20.30 23.85
Book value per share (Rs.)
(2)
29.67 61.39 84.11
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
India Capitol Resource Services Private Limited
India Capitol Resource Services Private Limited was incorporated on March 6, 1992 for export and import trading
activities. At present, its only source of income is interest from bank deposits. The registered office is at 41/42 Maker
Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Silo Trading Company Private Limited
Mrs. Anita Goyal
Mr. J. R. Gagrat jointly with Mr. Naresh Goyal
4999
1
5000
49.99
0.01
50.00
Board of Directors
The board of directors of India Capitol Resource Services Private Limited consists of Mr. Saroj K. Datta, Mr. S. N.
Sardeshpande and Mr. F. S. Nasarwanji.
Financial Performance
The financial results of India Capitol Resource Services Private Limited as at and for the years ended March 31, 2002,
2003 and 2004 are set forth below:
(Rs. In millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 0.08 0.01 0.35
Profit/ (Loss) after tax 0.03 (0.07) 0.30
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(12.22) (12.29) (11.99)
Earnings/ (Loss) per share (Rs.)
(2)
2.62 (7.15) 30.48
Book value per share (Rs.)
(2)
(1,212.27) (1,219.41) (1,188.93)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
Vimpal Holdings Private Limited
Vimpal Holdings Private Limited was incorporated on July 3, 1986. It is a holding and an investment company. It
earns income as rent from a commercial property it has taken on lease in New Delhi. Its registered office is C-28 Prem
House, Connaught Place, New Delhi 110 001.
102
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Naresh Goyal
Mr. Surinder Goyal
Jet Enterprises Private Limited
354
152
508
35.00
15.00
50.00
Board of Directors
The board of directors of Vimpal Holdings Private Limited consists of Mr. Naresh Goyal, Mr. Surinder Goyal and Mr.
Saroj K. Datta.
Financial Performance
The financial results of Vimpal Holdings Private Limited as at and for the years ended March 31, 2002, 2003 and 2004
are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 0.03 0.03 0.03
Profit after tax (0.01) (0.01) (0.002)
Equity capital 0.05 0.10 0.10
Reserves and Surplus
(1)
(0.27) (0.27) (0.27)
Earnings per share (Rs.)
(2)
(18.72) (6.08) (2.35)
Book value per share (Rs.)
(2)
(423.39) (167.79) (170.14)
_____________
(1)
Net of miscellaneous expenditure not written off.
(2)
Face value of each equity share is Rs.100.00.
Jet Aviation Private Limited
Jet Aviation Private Limited was incorporated on April 9, 1992. Currently the company has not commenced any
commercial activity. The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
India Capitol Resource Services Private Limited
Transmodal Services Private Limited
Silo Trading Company Private Limited
Vimpal Holdings Pvt. Ltd.
Mr. Naresh Goyal
Mrs. Anita Goyal
Mr. Mahiyar Sadri
1,990
1,990
1,990
1,990
950
950
140
19.90
19.90
19.90
19.90
9.50
9.50
1.40
Board of Directors
The board of directors of Jet Aviation Private Limited consists of Mr. Naresh Goyal, Mrs. Anita Goyal and Mr. Saroj
K. Datta.
Financial Performance
The financial results of Jet Aviation Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income - 0.02 0.02
Profit/ (Loss) after tax (0.001) 0.004 0.005
Equity capital * 0.1 0.1
Reserves and Surplus
(1)
(0.04) (0.03) (0.02)
103
Earnings/ (Loss) per share (Rs.)
(2)
(4,042) 0.49 0.57
Book value per share (Rs.)
(2)
(21,230) 6.40 7.16
_________________
* Rs. 20 only.
(1) Net of miscellaneous expenditure not written off
(2) Face value of each equity share is Rs.10.00
Transmodal Services Private Limited
Transmodal Services Private Limited was incorporated on December 20, 2000. The company provides ground
transportation services, including to our Company. The registered office is located at 2A Stadium House, 82, Veer
Nariman Road, Churchgate, Mumbai 400 020.
Shareholding
Names of Shareholders
No. of Shares
% holding
France Air Private Limited
International Cargo Carriers Private Limited
Silo Trading Company Private Limited
India Capitol Resource Services Private Limited
Vimpal Holdings Pvt. Ltd.
Jet Aviation Private Limited
Mr. S. Narayan
Dr. Suresh C. Nerkar
19,810
19,810
19,810
19,810
9,980
9,980
400
400
19.81
19.81
19.81
19.81
9.98
9.98
0.40
0.40
Board of Directors
The board of directors of Transmodal Services Private Limited consists of Mr. S. Narayan, Dr. Suresh C. Nerkar and
Mr. F. S. Nasarwanji.
Financial Performance
The financial results of Transmodal Services Private Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 21.47 52.34 91.51
Profit/ (Loss) after tax (0.83) 1.27 0.29
Equity capital. * 0.40 1.00
Reserves and Surplus
(1)
(1.19) 1.09 1.56
Earnings/(Loss) per share (Rs.)
(2)
(398,281.00) 88.31 5.07
Book value per share (Rs.)
(2)
(593,210.00) 37.21 25.64
________________
* - Rs. 20 only
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
SiloTrading Company Private Limited
Silo Trading Company Private Limited was incorporated on April 19, 1994 for the business of trading. The registered
office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Vimpal Holdings Pvt. Ltd.
India Capitol Resource Services Private Limited
Transmodal Services Private Limited
Jet Aviation Private Limited
International Cargo Carriers Private Limited
France Air Private Limited
Mrs. Anita Goyal
Mr. Mahiyar Sadri
1,995
1,996
1,995
1,900
997
997
110
10
19.95
19.96
19.95
19.00
9.97
9.97
1.1
0.1
104
Board of Directors
The board of directors of Silo Trading Company Private Limited consists of Mrs. Anita Goyal and Mr. F.S. Nasarwanji.
Financial Performance
The financial results of Silo Trading Company Private Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income - 0.03 0.53
Profit/ (Loss) after tax (0.01) 0.01 0.32
Equity capital in Rupees * 0.1 0.1
Reserves and Surplus
(1)
(0.04) (0.03) 0.29
Earnings / (Loss) per share (Rs.)
(2)
(5,261.00) 0.62 32.55
Book value per share (Rs.)
(2)
(23,250.00) 7.27 39.97
_____________
* - Rs. 20 only
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
UPS Jetair Express Private Limited
The company was incorporated on September 4, 2000. The company is engaged in the business of courier services and
uses the services of our Company for its operation. The registered office is at Lot 4-P, Nirlon Complex, off Western
Express Highway, Goregaon (E), Mumbai 400 063.
Shareholding
Names of Shareholders
No. of Shares
% holding
UPS International
Forwarding Inc.
Jetair Private Limited
12,60,000
8,40,000
60%
40%
Board of Directors
The board of directors of UPS Jetair Express Private Limited consists of Mr. Naresh Goyal, Mr. Victoriano P. Dungca,
Mr. Mahiyar Sadri, Lt. Gen. (Retd) I. K. Varma, Mr. Thomas Mathew, Mr. Joseph Paul Wilkins, Mr. Kenneth A.
Torok, Mr. Matt McGee, Mr. K. M. Liu and Mr. P. Sarkari.
Financial Performance
The financial results of UPS Jetair Express (Private) Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 431.90 810.31 1,315.92
Profit/(Loss) after tax (4.00) (20.80) (35.56)
Equity capital 210.00 210.00 210.00
Reserves and Surplus
(1)
(12.38) (33.11) (68.68)
Earnings per share (Rs.)
(2)
(1.91) (9.91) (16.94)
Book value per share (Rs).
(2)
94.10 84.23 67.30
(1)
Net of miscellaneous expenditure not written off.
(2)
Face value of each equity share is Rs.100.00.
UPS Jetair Logistics Private Limited
The company was incorporated on October 6, 2000. The company is engaged in the logistics business. The registered
office is at Lot 4-P Nirlon Complex, off Western Express Highway, Goregaon (E), Mumbai 400 063.
105
Shareholding
Names of Shareholders
No. of Shares
% holding
UPS International
Forwarding Inc.
Jetair Private Limited
1,65,600
1,10,400
60%
40%
Board of Directors
The board of directors of UPS Jetair Logistics Private Limited consists of Mr. Naresh Goyal, Mr. Victoriano P.
Dungca, Mr. Mahiyar Sadri, Lt. Gen. (Retd) I. K. Varma, Mr. Kenneth A. Torok, Mr. Mukesh Shah, Mr. Li Ip Wah,
Mr. Tan Kok Kean, Mr. Danny Yang and Mr. Todd Benson.
Financial Performance
The operating results of UPS Jetair Logistics Private Limited as at and for the years ended December 31, 2001, 2002
and 2003 are set forth below:
(Rs. millions, except share data)
Year ended December 31,
2001 2002 2003
Total income 86.37 146.47 102.00
Profit after tax 0.1 (4.99) (3.05)
Equity capital 27.6 27.6 27.6
Reserves and Surplus
(1)
0.1 (4.89) (6.20)
Earnings per share (Rs.)
(2)
0.36 (18.09) (11.04)
Book value per share (Rs).
(2)
100.36 82.28 77.53
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
National Travel Service (Partnership Firm)
National Travel Service is a partnership firm, which was set up on October 1, 1974 and reconstituted on January 1,
1991. The firm is a GSA for American Airlines and Kuwait Airways (for passenger and cargo services). Its principal
office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
The partners are as follows:
Names of Partners
Interest
Mr. Naresh Goyal
Mr. Surinder Goyal
Jet Enterprises Private Limited
35%
15%
50%
Financial Performance
The financial results of National Travel Service as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
(Rs. Millions)
Year ended March 31,
2002
2003
2004
Total income 59.05 64.98 63.92
Profit after tax 0.01 0.33 1.02
Partners capital 0.005 0.005 0.005
Partners Current Account (7.58) 17.70 18.62
106
Promoter Group Companies outside India
• Jet Airways LLC
• Jet Airways of India Inc.
• India Jet Airways (Pty) Ltd.
• Jetair Worldwide AG
Jet Airways LLC
Jet Airways LLC was incorporated as a limited liability company on 19 September 1995 under UAE Federal Law No. 8
of 1984. The registered office of the company is located at 1901, 19
th
Floor, Arbift Towers, Beniyas Road, Deira,
Dubai, P.O. Box 7218, United Arab Emirates. The company has two wholly owned subsidiaries: Jet Airways of India
Inc., incorporated in the State of California, United States of America and India Jet Airways (Pty) Ltd. incorporated in
the Republic of South Africa, and all three companies provide airline marketing services. Our Company has entered
into agreements with Jet Airways LLC for global marketing co-ordination services, and with Jet Airways of India Inc.
and India Jet Airways (Pty) Ltd. for GSA services in North America and in the Republic of South Africa, respectively.
Shareholding
Names of Shareholders
Number of Shares Held % Holding
Mr. Abdul Rehman Hussain Hassan Tahlak
Mr. Naresh Goyal
153
147
51
49
Board of Directors
The board of directors of Jet Airways LLC comprises of Mr. Naresh Goyal and Mr. Abdul Rehman Hussain Hassan
Tahlak.
Financial Performance
The financial results of Jet Airways LLC for the years ended March 31, 2001, 2002 and 2003 are set forth below
(Rupee translations have been done for convenience purposes only, at a single exchange rate for all periods):
( in thousands, except share data)
Year ended March 31,
2002
2002
(1)
2003
2003
(1)
2004
2004
(1)
AED Rs. AED Rs. AED Rs.
Total income 7,826 97,894 8,071 100,954 12,794 160,034
Profit after tax 3,596 44,979 5,484 68,599 9,827 122,918
Equity capital 300 3,752 300 3,752 300 3,752
Reserves and Surplus
(2)
7,677 96,025 13,161 164,624 3,545 44,337
Earnings per share
(3)
11,987 149,931 18,281 228,662 32,756 409,727
Book value per share
(3)
26,590 332,592 44,871 561,254 12,815 160,299
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.12.51 = AED$1.00 (the Interbank market mid rates as taken from Bloomberg as of
September 30, 2004). These financial statements of Jet Airways LLC have been translated into Rupees for each period presented solely to comply
with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation should
not be considered as a representation that such AED amounts have been, could have been or could be converted into Rupees at any particular rate, the
rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is AED1,000.00.
Jet Airways of India Inc.
It was incorporated as a domestic corporation on October 25, 1999 under the laws of the state of California, USA. Its
business is to provide airline marketing services.
Shareholding
This company is a wholly owned subsidiary of Jet Airways LLC.
107
Board of Directors
The board of directors of Jet Airways of India Inc., comprises of Mr. Victoriano P. Dungca and Ms. Gloria Y. Dungca.
Financial Performance
The financial results of Jet Airways of India Inc. for the years ended March 31, 2002, 2003 and 2004 are set forth
below:
(In thousands except share data)
Year ended March 31,
2002
US$
2002
(1)
Rs.
2003
US$
2003
(1)
Rs.
2004
US$
2004
(1)
Rs.
Total income 286.42 13,178.28 639.51 29,423.76 897.98 41,316.24
Profit after tax (463.82) (21,340.45) (258.00) (11,870.76) (29.44) (1,354.58)
Equity capital 300.00 13,803.00 300.00 13,803.00 300.00 13,803.00
Reserves and Surplus
(2)
(720.21) (33,136.82) (978.21) (45,007.58) (1,007.65) (46,362.16)
Earnings per share
(3)
(1.55) (71.13) (0.86) (39.57) 0.10 4.52
Book value per share
(3)
(1.40) (64.65) (2.26) (104.02) (2.36) (108.53)
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.46.01 = US$1.00 (the Interbank market mid rates as taken from Bloomberg as of
September 29, 2004). These financial statements of Jet Airways of India Inc.have been translated into Rupees for each period presented solely to
comply with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation
should not be considered as a representation that such US$ amounts have been, could have been or could be converted into Rupees at any particular
rate, the rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is US$1.00.
India Jet Airways (Pty) Ltd.
The company was incorporated on September 3, 2003 as Rodene Trading (Pty) Ltd. and subsequently changed its name
to India Jet Airways (Pty) Ltd. on September 12, 2003. It is in the business of servicing of passengers, including
customers of our Company. The registered office is at Ground Floor, C.I.B House, Eastwood Office Park, 11B Riley
Road, Bedford View 2008, S. Africa.
Shareholding
This company is a wholly owned subsidiary of Jet Airways LLC.
Board of Directors
The board of directors of India Jet Airways (Pty) Ltd., comprises of Mr. Van der Veer Gerrit Diric, Mr. H.D. Gardi,
Mr. T.A.H. Hassan and Mr. Anantha Narayanan.
Financial Performance
The financial results of India Jet Airways (Pty) Ltd. for the seven months ended March 31, 2004 are set forth below:
(In thousands except share data)
Year ended March 31,
2004
Rand
2004
(1)
Rs.
Total income 264.46 1,883.63
Profit from operations tax (8.92) (63.54)
Equity capital 1.00 7.12
Reserves and Surplus
(2)
(8.92) (63.54)
Earnings per share
(3)
(8.92) (63.54)
Book value per share
(3)
(7.92) (56.42)
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.7.12 = S. A. Rand 1.00 (the Interbank market mid rates as taken from Bloomberg as
of September 30, 2004). These financial statements of Jet Airways (Pty) Ltd. have been translated into Rupees for each period presented solely to
comply with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation
should not be considered as a representation that such S.A. Rand amounts have been, could have been or could be converted into Rupees at any
particular rate, the rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is 1 S.A. Rand.
108
Jetair Worldwide AG
Jetair Worldwide AG was incorporated in July 20, 2004. The registered office address is Hinterberg Str – 22, 6330
Cham, Zug, Switzerland. The company has been incorporated to provide services in the tourism sector, in particular,
the purchase and sale of airline tickets.
Shareholding
Jetair Worldwide AG is a privately held company and the shareholders are:
Names of Shareholders
% holding
Mr. Naresh Goyal
Mr. Ali Ghandour
Mr. H.D. Gardi
98
1
1
Board of Directors
The directors of Jetair Worldwide AG are Mr. Naresh Goyal, Mr. Andries B. van Luyk., Mr. Walter H. Boss and Mr.
Zsolt Zsigray.
Financial Performance
The total paid-up equity is CHF 100,000 (Rs.3,690,000 calculated for convenience purposes only, at an exchange rate
of Rs.36.90 = CHF 1.00, the Interbank market mid rates as taken from Bloomberg as on September 30, 2004. As the
company has only been incorporated in July 2004, no annual accounts are available as yet.
Companies from which the promoters have disassociated themselves in the past three years
There are no companies from which the Promoters have disassociated themselves in the past three years.
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RELATED PARTY TRANSACTIONS
Our Company has various transactions with related parties, including the following:
• Several promoter group companies, namely Jetair Private Limited, Jet Enterprises Private Limited,
Transmodal Services Private Limited, UPS Jetair Express Private Limited, Jet Airways LLC, Jet Airways of
India Inc., and India Jet Airways (Pty) Limited; and
• our directors and employees.
These transactions include the following:
• payments made under GSA agreements with Jetair Private Limited, Jet Airways LLC, Jet Airways of India
Inc. and India Jet Airways (Pty) Limited;
• payments for premises leased;
• payment of license fees to Jet Enterprises Private Limited pursuant to trade mark licensing agreements; and
• payments for ground transportation services.
For more detailed information on our related party transactions, see note 14 to our Interim Audited Financial
Statements under Indian GAAP. See also “Risk Factors – Mr. Naresh Goyal and his affiliates have significant control
over us including as a result of provisions in our Articles of Association, and have the ability to direct our business and
affairs; their interests could conflict with yours” and “Risk Factors – we do not own the “Jet Airways” mark”. See also
disclosure relating to interests of promoters and directors in the section “Statutory and Other Information – Interest of
Promoters and Directors” on page 169 of this Draft Red Herring Prospectus.
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REGULATIONS AND POLICIES
DGCA
The principal regulatory authority that regulates the civil aviation sector in India is the Director General of Civil
Aviation, or DGCA. The DGCA operates in accordance with the Aircraft Act, 1934, as amended, and the Aircraft
Rules, 1937, as amended.
To operate scheduled services in India, an airline requires an operating permit from the DGCA. The operating permit
can only be granted to:
• A citizen of India; or
• A company or a body corporate that is registered and has its principal place of business within India, its
chairman and at least two-third of its directors are citizens of India, and its substantial ownership and effective
control is vested in Indian nationals.
The eligibility requirements for such operating permit also include certain requirements relating to a minimum
subscribed equity capital, a minimum number of aircraft, adequate number of aircraft maintenance engineers, adequate
maintenance and repair facilities, adequate number of flight crew and cabin crew, and adequate ground handling
facilities and staff.
This permit is required to be renewed on a year-to-year basis. An airline incorporated in India and operating scheduled
services is also required to register all its aircraft with the DGCA, save and except aircraft which are wet leased.
In addition, such an airline is required to comply with Civil Aviation Regulations (“CARs”), and Aeronautical
Information Circulars as issued by the DGCA from time to time. CARs and AICs cover various areas of airline
operations including air safety, airworthiness, engineering and technical aspects, air transport operations, flight crew
standards and training, and licensing of flight crew and aircraft maintenance engineers.
Route Dispersal Guidelines
An airline providing scheduled services on domestic sectors in India is required to comply with Route Dispersal
Guidelines as set forth by the Government in March 1994. These guidelines classify city pairs into the following
categories:
• Category I, which covers 12 city pairs connecting metropolitan cities (Mumbai – Bangalore, Mumbai – Kolkata,
Mumbai – Delhi, Mumbai – Hyderabad, Mumbai – Chennai, Mumbai – Thiruvanathapuram, Kolkata – Delhi,
Kolkata – Bangalore, Kolkata – Chennai, Delhi – Bangalore, Delhi – Hyderabad, Delhi – Chennai);
• Category II, which covers routes connecting the North East, Jammu and Kashmir, Andaman and Nicobar Islands
and Lakshadweep with cities in Category I and Category III routes;
• Category IIA, which covers city pairs within the North east, Jammu and Kashmir, Andaman and Nicobar Islands
and Lakshadweep; and
• Category III, which covers any city pair that does not fall in Categories I, II and IIA.
The Route Dispersal Guidelines require airlines providing scheduled services on domestic sectors in India to operate in
the following manner:
• On Category II routes, 10% of the capacity deployed on Category I routes;
• On Category IIA, 10% of the capacity deployed on Category II routes; and
• On Category III, 50% of the capacity deployed on Category I routes.
The DGCA monitors compliance with the Route Dispersal Guidelines on a monthly basis. Compliance with these
guidelines is a condition for the renewal of our operating permit. Even for occasional non-compliance, the DGCA
requires the airline to make up any shortfall during the subsequent period. Failure to comply with these guidelines on a
consistent basis can lead to cancellation of the scheduled airline status of an airline or the non-approval of its schedules.
Increase in Fleet Size
An airline requires the permission of the Ministry of Civil Aviation, Government of India, to increase its fleet size.
Once such permission is granted, the import of aircraft requires a “no-objection” certificate from the DGCA.
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Permissions from the Ministry of Finance, Government of India, and the Reserve Bank of India are required for foreign
currency financing arrangements with regard to acquisition of aircraft.
Airports
There are three categories of airports in India:
• International airports from where international flights can operate;
• Domestic airports from where only domestic flights can operate; and
• Civil enclaves located in military airports from where civilian aircraft are permitted to operate.
The Airports Authority of India, or the AAI, manages 127 airports in India, of which 101 are civil airports (including
12 international airports) and 26 are civil enclaves at defence airfields. A few of the smaller civil airports are managed
by the State Governments. AAI also administers the use of terminal building facilities at military airports by civilian
aircraft, while Air Traffic Control, or ATC, and scheduled clearances at these airports are the responsibility of the
defense authorities. The only privately owned airport is located at Cochin. Two privately owned international airports
are currently under construction at Bangalore and Hyderabad. In addition, the Government is seeking to modernize and
restructure Mumbai and Delhi airports.
Airlines are required to pay the AAI terminal, landing and navigation charges, and route navigation facility charges.
Airlines are dependent on AAI to lease space for passenger services, parking facilities, engineering and dispatch
facilities and administrative offices.
Foreign Ownership Restrictions
Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by persons
resident outside India requires the prior approval of the FIPB. However, the MoCA, pursuant to a Notification No.
AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of India on November 13, 2004) has
permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector up to 49% through the
“automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also permits
investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline.
Amendments to the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are
awaited.
The RBI, by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognized OCBs, such as Tail Winds,
as an eligible class of investors under the various investment routes/schemes under the rules and regulations
promulgated under the FEMA. Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3,
2003, issued the OCB Regulations to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8,
2003, the RBI clarified, among other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the
OCB Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA
Regulations (i.e., with the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI),
an erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for
the transfer of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to
residents, subject to the terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi and Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested
the FIPB to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain
clarifications on behalf of an Indian company in the domestic airlines sector which was contemplating an initial public
offering. The FIPB was informed that the company was promoted by an NRI who held the shares of such company
through an OCB in which such NRI had a 100% shareholding. The FIPB was further informed that the initial public
offering by the company would be made to persons within the definition of Indian residents (including FIIs and QIBs
registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer for sale of shares in
the company by the OCB to such Indian residents.
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The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for such Allotment of Equity Shares under this Offer. We
will be required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines
issued by the DGCA from time to time, including the AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the
Company in accordance with the AIC No. 4, read with the MoCA notification No. AV.13011/10/96 DT (Vol II) dated
November 10, 2004, and other applicable laws, rules, regulations, guidelines and approvals.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor whether such investor is eligible to acquire
Equity Shares of the Company.
We have obtained an approval dated June 28, 1993 from the FIPB for investment by Tail Winds in the Company. We
have further obtained an approval dated June 14, 2000 from the FIPB for issue of non-voting convertible preference
shares to the International Finance Corporation, or IFC.
International Traffic Rights
The operation of international passenger services depends on traffic rights negotiated between the Government of India
and the government of the other country. These rights are contained in the Air Services Agreement, or ASA, (as
between the two governments) which deals with the capacity deployment of carriers of either country.
As ASAs are negotiated and agreed on a government-to-government basis, the relevant traffic rights contained in these
agreements belong to the Government of India. Depending upon the provisions of an ASA, each state may grant rights
to one or more airlines.
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The Chicago Convention and the contemporaneously drafted treaties (the International Air Services Transit Agreement
and the International Transport Agreement) are, however, silent as to the criteria for determining substantial ownership
and effective control of an airline. In these respects, certain countries and airlines have adopted mechanisms (including
specific legislation) aimed at controlling foreign investment in the airlines. In India, there is as yet no legislation to that
effect, other than what is contained in AIC No. 4.
The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20
aircraft to provide services to other international destinations. These destinations exclude the Gulf countries of UAE,
Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three
years. However, these policy changes are not yet effective, and detailed guidelines will need to be notified by the
Ministry of Civil Aviation. As and when the changes in policy become effective, the Government will also need to
negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the respective countries to which we
desire to fly. The Government will also specify the frequency of flights that we will be entitled to operate. There is no
certainty when these policy changes will become effective and whether or when we will be permitted to fly to
destinations of our choice.
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GOVERNMENT APPROVALS
In view of the approvals listed below, we can undertake this Offer and our current business activities and no further
material approvals from any government authority are required to continue such activities.
Approvals for the Offer
The following are the Government approvals and clarifications relating to the Offer:
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard.
• a transfer of the shares by an erstwhile OCB in favour of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for such allotment of Equity Shares under this Offer.
Approvals for the Business
We require various approvals for us to carry on our business in India and overseas. The approvals that we require
include the following:
Approvals from the Director General of Civil Aviation
• Permission from the DGCA to operate passenger air transport services (Permit S-6).
• Approval from the DGCA to carry by air goods listed in Part II of the Technical Instructions for the Safe
Transport of Dangerous Goods by Air (ICAO doc. 9284-AN/ 905) from/to/across India (Permit No. 461-
06/2003).
• Approval from the DGCA for the method of determination of the Aerodrome Operating Minima (DGCA
Approval No. AV 22029/13/99/FID).
• Certificates of Registration from the DGCA in connection with each of our aircraft.
• Certificates of Airworthiness from the DGCA in connection with each of our aircraft.
• No objection certificates for import of each of our aircraft.
Approvals from tax authorities
• Permanent Account Number and Tax Deduction Account Number under the I.T. Act.
• Registration under the Central Sales Tax Act, 1956 and the Bombay Sales Tax Act, 1959.
• Registration under the sales tax Acts of various states in India for local sales tax.
• CBDT approvals under Section 10(15A) of the I.T. Act.
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• CBDT approvals under Section 10(15)(iv)(c) of the I.T. Act.
• Service tax registrations.
Labor related approvals
• Principal employer registration under the Contract Labor (Regulation and Abolition) Act, 1970
• Registration under the Factories Act, 1948.
• Registration under the Payment of Wages Act, 1936.
• Registration under the Payment of Bonus Act, 1965.
• Registration under the Employees’ State Insurance Act, 1948.
• Registration under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
• Registration under the Payment of Gratuity Act, 1972.
• Registrations under the Shops and Commercial Establishments Acts, where applicable.
Department of Company Affairs approvals
• Approval dated April 10, 2003 of the Government of India under Section 314(1B) of the Companies Act.
• Approval dated August 11, 2004 under the proviso to sub-section (1) to Section 297 of the Companies Act.
Others
• Approvals from the Reserve Bank of India for issue of preference shares and equity shares (on repatriation
and non-repatriation basis), foreign inward remittances and payment of dividends on both equity and
preference shares.
• RBI approvals to remit payments for lease and hire purchase payments for our aircraft.
We have obtained the above approvals and the same are valid as of the date of this Draft Red Herring Prospectus.
We will be required to make the following applications for approvals that are material to our business or this
Offer:
An application will have to be made to the RBI in connection with the redemption of the CCRPS issued to IFC.
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OUTSTANDING LITIGATION
Except as described below and in the notes to the Summary Restated Statements and the Interim Audited Financial
Statements, there are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of
statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues
towards instrument holders like debenture holders, fixed deposits and arrears on cumulative preference shares issued by
the Company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for
economic/civil/any other offences (including past cases where penalties may or may not have been awarded and
irrespective of whether they are specified under paragraph (i) of Part 1 of Schedule XIII of the Companies Act, 1956)
against our Company as on the date of this Draft Red Herring Prospectus.
Cases/Proceedings against Jet Airways
Statutory Defaults
An inspection was carried between December 2001 and May 2002 under Section 209A of the Companies Act. The
Company filed applications under Section 621A of the Companies Act for compounding. Compounding orders were
passed by the Department of Company Affairs relating to Section 211, Section 205, Section 224(8) and Section 292 of
the Companies Act, and compounding fees of Rs.0.22 million have been paid by the Company pursuant to such orders.
Civil Cases
The Company granted exclusive rights to Press Communication Pte. Limited, a Singapore company (“Press
Communication”) in 1995 to publish an in-flight magazine pursuant to an agreement valid for three years. Press
Communication failed to supply the requisite number of copies for each issue of such magazine and also consistently
delayed delivery, thereby breaching the terms of the agreement. In July 1996 the Company terminated the agreement
with Press Communication in accordance with the terms of such agreement. In August 1996, Press Communication
filed a civil suit against the Company in the High Court at Mumbai for a decree of Rs. 39.0 million. Ad-interim relief
has been refused and the main suit not yet been taken up for final hearing.
Three pilots, Captain M. M. Singh, Captain Dadyalla and Captain Puneet Bhalla, left the services of the Company with
effect from July 1, 2002. These pilots have filed Suit Nos. 244/2003, 245/2003 and 246/2003 against the Company
before the Court of the Additional District and Sessions Judge, Tis Hazari Courts at Delhi for recovery of an amount
aggregating to approximately Rs.3.3 million, allegedly towards leave encashment, medical claim, alleged financial loss
due to delay in the start of follow-up training, difference in posting allowance, deductions from salary of certain
amounts and damages for mental harassment. These suits are pending before the Additional District and Sessions
Judge, Tis Hazari Courts, Delhi.
Captain M. M. Singh, Captain Dadyalla and Captain Puneet Bhalla have also filed suits against the Company before the
Court of District Judge at Delhi seeking permanent injunction restraining the Company from invoking the bank
guarantees furnished by them at the time of joining the Company. Interim orders have been passed in these
proceedings. While in two suits the bank guarantees had already been encashed, the third bank guarantee was not
encashed in view of the interim orders of the Court. The Company has filed its written statement and the cases are
currently pending. These pilots have also filed petitions no. CM(M) No. 308/2002, CM(M) No. 309/2002 and CM(M)
No. 310/2002 in the High Court of Delhi against an order of the Additional District Judge refusing the grant of an ex-
parte injunction order. The petition of Captain Dadyalla has been dismissed by the High Court of Delhi, and a review
petition filed by Captain Dadyalla has also been dismissed. The petitions filed by Captain Bhalla and Captain Singh are
currently pending in the High Court of Delhi.
Captain Bhalla and Captain Singh also filed contempt petitions in Suit No.308 of 2002 and Suit No.310 of 2002
against, among others, Captain N.T. Malkani, Vice-President, Flight Operations and Mr. Naresh Goyal, the Chairman
of the Company, alleging contempt of the orders of the High Court of Delhi dated July 5, 2002 and July 8, 2002. In this
case, before such orders were communicated to the Company, two bank guarantees furnished by these former
employees to the Company had been encashed. These contempt petitions are currently pending.
Mr. Mahavir Prasad Kakrania, the proprietor of M/s Takeshwary International, New Delhi, has filed a suit for recovery
of Rs.0.36 million before the Additional District and Sessions Judge, Tis Hazari Courts, Delhi. The suit has been filed
against the Company for a claim for short landing of cargo booked from Chennai to Delhi. The Company has filed its
written statement and the case is currently pending before the Additional District and Sessions Judge.
Carewell Securities Pvt. Ltd., Indore (“Carewell”) has filed a suit for recovery of Rs.0.14 million against the Company.
The Company entered into a contract of service with Carewell in 1996 for availing the services of loaders, drivers, etc.
from them at Indore Airport. The agreement was renewed from time to time and ultimately terminated in 1999.
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Carewell has claimed that under the terms of such agreement, the Company is liable to pay Rs.139,000 which it had not
paid even after termination of such agreement. The case is currently pending before the XXIst Additional District
Judge, Indore.
Kwick Travels (P) Ltd., Delhi (“Kwick Travels”) has filed a suit for recovery of approximately Rs.1.9 million against
the Company in the High Court at Delhi. In May 1993, Kwick Travels was appointed as an authorized travel agent to
hold, stock and sell air tickets against commission in New Delhi. Kwick Travels has alleged that it was assured of an
increase in its incentive inclusive of the special incentive being received by Kwick Travels from other airlines against a
target sale of Rs.4 million per month or Rs.48 million of annual business. Kwick Travels has further alleged that there
was non-cooperation from the Company and that with effect from October, 1996, the Company withheld supply of
tickets under the pretext of short supply of tickets. The case is pending before the Local Commissioner appointed by
the High Court of Delhi for recording of evidence.
Mr. Pawan Kumar Agarwala and Mr. Ashok Kumar Agarwala have filed civil defamation suits against the Company
for an amount of Rs. 0.5 million each before the Civil Judge, Senior Division, Siliguri. One of the plaintiffs was
offloaded from a flight at Kolkata Airport as he was found to be unfit for travel and the other plaintiff consequently did not
take the flight. The suits are currently pending before the Civil Judge, Senior Division, Siliguri.
United India Insurance has filed a suit against the Company for recovery of Rs.0.18 million before the Sub-Court at
Ernakulam. The suit has been filed against the Company for a claim for damaged cargo consignment booked from
Mumbai to Cochin. The Company has filed its written statement and the case is currently pending before the Sub-Court.
Dr. Mala Sur Mitra has filed a suit for recovery of Rs.9,190 before the Small Causes Court at Kolkata against the
Company. The plaintiff was wrongly booked by a travel agent in the Club Premiere class, and the Company’s staff at
Port Blair collected the difference in air fare from the plaintiff. The suit is currently pending before the Small Causes
Court.
Captain Cedric D’silva, an employee of the Company, has filed a declaratory suit against the Company in the Bombay
City Civil Court for an order and declaration that the Company’s action of reverting him from the position of Operation
Manager–Western Region to the position of Senior Commander in 2002 was arbitrary and illegal. The suit is currently
pending in the Bombay City Civil Court.
Mr. N.K. Chawla, a car-parking contractor, has filed a suit in the Civil Court, Bhopal for recovery of approximately
Rs.30,000 towards certain car parking charges that the Company has allegedly failed to pay for the use of the car
parking area at Bhopal Airport. The suit is currently pending before the Civil Court.
Capt. . Jagbir Singh, a pilot formerly employed by the Company, has filed a suit before the Court of the Civil Judge at
Delhi, to restrain the Company from invoking the bank guarantee furnished by him at the time of joining the Company.
Capt, Jagbir Singh left the Company’s employment in December 1999. Immediately upon his resignation, Capt. Jagbir
Singh filed such suit and obtained a stay order against the Company from invoking the bank guarantee amounting to
Rs.0.75 million. The stay order has since been vacated by the Court, and the suit has been dismissed by the Court for
non-appearance by the plaintiff.
Captain Puneet Mehta, a pilot formerly employed by the Company, left the Company’s employment in 2001. He filed
a suit against the Company before the Senior Civil Judge, New Delhi, to restrain the Company from invoking the bank
guarantee furnished by him at the time of his joining the Company. The Company has filed its written statement.
Subsequently, the Court dismissed Captain Mehta’s application for interim stay restraining the Company from invoking
the bank guarantee. Captain Mehta has filed an appeal against this order before the High Court, Delhi. The High Court
has directed the bank to deposit the bank guarantee amount in the Court and this has been complied with. The
proceeding has not yet been posted for hearing.
Captain Deven Kanani, a pilot formerly employed by the Company, left the Company’s employment in 2003. He filed
a suit against the Company in the High Court at Mumbai, to restrain the Company from invoking the bank guarantee
furnished by him at the time of his joining the Company. As an interim measure, he also obtained an order from the
Court directing the Company to issue to him a ‘no objection certificate’ to join Air India, whose employment he had
already joined. This order was challenged by the Company before the Division Bench of the High Court of Mumbai,
and such interim order was set aside. The suit is currently pending.
Mr. Miraj Alam, the proprietor of M/s. Gemex Travel & Cargo Services has filed a suit before the City Civil Court at
Kolkata, seeking to restrain the Company from invoking/encashing the bank guarantee of Rs.0.5 million furnished by
him. However, the bank guarantee had already been encashed by the Company before the Company had received the
summons from the Court. The suit is currently pending before the City Civil Court.
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M/s. Porter Service has filed a suit against the Company before the Civil Court, Varanasi, for the recovery of Rs.0.35
million. The case has been referred to the District Court, Varanasi and is currently pending.
Suit No. 623/1996 has been filed by Mr. Rajeshkumar R. Thekedar, the proprietor of M/s. Speedways Travels, claiming
an amount of approximately Rs.23 million, has been dismissed by the High Court of Mumbai in favor of the Company.
The suit was dismissed for default/want of prosecution by the plaintiff.
Writ Proceedings
The Consumer Education and Research Society Suraksha Sankool and others have filed Special Civil Application No.
11105/2004 against the Secretary, Government of India, Ministry of Civil Aviation and others, including the Company,
before the High Court of Gujarat at Ahmedabad. The writ petition challenges the terms of the concession scheme in
airfare for senior citizens that has been adopted by the main airlines in India, as being in violation of Article 41 of the
Constitution of India. The writ petition is pending hearing and disposal in the High Court.
Writ Petition No. 7162/2004 has been filed before the High Court of Judicature for Rajasthan at Jaipur. The petition is
against the Union of India and the Company is one of the respondents. The writ petition challenges the terms of the
concession scheme in airfare for senior citizens that has been adopted by the main airlines in India, as being in violation
of Article 41 of the Constitution of India. A specific complaint has also been made against the Company in connection
with refund against cancellation of an air ticket. The petition is currently pending.
Ansham Travels and seven other travel agencies have filed Writ Petition No.14771/2001 against the Union of India and
43 airlines, including the Company, before the High Court of Madras, in connection with deduction of tax at source
under section 194H of the I.T. Act. The writ petition is currently pending.
Gay Travels has filed Writ Petition No. 19569/2003 before the Madras High Court, in connection with deduction of tax
at source. An interim order was vacated in the Company’s favor on December 12, 2003. The writ petition is currently
pending.
Around the World Travel and Tours Private Limited and 13 other travel agencies have filed Writ Petition No.
20722/2003 against the Union of India and 21 airlines, including our Company, before the High Court of Madras, in
connection with deduction of tax at source under section 194H of the I.T. Act. The writ petition is currently pending.
The AFT Trust – Sub-1 of USA had filed a writ petition before the High Court of Delhi challenging the orders of the
CBDT dated November 15, 2000 and March 4, 2002, refusing to accord approval under section 10(15A) of the I.T. Act
in connection with aircraft lease agreements for two aircrafts leased to the Company. The Company has been
impleaded as one of the respondents. The Court was pleased to quash the orders of the CBDT and directed AFT Trust-
Sub-1 of USA to approach the Government of India for approval by way of a fresh application.
Mr. S. N. Sharma has filed a writ petition in the High Court of Delhi against The Secretary, Government of India,
Ministry of Civil Aviation and others. The Company and certain of its current and former Directors have been
impleaded as respondents in the proceedings. The writ petition has been filed in relation to the hazardous conditions
under which the Company allegedly allowed flight 9W 312 to take off on December 28, 2001 from New Delhi to
Mumbai. The writ petition is currently pending before the High Court.
Tax related Cases/Proceedings
As a marketing promotional measure, Satyam Infoway Ltd., Chennai (“Satyam”) supplied free compact discs to be
distributed among the Company’s Jet Privilege members. The distribution was effected through GE Capital Business
Process Management Services Pvt. Ltd., Gurgaon (“GE Capital”). One of the consignments despatched by Satyam,
valued at Rs.0.724,600 was detained by the Excise and Taxation Officer, Gurgaon, in connection with the payment of
sales tax. The Excise and Taxation officer served a show cause notice on Satyam, GE Capital and the Company, on the
ground that sales tax was required to be paid on such consignment. The Company has contended before the Assessing
Authority that there had been no incidence of sale and therefore such consignment did not attract sales tax. The
Assessing Authority’s order is currently awaited.
A cargo consignment of cordless handsets was confiscated by the Uttar Pradesh Trade Tax Department, Lucknow for non-
submission of Form No. 31. The owner of the consignment never claimed the goods. The Company was charged as a
dealer/trader of the cordless phones and notices were issued by the authorities. However, these notices were not received
due to a change in address. Two ex-parte orders for assessment and penalty under the Uttar Pradesh Trade Tax Act,
1948, were passed against the Company for a total amount of Rs.148,800. The Company filed two applications before
the Assistant Commissioner (Assessment)-9, Trade Tax, Lucknow for setting aside the orders and reopening the case.
The authority heard the Company’s arguments and set aside the Company’s applications and upheld the ex-parte
119
orders. The Company has appealed against these orders before the Joint Commissioner (Appeals), Trade Tax, Lucknow
who has stayed the tax assessed in an amount of Rs.36,000 against a bank guarantee of the said amount. The appeal is
pending.
Corporate Income Tax Assessments
Assessment year 2003-2004
Income tax returns were filed by the Company claiming a refund of Rs.67 million. An order under section 154 of the
Income Tax Act, 1961 was issued by the Deputy Commissioner of Income Tax (DCIT) – 5(1) allowing a refund only
for Rs.66 million. The disallowance was made on account of short credit granted against defective T.D.S. certificates
filed. The Company is in the process of filing the rectified TDS certificates for claiming the balance refund amounts.
Assessment year 2001-2002
The Company has preferred an appeal before the Income Tax Appellate Tribunal (“ITAT”) against the disallowances of
provision for obsolescence, repairs to furniture and fixtures, treatment of interest income as “income from other
sources” and provision for doubtful debts. The tax effect of the disputed amounts involved in such appeal proceeding is
Rs.4.45 million.
Assessment year 2000-2001
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for obsolescence and repairs to furniture and fixtures. The Income Tax department has also
preferred an appeal before the ITAT against the deductions of depreciation on hire purchased aircraft and aircraft heavy
maintenance expenses allowed in favour of the Company. The tax effect of the disputed amounts is Rs.14.61 million.
The Company has also preferred an appeal before the Commissioner of Income Tax (Appeals) (“CIT(A)”) against the
order passed under section 154 of the I.T. Act for recomputation of the book profits under section 115JA of the I.T.
Act, after including therein provision for obsolescence, provision for doubtful debts and provision for gratuity. The tax
effect of the disputed amounts is Rs.7 million.
Assessment year 1999-2000
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for obsolescence and repairs to furniture and fixtures.
The Income Tax Department has also preferred an appeal before the ITAT against the deductions of depreciation on
hire purchased aircraft and aircraft heavy maintenance expenses allowed in favour of the Company. The tax effect of
the disputed amounts is Rs.824.54 million.
The Company has also preferred an appeal before the ITAT against the order passed under section 154 of the I.T. Act
for recomputation of the Book Profits under section 115JA after including therein provision for obsolescence to book
profits which is pending before the ITAT. The tax effect of the disputed amounts cannot be presently quantified.
Assessment year 1998-1999
The Company has preferred an appeal before the ITAT against the order passed under section 143 (3) of the I.T. Act
disallowing provision for obsolescence, repairs to furniture and fixtures, consultancy charges and depreciation claimed
on computers. The Income Tax department has also preferred an appeal before the ITAT against the deductions of
depreciation on hire purchased aircraft and aircraft heavy maintenance expenses allowed in favour of the Company.
The tax effect of the disputed amounts is Rs.786.78 million.
The Company has also preferred an appeal before the ITAT against the order passed under section 154 of the I.T. Act
for recomputation of the book profits under section 115JA after including therein provision for obsolescence to book
profits which is pending before the ITAT. The tax effect of the disputed amounts is Rs.3.44 million.
Assessment year 1997- 1998
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for leave encashment and repairs to furniture and fixtures. The Income Tax department has also
preferred an appeal before the ITAT against the deductions of depreciation on hire purchased aircraft and aircraft heavy
maintenance expenses allowed in favour of the Company. The tax effect of the disputed amounts is Rs.353.02 million.
120
The Company has preferred an appeal before the ITAT against the order passed under section 148 of the I.T. Act
confirming the disallowance of provision for obsolescence. The tax effect of the disputed amounts is Rs.12.579 million.
Assessment years 1994-1995 and 1995-1996
The Company has preferred an appeal before the ITAT against the order passed under section 148 confirming the
disallowance of provision for obsolescence. The tax effect of the disputed amounts cannot be presently quantified.
Tax Deducted at Source on Salaries
Assessment years 1998-1999, 1997 – 1998,1996-1997, 1995-1996
The Income Tax department has filed an appeal before the ITAT against the order passed by the CIT(A) allowing
deduction of conveyance allowance in favour of the Company.
Assessment year 1994 - 1995
The Income Tax department has filed an appeal before the Bombay High Court, against the order passed by the CIT(A)
allowing deduction of conveyance allowance in favour of the Company.
Tax Deducted at Source on other Payments
Assessment year 2002-2003
The Company has preferred an appeal before the ITAT against the order passed by the CIT(A) regarding applicability
of TDS on route navigation facility charges (RNFC), terminal navigation facility charges (TNLC) and X-ray charges
paid to the AAI. The amount involved in such appeal is Rs.14.19 million.
Sales Tax
Fiscal 2000
The Company has preferred an appeal before the Assistant Commissioner of Sales Tax–(Appeal) V (ACST(A)) against
the assessment order wherein the purchases from unregistered dealers has been taxed. The amount involved is Rs.0.58
million.
Fiscal 1999
The Company has preferred an appeal before the Assistant Commissioner of Sales Tax–(Appeal) V (ACST (A)) against
the assessment order wherein the purchases from unregistered dealers has been taxed. The amount involved is Rs.0.38
million.
Service Tax
Ahmedabad Region
The Company has received a show cause notice from the Deputy Commissioner, Division – V, Ahmedabad I, raising a
demand of Rs.9.6 million on freight and other incidental charges collected from August 16, 2002 to September 9, 2004.
The Company has already made a representation before such authority.
Coimbatore Region
The Company has received a show cause notice from the Assistant Commissioner, Division – II, Coimbatore, raising a
demand of Rs.2.6 million on freight and other incidental charges collected from August 16, 2002 to September 9, 2004.
The Company has already made a representation before such authority.
Consumer Cases
Jet Airways is a service sector company and various consumer cases have been filed and are pending against the
Company. As on date of this Draft Red Herring Prospectus, there are 87 consumer complaints filed and pending
against the Company in various Consumer Forums and State Commissions across the country and in the National
Commission. These consumer complaints have been filed on account of the following reasons:
121
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
Denied Boarding: These are complaints where overbooking by the Company resulted in passengers holding
confirmed bookings and valid tickets being denied boarding. There are 15 cases of denied boarding pending in
different forums across India and names of the complainants, place of litigation and amounts involved are as
follows:
1. Mr. Vishnu Vardan Reddy Hyderabad 105,000
2. Mr. Vinod K. Agarwal Hyderabad 304,000
3. Mr. Ravi Soni Guwahati 1,025,850
4. Mr. Navratan S. Jain New Delhi 500,000
5. Mr. Ajay Jajodia New Delhi 1,500,000
6. Dr. Bhavinbhai Kothari Rajkot 112,815
7. Mr. Karan Nanda Jammu 205,000
8. Mr. Ravinder Saini Jammu 205,000
9. Mr. Muzamil M. Dar Srinagar 3,706,790
10. Mr. Vinay Dwivedi Indore 125,000
11. Mr. Ramesh B. Rander Nagpur 1,658,000
12. Mr. Umesh P. Naik Mumbai 171,453
13. Mr. Dhiren Sheth Mumbai 2,00,000
14. Mr. Navin K. Dargar Udaipur 450,000
15. Mr. A. M. S. G. Ashokan Virudhunagar 450,000
Refused Boarding: These are complaints of passengers who could not board the aircraft for various reasons
such as a mistake on the part of the travel agent, resulting in non-issuance of a valid ticket and other lapses in the
booking of tickets, passengers refusing to buy a fresh ticket against cancellation of a ticket bought by a credit card
that has been blacklisted by the concerned bank, passengers seeking to carry a weapon on our aircraft without
obtaining prior security clearance or flight coupons being misplaced by passengers etc. There are 20 cases of
refused boarding pending in different forums across India and the names of the complainants, place of litigation
and the amounts involved are as follows:
1. M/s. Andhra Bank Hyderabad 5,500
2. Mr. S. K. Agarwal New Delhi 450,000
3. Mr. Surya Buragohain Sivsagar 100,000
4. Mr. Sushil Kumar Jain New Delhi 114,460
5. Mr. Narottam Mittal & Four Ors. New Delhi 68,540
6. Mr. T. R. Mittal New Delhi 500,000
7. Ms. Sonal S. Mehta Surat 495,000
8. Ms. Poojaben V. Mali Surat 495,000
9. Ms. Champaben G. Rathod Surat 495,000
10. Ms. Beroz N. Daruwala Surat 495,000
11. Mrs. Neelam Gupta Jammu 137,960
12. Mr. T. K. Dilip Sukumar & Ors. Kannur 205,030
13. Mrs. Shahida Razak Trivandrum 153,941
14. Mr. D. K. Baser Bhopal 34,800
15. Mr. Nitin Arora Bhopal 60,980
16. Dr. Mahendra N. Kabra Mumbai 120,000
17. Mr. Roop Kumarji Paliwal Udaipur 422,000
122
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
18. Mr. Madanlal Paliwal Udaipur 422,000
19. Mr.Madhusudan Vaishnav & Anr Udaipur 100,082
20. Mr. M. K. Singhal New Delhi 111,811
Off Loading: These are complaints where passengers have been off loaded for various reasons such as Company
staff issuing a boarding card to the passenger although there was no seat, passengers refusing to board the aircraft
because their accompanying relative could not be accommodated on the same flight or a passenger being
accommodated after the economy class counter was closed, and later being off loaded because one of the
Company’s AMEs had to travel on the flight. There are three such cases of off loading pending in different
forums across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. G. R. Vyas Ahmedabad 110,000
2. Mr. Chandulal Gariba & Ors. Mumbai 410,000
3. Mr. Perumal Chennai 300,000
Gate No Show by Passengers: These are complaints by passengers in connection with a gate no show, which
occurs when a checked in, security cleared passenger does not report at the departure gate for boarding the
aircraft. There are three cases in connection with gate no show pending in different forums across India and the
names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. Rajesh Verma Guwahati 86,227
2. Mr. Suben Roy Papumpare 500,000
3. Mr. S. Sukumar Bangalore 16,994
Delay in Departure/Cancellation/Diversion of Flights: There are eight cases pending in different forums
across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. S. P. Nachnolkar Goa 109,000
2. CERS and others Ahmedabad 43,000
3. CERS and others Ahmedabad 58,000
4. Mr. Prakash I. Patel Baroda 113,030
5. Major. Yogesh S. Dani Mumbai 509,794
6. Mrs. Priti Y. Dani Mumbai 509,794
7. Mr. Manmohan Singh and Ors. Mumbai 90,000
8. Mr. S. Visweswara Vizianagaram 18,376
Pilferage/Damage/Loss of Baggage and Cargo: There are 20 cases in connection with pilferage/damage/loss of
baggage and cargo pending in different forums across India and the names of the complainants, place of litigation
and amounts involved are as follows:
1. Mr. Lakshmikar Reddy Hyderabad 341,021
2. Mr. Sankar Patgiri Goalpara 306,500
3. Mr. Asraf Shawl New Delhi 111,500
4. Jagrut Nagrik and Solarson Inds. Baroda 181,836
5. Jagrut Nagrik and Solarson Inds. Baroda 259,170
6. Mr. N. C. Rana Baroda 23,250
7. Ms. Padmaben Patel Baroda 144,882
8. Ms. Lata A. Shah Baroda 512,000
123
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
9. Ms. Kirti Patel Baroda 83,900
10. Mrs. Harpal Kaur Srinagar 114,400
11. High Tech Computers Srinagar 450,000
12.
Ms. Ramadasini (the Company has been impleaded as
a formal party) Mangalore 150,500
13. Mr. Thayyil Aboobacker Malappuram 457,000
14. Mr. Jojo Jameson Ernakulam 50,000
15. Ms. Hiba Fathima Calicut 98,000
16. Mr. Ashok Chatterjee Indore 34,250
17. Transworld Compressor Pune 185,183
18. M/s. Metro Fabrics Chennai 1,959,403
19. Mr. Sadhan Das Agartala 103,280
20. XPS Cargo Services New Delhi 55,500
Miscellaneous Complaints: These include passenger complaints about in-flight meals, air conditioning systems,
claims for senior citizen fares and delay in delivery of baggage, etc. There are 18 such cases pending in different
forums across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Ms. Anita Hegde and another Port Blair 78,636
2. Mr. S. N. Ghatia Ahmedabad 1,500,000
3. CERS and another Ahmedabad 205,080
4. CERS and another Ahmedabad 534,608
5. Mr. Pradeep Jain Jammu 460,000
6. Mr. Ashvini Ranjan Bangalore 490,000
7. Mr. Chandrakant C. Anandpara Mumbai 26,000
8. Mr. Arvindrao Hukkeri Mumbai 376,284
9. Consumer Unity and Trust Society Jaipur 420,294
10. Mr. A. A. Mohan Chennai 107,795
11. Mr. S. S. Radhakrishnan and others Chennai 1,500,000
12. Mr. C. P. M. Rathnam Coimbatore 105,790
13. Ms. N. Indumathi Chennai 100,000
14. Mr. G. P. Singh Dehradun 91,500
15. Mr. Abdul Moiz Khan Lucknow 1,002,365
16. Mr. Debashis Dutta and others Kolkata 500,000
17. Godfrey Philips India Ltd. Bangalore 32,360
18. Mr. Arora and Ors. Baroda 12,00,000
Employee Related Cases/Proceedings
As on the date of this Draft Red Herring Prospectus, there are 31 labor and employee related cases and proceedings
filed and pending against the Company in various Labor Courts/Central Government Industrial Tribunals/ Civil Courts
across the country.
Sr.No.
Name of the Employee
Matter Before
Grounds
1. Vishnu Rewale ID 28/2001
CGIT–II/MUMBAI
Termination for theft
124
Sr.No.
Name of the Employee
Matter Before
Grounds
2. Ravindra Thombre ID 59/2001
CGIT – II/Mumbai
Termination for theft
3. Pradeep Bhatkar
ID 60/2001
CGIT - II/ Mumbai
Termination for theft
4. Mohd. R. S. Pathan ID 1/30/03/1208/2003
CGIT - II/ Mumbai
Absenteeism
5. Amrit Melant ID 2 2/14/2000
CGIT-II/ Mumbai
Absenteeism
6. Rajendra Wagmare
ID 75/03/48/2004
CGIT – II/ Mumbai
Absenteeism
7. Sanjay Jassoria ID 23/2000
CGIT – II Delhi
Absenteeism
8. Ramakrishna ID 195/99
CGIT – II Delhi
Absenteeism
9. Naresh Kumar ID 84/2001
CGIT – II Delhi
Absenteeism
10. K. N. Suresh Kumar ID 4/02
Calicut Labour Court, Calicut
Riotous behavior
11. Digant Hathi Civil Court-Rajkot Fraud
12. Abhimanyu Rathore ID 23/03
Tribunal Court – Jodhpur
Fraud
13. Chandrashekar Pattan ID 75/03/28/2004
CGIT- Mumbai
Fraud
14. Anil Chaugule
ID 2/28 of 2004
CGIT – Mumbai
Fraud
15. Prakash Gore ULP 271/2001
Labour Court - Mumbai
Ramp accident
16. Prashant Shetye ID22/2003
CGIT – Mumbai
Riotous behavior
17. Santosh B Takke ID 13/1999
CGIT – Mumbai
Termination for theft
18.
Rajeev Sharma ID 11012/45 of 2002
ID 60/2004
CGIT I Delhi – Tis Hazari
Not reporting on duty
19.
G. Victor David 1/8(94)/03
ALC (C) Mumbai
Termination of service
20.
Mukesh Parmar ITC 35/ 2002
CGIT – Ahmedabad
Termination of service
21.
Babubhai P. Solanki 7(9)/ 2004
RLC(C)- Ahmedabad
Termination of service
22.
Bijender Pal ID 11012/49 of 2002
CGIT – II Delhi
Not confirmed after probation
Certain industrial disputes have been raised by terminated workmen who were working for contractors engaged by the
Company. These workmen have sought reliefs such as reinstatement and back wages. These cases are set forth
below:
23. 10 workmen, working for a contractor T.K.
Hassan Koya
ID 29/1997
CGIT-Calicut
Termination by the contractor
24. Six workmen, working for a contractor Take Off
Services
ID CR 50/02, CR 68/01, CR
69/01, CR 70/01, CR 71/01, CR
72/01
CGIT-Bangalore
Termination by the contractor
125
Sr.No.
Name of the Employee
Matter Before
Grounds
Certain cases, as set forth below, have been filed by workers who had fixed term contracts, which were not renewed:
25. 169 workmen belonging to the BKKM Union CGIT –I BOM Termination of fixed term employment
contracts. An industrial dispute has been
raised.
26. 24 workmen belonging to the BKKM Union CGIT –I BOM Termination of fixed term employment
contracts. An industrial dispute has been
raised.
27. 24 workmen belonging to the BKKM Union Labour Court, Pune Claim of permanency
In addition to the matters listed above, the Company is a party in certain prosecutions against the Company under the
Contract Labour (Regulation and Abolition) Act, 1970 (“Contract Labour Act”) which are as under:
In Bangalore, prosecution proceedings (C.C. No. 14558/02) under the Contract Labour (Regulation and Abolition)
Rules (the “Contract Labour Rules”) for procedural irregularities has been challenged by the Company before the 6
th
Additional Court, Bangalore. The proceedings have been stayed by the Karnataka High Court.
In Chennai, prosecution proceedings (STC/149/2004 and STC/467/2004) has been initiated under the Contract Labour
Rules (by the Labor Enforcement Office, Central and Assisstant Labor Commissioner, Central) for contraventions
under the Contract Labour Act has been challenged by the Company before the Court of the Judicial Magistrate at
Alandur, Chennai.
Prosecution proceedings (ST-1757/04) have been initiated by the Labor Enforcement Officer (Central) for alleged
contravention of the Contract Labour Act before the First Class Magistrate, Kunnamangalam, Calicut.
Prosecution proceedings against the Company under the Payment of Wages Act have been initiated by the Enforcement
Officer before the Civil Court (Senior Division) at Vadodara.
Miscellaneous Proceedings/Notices
There are seven applications pending under the Motor Vehicles Act at different stages before the Motor Vehicles
Accident Tribunals across India. The details of these applications are as follows:
Sr. No. Complainant’s Name Place of Litigation Claim Amount
(Rs.)
1. Mr. Nandkumar T. Kadam Baroda 300,000
2. Mrs. Janaki Devi and others New Delhi 4,072,000
3. Mr. Sunil G. Saxena Mumbai 150,000
4. Ms. Seema D. Shinde Mumbai 150,000
5. Mr. A. Ganesan Madurai 100,000
6. Mr. Nilesh J. Shinge Mumbai 125,000
7. Kumari. Rambali Prajapati Mumbai 125,000
The Deputy Commissioner of Customs at Hyderabad has issued a show cause notice (C.No.S/26/Appg/R&I/146/2004-
ACC) levying a penalty of approximately Rs. 0.35 million due to short receipt of cargo under a shipment on the
Bombay-Hyderabad sector. The Company will be submitting its reply and seeking a personal hearing.
Criminal case C.C. No. 884/ P/ 2002 under section 304(A) of the Indian Penal Code has been filed by the State of
Maharashtra against a ramp manager employed by the Company at Mumbai airport for criminal negligence that
allegedly resulted in the death of a passenger, Mr. Manubhai Patel as he was climbing up an aircraft step ladder to
board the aircraft. The trial is currently pending.
A first information report no. 46/04 has been filed against Mr. Sanjay Bhatnagar, a driver employed by our Company
for an accident that occurred on October 21, 2004 at the Delhi airport while such driver was engaged in the services of
the Company.
Litigations/Proceedings by Jet Airways
126
Criminal Cases
The Company has filed six complaints under section 138 of the Negotiable Instruments Act, 1881 (“N.I. Act”) against
two travel agents, Green Channel and Piercy Exim, before the Court of the Chief Metropolitan Magistrate at Kolkata
and another four complaints against D.S.P. Tours at Bangalore, in connection with the dishonor of cheques issued by
such travel agents of an aggregate amount of approximately Rs.1.9 million towards payment of their dues to the
Company.
The Company has filed Criminal Complaint No. 27708/2000 against Mr. Satish Athmanathan, a former employee, in
the Court of the XX Additional Chief Metropolitan Magistrate at Bangalore for criminal misappropriation, criminal
breach of trust and cheating. Due to non-appearance of the accused on a number of occasions before the Court, a non-
bailable arrest warrant has been issued against him.
Restrictive Trade Practices Proceedings
In June 1999 the Company filed a complaint against the Cochin International Airport Limited, or CIAL, before the
Monopolies and Restrictive Trade Practices Commission (“MRTP Commission”) in connection with an exclusive
ground handling services contract entered into between CIAL and Air India. As a result of this contract, the Company
is prevented from providing its own ground handling services for its flights at Cochin International Airport and is
compulsorily required to use Air India’s services. At present, the Company is permitted to provide ground handling
services for its flights at all other airports in India where it operates. Pending the disposal of the proceedings, the
Company has entered into an interim arrangement with Air India for ground handling of its flights at Cochin
International Airport. We are currently making payments of a part of the charges claimed by Air India under protest.
The MRTP Commission by its order dated October 23, 2000, granted interim reliefs in favour of the Company. This
order was challenged before the Supreme Court of India which passed an order of status quo as of November 2, 2000.
However, this would not prevent the MRTP Commission to proceed with the final hearing of the complaint. The
complaint is pending before the MRTP Commission for final disposal.
Winding-up Petitions
The Company has filed two winding-up petitions under the Companies Act against NEPC–MICON Limited and
Quality-Inn Resort and Travels Pvt. Ltd, in the High Courts of Chennai and Kolkata, respectively, for recovery of
outstanding dues amounting to approximately Rs.2.7 million. The petitions are currently pending before the respective
High Courts.
Civil Suits/Arbitration
The Company has filed suits in the High Court, Mumbai, against nine pilots who left the employment of the Company
in 1999, seeking recovery of training costs and for injunctive reliefs. . The Court refused to grant such injunctions. The
Company had filed appeals before the Division Bench of the High Court and these have not yet been taken up for
hearing.
The Company has filed summary suits in the High Court, Mumbai against four pilots, Captain M.M. Singh, Captain
Dadyalla, Captain Puneet Bhalla and Captain B. K. Chaudhary who left the Company’s employment between 2002 and
2003. The suits have been filed against these pilots and their sureties for recovery of a portion of their training costs.
The suits are currently pending before the High Court.
The Company has filed suits against 10 defaulting travel agents for recovery of outstanding dues amounting to
approximately Rs.11.6 million, which includes a counter claim of Rs. 2.3 million against Kwick Travels (Private)
Limited. All these suits, except one suit where an ex-parte decree has been passed in favor of the Company, are
currently pending before various courts across India.
M/s. Destination Tours and Travels (“DTT”) and the Company had entered into three contracts for DTT to handle
ground handling at Jammu, ground handling at Srinagar and to act as principal sales agent for the territory of Jammu &
Kashmir. Pursuant to the termination of these contracts, DTT filed a case against the Company before the Munsif’s
Court to restrain invocation of bank guarantees furnished by DTT. The Company got an ex-parte order vacated and
encashed the guarantees of Rs.5 million. In order to recover the balance amounts, the Company approached the High
Court at Mumbai to initiate arbitration proceedings. Although arbitration proceedings were initiated, DTT failed to
participate in such proceedings, and an award was passed on January 23, 2004 in favor of the Company granting the
balance amount of Rs.4.7 million and Rs.0.18 million as costs of the arbitration. The Company is in the process of
enforcing the award.
127
Taxation related Cases/Proceedings
The Municipal Corporation of Greater Mumbai levied Rs.158 million and Rs.1.8 million as octroi duty (an entry tax)
on the full flight simulator and flight training device of the Company. The Company paid the amount that was levied
and subsequently filed Municipal Appeal Nos. 12/2001 and 350/2002 in the Small Causes Court at Mumbai for refund
of the excess duty paid. Both the appeals were allowed, although the order was stayed until October 31, 2004. By its
order dated October 1, 2004, the Court has rectified the rate of duty imposed from 4% to 4.5%.
We have filed a writ petition in the High Court, Mumbai (Writ Petition No.208 of 2001) challenging the order of the
Municipal Corporation of Greater Mumbai demanding octroi duty (an entry tax) of approximately Rs. 290 million on
certain of the Company’s fleet of aircraft. The matter has not yet been listed for hearing.
The Company had filed an appeal before the CEGAT, Mumbai against an order dated February 11, 2000 issued on
February 15, 2000 by the Commissioner of Customs imposing a penalty of Rs.2.5 million on the Company under
Section 112(a) of the Customs Act, 1962 with regard to reconditioned / second hand spares imported by our Company.
The appeal has been heard in August, 2004 and the CEGAT has reserved its order.
Consumer related Cases
The Company has filed three consumer appeals before the National Commission against orders of the State
Commissions across India for an aggregate amount of Rs.297,216 and eight consumer appeals before State
Commissions against orders of various District Forums across India for an aggregate amount of Rs.291,598. The
details of these cases are set forth below:
Sr. No.
Complainant's Name
Region
Claim Amount
(Rs.)
1. Dr. Prabhakar Chowdhary & Ors. New Delhi 191,716.00
2. Mr. Anil Kumar Sanyal New Delhi 50,000.00
3. Capt. K. S. Bajwa Jammu 90,000.00
4. Mr. Ravi B. Wattamwar Mumbai 50,000.00
5. Mr. Sandeep Arora New Delhi 55,500.00
6. Ms. Ayshabi Trivandrum 11,000.00
7. Ms. Khadeejabi Trivandrum 11,000.00
8. Ms. Soudabi Trivandrum 11,000.00
9. Mr. Hassan Abdulla Trivandrum 11,000.00
10. Mr. P. R. Bharech Kolkata 83,353.00
11. Mr. Swapan Gupta Kolkata 24,245.00
Litigations against our Directors
Except as described below, there are no outstanding litigations, suits or criminal or civil prosecutions or proceedings,
and there are no defaults, non-payment of statutory dues, overdues to banks/ financial institutions or defaults against
banks/ financial institutions by our Directors (including past cases where penalties may or may not have been awarded
and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act,
1956).
The Executive Director and certain other Directors have been impleaded as a party in two writ petitions filed against
the Company, one pending before the Gujarat High Court at Ahmedabad (SCA No. 11105 of 2004) and the other
before the High Court of Delhi (Writ Petition No. 1491 of 2004) and in 15 consumer forum complaints filed against the
Company.
Litigations/Proceedings against our Promoters
Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions or proceedings or
disputes against our promoters and there are no defaults, non-payment of statutory dues, overdues to banks/ financial
institutions or defaults against banks/ financial institutions by our promoters (including past cases where penalties may
128
or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule
XIII of the Companies Act, 1956).
Cases pending against Mr. Naresh Goyal
Two contempt petitions have been filed by Captain Puneet Bhalla and Captain M.M. Singh against Mr. Naresh Goyal
before the High Court of Delhi, alleging contempt of the orders of the High Court of Delhi dated July 5, 2002 and July
8, 2002 in the suits filed against the Company before the Court of the District Judge at Delhi seeking permanent
injunction restraining the Company from invoking the bank guarantees furnished by the petitioners at the time of
joining the employment of the Company. Mr.Goyal has not yet been served with summons.
In addition to these petitions, Mr. Goyal has been impleaded as a party in one writ petition, pending before the High
Court of Delhi being Writ Petition No.1491 of 2004 and in 16 consumer forum complaints filed against the Company,
in a criminal prosecution under the Contract Labour Act pending before 6
th
Additional Court, Bangalore filed against
the Company and in a criminal prosecution under the Payment of Wages Act, 1936 pending before the Court of Civil
Judge (Senior Division), Vadodara.
Cases pending against our Directors in their capacity as Directors of companies other than our Company
There are no cases pending against any of our Directors, in their capacity as directors of companies other than our
Company.
Litigations/Proceedings against our group companies
Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions or proceedings or
tax liabilities against our promoter group companies, and there are no defaults, non-payment of statutory dues, overdues
to banks/ financial institutions, defaults in dues payable to holders of any debentures, bond or fixed deposits and arrears
on preference shares issued by our group companies (including past cases where penalties may or may not have been
awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies
Act, 1956).
Jetair Private Limited
Cases/Proceedings against Jetair Private Limited
Criminal Cases
Eastman Travels has filed an appeal, R.C. No. 89/2002 before the VIth Additional Sessions Judge at Chennai against
the order of the XIIIth M.M. Court, directing Eastman to pay an amount of Rs.0.4 million to Jetair. The appeal is
currently pending.
Criminal Complaint No.308/1993 has been filed by the State of West Bengal against Mr. David Mark Paul, who was
working as counter staff at the Singapore Airlines counter of Jetair at the Kolkata Airport. The case is pending trial
before the court.
Civil Cases
Mr. Ganesh Das Bhatter has filed Suit No.743/1993 before the City Civil Court, Kolkata against Jetair for deficiency in
services and claiming approximately Rs.0.1 million with interest.
Suit No. O.S. 170/1998 before the Principal Civil Judge (Senior Division), Civil Court, Mangalore has been filed by
Mr. Rego, claiming approximately Rs.0.18 million from Jetair.
Asianet Communications has filed Suit No.286/2001 against T. Sukumari Amma in the Principal Sub Court in
Trivandrum for the attachment of certain property at Saran Chambers, where Jetair has offices. Jetair has, in view of
the order, filed a petition before the Court for excluding that portion of the property which it occupies from the scope of
attachment.
Jetair has been impleaded as a respondent in a Contempt Petition No.39/2001 filed by Mrs. Madhuri Dalal against Mr.
Amit Agarwal before the High Court, Mumbai. Jetair is a party to a business service agreement with Mr. Amit
Agarwal. Pursuant to the court’s order, Jetair is paying service charges to the court receiver.
129
Mr. Rangaswamy has filed a suit against Jetair in the City Civil Court, Madras, which Court has ordered compensation
of Rs.11,400. An appeal has been prefered by Jetair against the said order.
Mr. Rominder Juneja had filed a suit for recovery of Rs.1.5 million before the High Court of Delhi against Royal
Jordanian Airlines and Jetair (as the GSA for Royal Jordanian Airlines). The suit has been transferred to the Tis Hazari
courts at Delhi and is currently pending.
Writ Proceedings
Ansham Travels and others have filed Writ Petition No.14771/2001 before the Madras High Court against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Viagai Wings Pvt. Ltd. has filed Writ Petition No.11284/2001 before the High Court of Madras against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Gay Travels Pvt. Ltd and others have filed Writ Petition No.19569/2003 before the High Court of Madras against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Taxation related Cases/Proceedings
For assessment years 2004-2005, 2003-2004, 2002-2003, 2001-2002 and 2000-2001, Jetair had proceedings pending at
various stages in connection with corporate income tax assessments. The aggregate of the amounts involved in these
matters is approximately Rs.1.2 million.
Restrictive Trade Practices Cases
A complaint has been filed against Gulf Air and others by Mr. M. B. Kalia before the MRTP Commission for
deficiency in services, claiming compensation/damages of Rs.1.0 million. Jetair being the GSA of Gulf Air in India,
has been made a party to these proceedings.
Consumer Cases
Consumer Complaint No.206/1999 has been filed by Mrs. A.M.V. Batista in the District Consumer Redressal Forum,
Goa against Gulf Air and others, seeking compensation of approximately Rs.0.2 million. The passenger was offloaded
at Mumbai by Gulf Air en route to Abu Dhabi. Jetair, being the GSA of Gulf Air in India has been impleaded as a
party to the proceedings. The complaint is currently pending before the Forum.
Consumer Complaint No.610/1998, has been filed by Father Arokiaswamy before the District Consumer Redressal
Forum, Chennai against the Royal Jordinian Airlines and others, seeking compensation of approximately Rs.0.2 million
towards loss of baggage. Jetair, being the GSA of Royal Jordanian Airlines in India, has been impleaded as a party to
the proceedings. The complaint is pending before the Forum.
Consumer Complaint No.60/2004 has been filed by Mr. Maheshbhai Chimanbhai and others before the District
Consumer Redressal Forum, Surat against Cathay Pacific Airlines for compensation of Rs.0.05 million with interest
towards refund on unutilized air tickets. Jetair, being the GSA of Cathay Pacific Airlines in India, has been made a
party to the proceedings. The complaint is pending before the Forum.
Consumer Complaint No.980/2002 has been filed by Kalyani P. Vyas before the District Consumer Redressal Forum,
Ahmedabad against Royal Jordanian Airlines and others seeking compensation of approximately Rs.0.1 million for
being offloaded at the airport. Jetair, being the GSA of Royal Jordanian Airlines in India, has been made a party to the
proceedings. The complaint is pending before the Forum.
Consumer Complaint No.520/2001, has been filed by Santosh Kumar Mehrotra before the District Consumer Redressal
Forum at Kanpur for an amount of Rs.4,500. The basis of the complaint is that he was not provided with a visa by
Jetair, in spite of having paid consideration for the same to Jetair. The complaint is pending before the Forum.
Consumer Complaint No.77 of 1994 was filed by Hira Lall & Sons (Exports) Pvt. Ltd. before the State Consumer
Disputes Redressal Commission, Delhi against Royal Jordanian Airlines claiming compensation of Rs. 1.8 million
towards loss and damages for wrong delivery of goods. Jetair, being the GSA of Royal Jordanian Airlines in India, has
been made a party to the proceedings. In the same matter, against an order of the State Commission, in which the State
130
Commission declined to permit impleadment of Czechoslovakian Airlines (trans-shipper) as a party, Royal Jordanian
has filed a Revision Petition No.1868/2004 before the National Commission. Jetair has also been made a party to the
proceedings. The complaint and appeal are both pending before the respective Commissions.
Jetair has been impleaded as a party to certain appellate proceedings in the National Commission (Appeal No.573 of
1996) initated by Makers and Sellers Union alleging deficiency of service in delivery of cargo without collection of the
original airway bill. The claim amount is Rs.0.7 million and the matter is currently pending before the said
Commission.
Employee related Cases
Mr. Ramesh Kumar has filed Case No.86/2001 before Central Government Industrial Tribunal, Delhi against Jetair for
dismissal of service. The case is pending before the Tribunal
Archana Srivastava has filed case No.128/2001 before the Labour Court (First) Uttar Pradesh Sarvod, Kanpur against
Jetair relating to her resignation from the services of Jetair. The case is pending before the Court.
Cases/Proceedings by Jetair Private Limited
Criminal Cases
Jetair has filed Criminal Complaint No.96/1997 before the Chief Metropolitan Magistrate, Ahmedabad against Mr.
Shailesh Shah, an ex-employee who had misappropriated funds amounting to Rs.10.0 million. Jetair has recovered
approximately Rs.5.3 million till date. The complaint is pending.
Jetair has filed Criminal Complaint No.76/2000 before the Judicial Magistrate First Class, II Court, Mangalore, against
an ex-employee, Mr. K.V. Nayak for criminal misappropriation of Jetair funds amounting to approximately Rs.1.7
million plus interest. The complaint is pending
Jetair has filed ten complaints under Section 138 of the N.I. Act against the following travel agents as set forth below:
Sr. No.
Travel Agent
No. of cases Court
1. Shivam Airways Pvt. Ltd.
3
Chief Metropolitan Magistrate’s Court, Delhi.
2. M/s Multipal Tours & Travels
1
Chief Metropolitan Magistrate’s Court, Delhi.
3. SRK Travels
2
Metropolitan Magistrate’s Court, Indore
4. M/s Jee World Travels
1
Metropolitan Magistrate’s Court, Baroda
5. Mr. Shailesh Shah
2
Metropolitan Magistrate’s Court, Ahmedabad
6. M/s Transworld Tours & Travels 1 Additional Chief Metropolitan Magistrate’s Court,
Bangalore
All the above complaints have been filed against these travel agents for issuance of dishonoured cheques for an
aggregate amount of Rs.10,442,903 towards payment of their dues to Jetair.
Civil Cases
Jetair has filed two recovery suits, Suit No.1044/1998 and Suit No.1160/1998 for approximately Rs.3.7 million and
Rs.4.4 million, respectively, before the City Civil Court at Ahmedabad against Mr. Sailesh Shah, an ex-employee.
These suits are pending.
Jetair has filed two recovery Suits No.2248/2004 and 2249/2004 for approximately Rs.0.15 and Rs.0.42 million
respectively, before the High Court at Lucknow against Avadh Travels and Tourism Bureau Pvt. Ltd. The suits are
pending before the court.
Jetair has filed Suit No.206/2002 at Tis Hazari Court, New Delhi against Skymates India Private Limited, a travel
agent, for the recovery of approximately Rs.0.04 million. The suit is pending.
Jetair has filed Suit No.44/2001 against Classic Courier, a defaulting cargo agent, before the 27
th
Court, Tis Hazari
Court at New Delhi, for the recovery of approximately Rs.0.78 million. The suit is pending.
131
Jetair has filed Summary Suit No.366/2003 against M/s. Jee World Travels of Baroda for the recovery of approximately
Rs.0.86 million. The suit is pending.
Jetair has filed recovery Suit N
.S 194/1996 before the Principal Civil Judge, Mangalore against Mr. Rego, an
interior decorator, for approximately Rs.0.14 million. The suit is pending.
Jetair has filed Suit No.171/2000 before the Delhi High Court against the Jetair Employees Union, North India seeking
a permanent injunction restraining the union from holding demonstrations and shouting slogans in front of the Jetair
offices in New Delhi. The injunction order has been granted in favor of Jetair and the matter has been transferred to Tis
Hazari Court, New Delhi as Case No.184/2004. This suit is pending.
The Madras High Court has in Appeal No.346/1995 filed by Jetair, stayed the operation of an order passed by the City
Civil Court, Madras ordering compensation of Rs.11,400 in favour of a certain Mr. P. N. Rangaswamy. The original
suit is pending.
Jetair has filed a suit, O.S. No.16653/2004, as the second plaintiff, before the court of the City Civil Judge, Bangalore
against Mer-India Travels Pvt. Ltd. for the recovery of approximately Rs.0.47 million. The suit is pending.
Winding-up Petitions
The Madras High Court has appointed an official liquidator to take charge of all the assets of Eastman Travels Pvt.
Ltd. in Application No.557/2001 under CP No.110/2001, filed by Jetair in relation to an outstanding amount of
approximately Rs.0.8 million.
Writ Proceedings
Jetair has filed Writ Petition No.33879/1990 before the Calcutta High Court against the Employees State Insurance
Corporation (“ESIC”) restraining them from demanding Rs. 0.1 million as per their Certificate of Demand dated
November 7, 1990. However, Jetair has subsequently paid the amount under protest in 1999 to ESIC and the matter is
pending before the court.
Amarchand Mansion Co-operative Housing Society, of which Jetair is a member, filed Writ Petition No.2332/2000
before the Bombay High Court against the Municipal Corporation of Greater Mumbai, restraining them from taking
any action on a certain property as per a notice of attachment dated March 12, 1999. The action of the Municipal
Corporation of Greater Mumbai against the property arises out of arrears towards property tax and repair cess
amounting to approximately Rs.4.0 million. The High Court has stayed the notice of attachment and the petition is
pending hearing.
Jetair has filed Writ Petition No.46610/2003 before the High Court of Karnataka at Bangalore against the award passed
by the Presiding Officer, Labour Court, Mangalore, in Ref. No.9/2000, in relation to one Mr. K.V. Nayak. The award
was stayed by the Karnataka High Court. The Writ Petition is pending.
Jet Enterprises Private Limited
Cases/ Oppositions against Jet Enterprises
There is an opposition case pertaining to Jet Enterprises’ application for registration of the mark ‘JET AIRWAYS THE
JOY OF FLYING (and the device of the rising sun)’ bearing Application No.2307368 in the United Kingdom. The
opposition has been filed by ConocoPhillips on the ground that the Jet Entreprises’ trademark application is similar to
their “JET” trademark and the goods sought to be protected by Jet Enterprises’ application are similar to their goods.
Jet Enterprises has engaged English counsel to represent it against such opposition.
Jet Enterprises has received a notice of “Office Actions” issued by the Trademark Examining Authority in the U.S.A.
against its application for registration of the trademark “Jet Airways –The Joy of Flying” (and the device of the rising
sun) on technical issues and on the ground of likelihood of confusion with an existing service mark registration by Jet
Airways Inc., a Delaware company.
In addition to such “Office Action”, Jet Enterprises has received a notice from the chief executive officer of Jet
Airways Inc., demanding that the Company abandon its application for registration in the United States. No formal
litigation or opposition has, however, been filed against Jet Enterprises. Jet Enterprises intends to contest the claims, if
any, initiated by Jet Airways Inc.
132
There are currently two oppositions to the application made by Jet Enterprises for the registration of the trademark “Jet
Kids” (with a device of a toy aeroplane), being Application No.1068705 in Class 28 in India:
• Opposition No.166183 by Godrej Sara Lee Ltd.; and
• Opposition No.165450 by Hero Cycles Ltd.
Jet Enterprises has provided formal responses to such oppositions, which are pending before the Registrar of Trade
Marks, Mumbai.
Jet Enterprises has received a notice from the New Delhi Municipal Council (“NDMC”) relating to property tax
payable for the periods 2002-2003 and 2003-2004 for an amount of approximately Rs.20 million in connection with
certain premises owned by Jet Enterprises in New Delhi. Jet Enterprises has filed the necessary documents/letters with
NDMC disputing this liability. The matter is pending consideration with the NDMC.
France Air Private Limited (“FAPL”)
Cases/Proceedings against FAPL
Appeal No.32/2000 has been filed by Mr. A.L. Barreto before the State Commission, Goa against the order of the
District Forum awarding Rs.10,000 as compensation against a claim of Rs.0.1 million.
For Assessment Years 2003-2004, 2002-2003, 2001-2002, 2000-2001, 1998-99, 1997-98 and 1996-97, FAPL has
refund claims pending at various stages relating to its corporate income tax assessments. The aggregate of the refund
amounts claimed is approximately Rs.1,145,716.
Cases/Proceedings by FAPL
FAPL has filed recovery cases against Mr. Shailesh Shah, an ex-employee being Suit No.813/1999 and Suit No.
812/1999, for approximately Rs.0.46 million and Rs.1.2 million respectively, before the City Civil Court at Ahmedabad
Vimpal Holdings Private Limited (“Vimpal”)
Vimpal has filed Suit No.425/2003 in the High Court of Delhi seeking to restrain the New Delhi Municipal Corporation
from demolishing the mezzanine floor of certain premises at G-11/12, Connaught Circus, New Delhi.The suit is
pending.
International Cargo Carriers Private Limited (“ICCPL”)
Cases/Proceedings against ICCPL
Consumer Cases
Surendra Engineering Corporation has filed Consumer Complaint No.34/1999 in the Maharashtra State Commission
against ICCPL claiming damages of approximately Rs.1.3 million as compensation towards deficiency in services.
Taxation
For the Assessment Year 2003-2004, a refund of Rs. 17,95,923 was claimed, against which a refund of Rs. 15,56,360
was accorded. A refund is being sought for the balance amount. For the Assessment Years 1996-1997, 1997-1998 and
1998-1999, a refund of an aggregate amount of Rs.0.17 million has been sought and which is pending.
Cases/Proceedings by ICCPL
ICCPL has filed Winding Up Petition No.1225/1999 against M/s. Image before the Bombay High Court for recovery of
approximately Rs.0.17 million towards demurrage charges for a shipment at Kuwait that was not claimed by the
consignee, M/s Aziz & Akram General Trading Company at Kuwait, in spite of various reminders. The petition has
not been listed as yet.
UPS Jetair Express Private Limited (“UPS Jetair Express”)
Cases/Proceedings against UPS Jetair Express
Criminal Cases
133
A prosecution has been filed by the octroi duty inspector of Pimpri Chinchwad Municipal Corporation, Pimpri before
the Judicial Magistrate First Class, Municipal Corporation Court bearing Criminal Case No.158/2003 for evasion of
octroi duty against, among others, UPS Jetair Express. The matter is currently pending.
Civil Cases
UPS Jetair Express has been named as the second respondent in a case filed by KRAVAG before the German Court,
Landgericht Hamburg, Az.: 425 O 121/01, Reference: R/IN 1099/01. The parties to this proceeding are considering
settlement of the dispute.
Consumer Cases
A Consumer case being O.P. No.610/2003 filed by one Jyotsna Ravi before the Consumer Dispute Redressal Forum at
Ernakulam claiming Rs.0.1 million as compensation against UPS Express for delay in delivery of consignment. The
matter is currently pending.
UPS Jetair Express has been made a party in a consumer case being CD No. 116/2002 filed by Dr Aswini Kumar Rath
before District Consumer Redressal Forum Khurdha, Bhubaneshwar claiming Rs.1,38,264/- as compensation for
deficiency in service. The matter is currently pending.
Miscellaneous Cases/Show Cause Notices
UPS Jetair Express has been impleaded as a party in a complaint bearing O.S. No. 16237/2003 filed by the United
Cottage Industry before the City Civil and Sessions Judge, Mayo Hall, Bangalore for recovery of money.
A show cause notice under section 124 of the Customs Act, 1962 has been issued by the Office of the Commissioner of
Customs (Export), Air Cargo Complex, Sahar, Mumbai on July 1, 2003 with regard to the seizure of bone toggles
made out of stag horns. UPS Jetair Express is in the process of responding to the show cause notice.
Cases/Proceedings by UPS Jetair Express
Criminal Cases
UPS Jetair Express has filed following complaints under Section 138 of the N.I. Act for dishonour of cheques issued to
UPS Jetair Express:
Sr. No. Claim against Location Amount Case No.
1. Consolidated Traders & Exporters Mumbai
221,746 1773/S/2002
1774/S/2002
1775/S/2002
2. Vaishali Petrochemicals & Consultants Mumbai 9,972 1235/S/2002
3. International Impex Mumbai 20,543 1877/S/2002
4. Shree Krishna Enterprises Mumbai 5,180 1873/S/2002
5. Royal Trading Company Delhi 56,000 172/S/2003
6. Grand Rio Exports/Mendoza Delhi 11,456 1241/S/2002
7. S. A. Exim Delhi 48,582 1878/S/2002
8. Emego Collection India Pvt Ltd. Delhi 24,724 1378/S/2002
9. Skylark Garments Chennai 23,755 173/S/2003
10. S. S. Buying Services Delhi 91,600 179/S/2003
11. Ramco Super Leather Chennai 99,326 219/S/2003
12. Western Express Chennai 425,000 254/S/2003
255/S/2003
134
28/S/2004
13. House of Seassons Delhi 57,528 29/S/2004
14. Somko Overseas Pvt Ltd. Mumbai 120,818 296/S/2004
15. Yogesh Mordani (Pro - Solomio) Mumbai 409,233 427/M/2004
16. Aalishan Creation Mumbai 17,622
297/S/2004
17. Baron Incorporated Mumbai 25,000
1379/S/2002
18. Deepak Parekh (Trade Centre) Mumbai 17,865
428/M/2004
19.
Corporate Identity Tirupur
170,275
Civil Cases
The following recovery suits/summary suits have been filed by UPS Jetair Express before the High Court of Bombay
and are currently pending:
Sr. No. Suit filed against Claim Amount
(Rs.)
1. Solanki Western Express Pvt. Ltd. Rs. 766,422 (including interest payable)
2. Punit Babu Gemor Impex. Rs.1,346,672 (including interest payable)
3. Jagdish Dewan Dee Cee Design Rs. 260,313 (including interest payable)
Tax related Cases/Proceedings
Corporate income tax assessments for fiscal 2003 and 2004 are pending.
Third party summons have been issued by sales tax authorities for submission of particulars relating to a specific
shipment. UPS Jetair Express is in the process of filing a response with the sales tax authorities.
Certain queries have been raised by service tax authorities for September 2003 and UPS Jetair Express is in the process
of filing a response with the said tax authorities.
Miscellaneous Cases
Summons have been issued by the Enforcement Directorate against a director of UPS Jetair Express in connection with
advertising and marketing campaigns done for UPS Group in India and the import of diamond powder by one
consignee belonging to the UPS Jetair Express courier network. Submissions have been made to the Office of
Enforcement Directorate and no further notice in this regard has been received until date.
UPS Jetair Logistics Private Limited (“UPS Logistics”)
Cases/Proceedings against/by UPS Logistics
Civil Cases
UPS Logistics has received a legal notice from its landlord relating to the alleged non-payment of electricity bills in an
amount of Rs.569,500, and has responded to such claim.
Tax related Cases/Proceedings
Corporate income tax assessments for fiscal 2003 and 2004 are pending.
Sales tax assessments for the Delhi, Bangalore and Chennai for fiscal 2004 are pending. Sales tax assessments for the
Mumbai region for fiscal 2002 are pending.
135
UPS Logistics has received a show cause notice from the service tax authorities relating to a dispute on the input credit
of the service tax charged. UPS Logistics has paid an amount of Rs.209,962 under protest on such account, and further
directions of the authorities are awaited.
National Travel Service (“NTS”)
Cases/Proceedings against NTS
The following cases have been filed against Kuwait Airways and NTS in the Consumer Forum at Hyderabad for
mishandling of baggage:
Sr. No. Complaint No. Complainant Claim Amount
(Rs.)
1. CD/O/P No.1283/ 2004 Khatija Banu 78,500
2. CD/O/P No.290/ 2003 Rakala Arjun 1,250,000
3. CD/O/P No.833/ 2003 Farhan Shrath 850,000
Cases/Proceedings by NTS
Criminal Cases
NTS has filed a complaint under section 138 of the N.I. Act in the Metropolitan Magistrate’s Court, Baroda against M/s
Jee World Travels, a travel agent for issuance of dishonoured cheques amounting to approximately Rs.0.18 million
towards payment of the agent’s dues to NTS.
Civil Cases
NTS has filed Summary Suit No.1620/2003 before the Magistrate’s Court at Baroda against M/s Jee World Travels of
Baroda for the recovery of approximately Rs.0.18 million.
NTS has filed Execution Petition No.122/2003 before the Subordinate Judge at Tirupur against Freelook International
for the execution of a decree of approximately Rs.0.19 million passed by the Additional Civil Judge, Bangalore in Suit
No. 15603/1999 in favour of NTS.
An ex parte decree was passed by the High Court of Bombay against M/s. K.R.V. Exporters, in summons for
Judgement No.122/1997 in Summary Suit No.1385/1995. The decree for approximately Rs.1.1 million is being
executed.
Consumer Cases
NTS has filed Appeal No.848/2004 before the Andhra Pradesh State Commission against the order of the District
Forum directing, inter alia, NTS as being jointly and severally responsible for refunding approximately Rs.32,137 to
M/s Alla Sambrajyam and others. An interim stay has been granted in favour of NTS and the appeal is pending.
136
MATERIAL DEVELOPMENTS
In the opinion of the Board of Directors of the Company, there have not arisen, since the date of the last financial
statements disclosed in this Draft Red Herring Prospectus, any circumstances that materially or adversely affect or are
likely to affect the profitability of the Company taken as a whole or the value of their consolidated assets or their ability
to pay their material liabilities within the next twelve months.
137
DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and our shareholders, in
their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements
and overall financial condition. The dividends declared by our Company during the last five fiscal years are presented
below.
Class of shares Face Value Year ended March 31,
Rs.
2000 2001 2002 2003 2004
Six months ended
September 30,
2004
(Rs. in million)
Equity Shares 10
- Interim 72.09 72.09 Nil Nil Nil Nil
- Final Nil Nil 82.90 Nil Nil Nil
Total 72.09 72.09 82.90 Nil Nil Nil
CCRPS - 4.37 36.60 - - -
Dividend per share
Equity Shares 10 1.00 1.00 1.15 Nil Nil Nil
CCRPS 10 - 0.06 0.52 Nil Nil Nil
________
The amounts paid as dividend or bonus in the past are not indicative of our dividend policy in the future.
138
OTHER REGULATORY DISCLOSURES
Stock Market Data for our Equity Shares
This being an initial public issue of Jet Airways, the Equity Shares of Jet Airways are not listed on any stock exchange.
Particulars Regarding Public Issues during the Last Five Years
We have not made any public issues during the last five years.
Companies under the Same Management
There are no companies under the same management within the meaning of Section 370(1B) of the Companies Act,
other than the promoter group companies in India (excluding National Travel Services, which is a partnership firm) and
the promoter group companies outside India, details of which companies are provided in the section entitled “Our
Promoters and Group Companies” on page 96 of this Draft Red Herring Prospectus.
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Offer, and us will provide for retention of records with the Registrar to the
Offer for a period of at least one year from the last date of dispatch of the letters of allotment advice or refund orders to
enable the investors to approach the Registrar to the Offer for redressal of their grievances.
All grievances relating to the Offer may be addressed to the Registrar to the Offer, giving full details such as name,
address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or
collection centre where the application was submitted.
We estimate that the average time required by us or the Registrar to the Offer for the redressal of routine investor
grievances will be seven business days from the date of receipt of the complaint. In case of non-routine complaints and
complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible.
We have an Investors Grievance Committee, comprising of Mr. I.M. Kadri as the Chairman, Mr. Charles A. Adams and
Mr. Saroj K. Datta. We have also appointed Mr. A.R. Rajaram as the Compliance Officer for this Offer.
Certain Indebtedness
Please refer to page 226 of this Draft Red Herring Prospectus for details of borrowings in our Company as specified in
our financial statements under Indian GAAP.
The following table summarizes our secured and unsecured long-term indebtedness and subordinated debt obligations
as of September 30, 2004. We had no short-term indebtedness as of September 30, 2004.
As of September 30, 2004
Secured
HDFC Limited
(Secured by hypothecation of simulator and other accessories thereto)
600
Unsecured
Hire Purchase/Finance Lease installments for aircraft 27,524
Hire Purchase/Finance Lease installments for vehicles 16
Subordinated Debt from IDFC
(collateral in the form of a bank guarantee to the extent of 35% of the outstanding loan)
3,341
___________ _______
Total 31,481
Under the U.S. Exim-guaranteed hire purchase finance agreements relating to 19 of our aircraft, we are required to
comply with certain financial covenants. Pursuant to agreements relating to nine of the aircraft, at the end of each fiscal
quarter our ratio of EBITDAR to fixed charges must be at least 1.1:1 and we may not pay cash dividends in excess of
US$1.7 million. The covenants relating to the other 10 aircraft require that, at the end of each fiscal year, we have a
fixed charge ratio of at least 1.1:1 and a ratio of total liabilities to tangible net worth of not more than 3:1. In all cases,
financial ratios are calculated on the basis of particular terms defined in the agreements, and not on the basis of Indian
GAAP or IFRS.
139
The subordinated debt facility has been availed from IDFC and is subordinated to all present and future indebtedness of
our Company whether secured or unsecured. Under our IDFC subordinated debt agreement, we are required to
maintain a certain EBITDA to debt ratio, debt to equity ratio, net profit margin and closing cash balance for each fiscal
year. Our inability to comply with any of the required financial covenants could result in default under our hire
purchase, finance lease or debt agreements. As of November 30, 2004, we were in compliance with the covenants of all
of our hire purchase and debt agreements.
140
TERMS OF THE OFFER
The Equity Shares being offered are subject to the provisions of the Companies Act, the Memorandum and Articles, the
terms and conditions of the FIPB letter dated November 5, 2004, the terms of the Red Herring Prospectus, the
Prospectus, the Bid cum Application Form, the Revision Form and other terms and conditions as may be incorporated
in the CAN, allotment advice and any other document/certificates that may be executed in respect of the Offer. In
addition, the Equity Shares shall also be subject to all applicable laws, guidelines, notifications, rules and regulations
relating to the issue of capital and listing of securities issued from time to time by SEBI, Government of India, Stock
Exchanges, RBI, Registrar of Companies and/or other authorities, as in force on the date of the Offer and to the extent
applicable.
Authority for the Offer
The Fresh Issue of Equity Shares in this Offer by the Company has been authorized by a resolution of its Board of
Directors passed at their meeting held on November 4, 2004, subject to the approval of the shareholders through a
special resolution dated December 28, 2004 pursuant to Section 81(1A) of the Companies Act. The shareholders
approved the Fresh Issue of Equity Shares at an EGM of the shareholders of the Company held on December 28, 2004.
Pursuant to the authority granted by the Board of Directors of the Company at its meeting held on November 4, 2004, a
Committee of the Board approved the Fresh Issue by the Company on January 4, 2005.
The Offer for Sale has been authorized by a resolution of the board of directors of Tail Winds Limited dated December
27, 2004, which has also (i) authorized the Company to take decisions on its behalf in relation to the Offer and (ii)
appointed the Company to act as its attorney with respect to any matter or thing required to be done in connection with
the Offer.
Ranking of Equity Shares
The Equity Shares being offered shall be subject to the provisions of the Companies Act, the Memorandum and
Articles of Association of Jet Airways and shall rank pari passu in all respects with the existing Equity Shares of the
Company including in respect of the rights to receive dividends. See “Main Provisions of the Articles of Association”
beginning on page 171 of this Draft Red Herring Prospectus for a description of the Articles of Association of our
Company. The persons in receipt of Allotment will be entitled to dividends or any other corporate benefits (including
dividends), if any, declared by our Company after the date of Allotment.
Face Value and Offer Price
The Equity Shares having a face value of Rs.10 each are being offered in terms of this Draft Red Herring Prospectus at
a price of Rs.[•] per Equity Share. At any given point of time, there shall be only one denomination for the Equity
Shares.
Rights of the Equity Shareholder
Subject to applicable laws, rules, regulations and guidelines and the Articles of Association, the equity shareholders
shall have the following rights:
• Right to receive dividend, if declared;
• Right to attend general meetings and exercise voting powers, unless prohibited by law;
• Right to vote on a poll either in person or by proxy;
• Right to receive offers for rights shares and be allotted bonus shares, if announced;
• Right to receive surplus on liquidation;
• Right of free transferability; and
• Such other rights, as may be available to a shareholder of a listed public company under the Companies Act
and the Memorandum and Articles of Association of our Company.
For a detailed description of the main provisions of the Articles of Association of the Company relating to voting
rights, dividend, forfeiture and lien and/or consolidation/splitting, see “Main Provisions of the Articles of Association”
beginning on page 171 of this Draft Red Herring Prospectus.
141
Market Lot and Trading Lot
As trading in the Equity Shares is compulsorily in dematerialized form, the tradable lot is one Equity Share. Allotment
of Equity Shares will be done in electronic form, in multiples of one Equity Share, subject to a minimum allotment of
[•] Equity Shares.
Jurisdiction
Exclusive jurisdiction for purposes of this Offer is with the competent courts in Mumbai, India.
Nomination Facility to Investor
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, may
nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death of all the
Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the
Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies
Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of
the Equity Shares. Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed
manner, any person to become entitled to the Equity Shares in the event of his or her death during the minority. A
nomination shall stand rescinded upon a sale of the Equity Shares by the person nominating. A buyer will be entitled to
make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form
available on request at the Registered Office of our Company or to the Registrar and transfer agents of our Company.
In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by
the Board, elect either:
• to register himself or herself as holder of Equity Shares; or
• to make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or
herself or to transfer the Equity Shares, and if the notice is not complied within a period of ninety days, the Board may
thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity Shares, until the
requirements of the notice have been complied with.
Since the allotment/transfer of Equity Shares in the Offer will be made only in dematerialized form, there is no need to
make a separate nomination with our Company. Nominations registered with respective depository participant of the
applicant would prevail. If the investors require a change in the nomination, they are requested to inform their
respective depository participant.
Application by NRIs/FIIs registered with SEBI and FVCIs registered with SEBI
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline.
No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA, and all other applicable
laws, rules, regulations, guidelines and approvals.
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign
Ownership Restrictions” on page 111 of this Draft Red Herring Prospectus.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to
acquire Equity Shares of the Company.
It is to be distinctly understood that there is no reservation for NRIs or FIIs registered with SEBI or FVCIs registered
with SEBI. Such NRIs, FIIs registered with SEBI or FVCIs registered with SEBI, applicants will be treated on the
same basis as other categories for the purpose of allocation.
142
The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended (the
“Securities Act”) or any state securities laws in the United States and may not be offered or sold within the
United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities
Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of
the Securities Act. Accordingly, the Equity Shares will be offered and sold only (i) in the United States to
“qualified institutional buyers”, as defined in Rule 144A of the Securities Act, and (ii) outside the United States
in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur.
Offer Structure
The present Offer of 17,266,801 Equity Shares comprises a Fresh Issue of 14,245,111 Equity Shares of Rs.10 each and
an Offer for Sale of 3,021,690 Equity Shares of Rs.10 each for cash issued at a price of Rs.[•] per Equity Share,
aggregating Rs.[•] million, and is being made through the 100% Book Building Process. 1,200,000 Equity Shares will
be reserved in the Offer for subscription by Employees at the Offer Price.
If at least 60% of the Net Offer cannot be allocated to QIBs, then the entire application money shall be refunded
forthwith.
Employees QIBs Non-Institutional Bidders Retail Individual Bidders
Number of Equity
Shares available for
allocation
1,200,000 Equity Shares At least 9,640,081Equity
Shares
Up to 2,410,020 Equity
Shares
(1)
Up to 4,016,700 Equity
Shares
(1)
Percentage of Offer
Size
[?]%
At least 60% of the Net Offer
(2)
Up to 15% of the Net Offer
to public or Net Offer size
less allocation to QIBs and
Retail Portion
(2)
Up to 25% of the Net Offer
to public or Net Offer size
less allocation to QIBs and
Retail Portion
(2)
Basis of Allocation or
Allotment
Proportionate Discretionary Proportionate Proportionate
Minimum Bid [•] Equity Shares and in
multiples of [•] Equity
Shares thereafter
Such number of Equity Shares
that the Bid Amount exceeds
Rs.50,000 and in multiples of
[?] Equity Shares
Such number of Equity
Shares that the Bid
Amount exceeds Rs.50,000
and in multiples of [?]
Equity Shares
[?] Equity Shares and
thereafter in multiples of
[?] Equity Shares
Maximum Bid Not exceeding the size
of the Offer.
Not exceeding the size of the
Offer subject to regulations as
applicable to the Bidders
Not exceeding the size of
the Offer subject to
regulations applicable to
the Bidders
Such number of Equity
Shares so as to ensure that
the Bid Amount does not
exceed Rs.50,000
Allotment Mode Compulsorily in
dematerialized mode
Compulsorily in dematerialized
mode
Compulsorily in
dematerialized mode
Compulsorily in
dematerialized mode
Trading Lot
One Equity Share One Equity Share One Equity Share One Equity Share
Who can Apply
(3)
Indian Nationals who are
permanent employees
and directors of the
Company and Tail
Winds who are based in
India and are present in
India on the date of
submission of the Bid
cum Application Form.
Public financial institutions, as
defined in section 4A of the
Companies Act, scheduled
commercial banks, mutual
funds, foreign institutional
investors registered with SEBI,
venture capital funds registered
with SEBI, foreign venture
capital investors registered with
SEBI, state industrial
development corporations,
insurance companies registered
with Insurance Regulatory and
Development Authority,
Provident Funds with minimum
corpus of Rs.250 million and
Pension Funds with minimum
corpus of Rs.250 million
Resident Indian
individuals, HUF (in the
name of Karta),
companies, corporate
bodies, NRIs, societies and
trusts
Individuals including NRIs
and HUFs (in the name of
Karta) applying for such
number of Equity Shares
such that the Bid Amount
does not exceed Rs.50,000
Terms of Payment Margin Amount
applicable to Employees
at the time of submission
of Bid cum Application
Form to the Syndicate
Margin Amount applicable to
QIB Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
Margin Amount applicable
to Non Institutional
Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
Margin Amount applicable
to Retail Individual
Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
143
Employees QIBs Non-Institutional Bidders Retail Individual Bidders
Margin Amount Full Bid Amount on
Bidding
Nil Full Bid Amount on
Bidding
Full Bid Amount on
Bidding
_________
(1)
The unsubscribed portion, if any, out of the Equity Shares under Employee Reservation Portion will be added back to the categories of Non
Institutional Bidders and Retail Individual Bidders in the ratio 50:50..
(2)
Subject to valid bids being received at or above the Offer Price. Undersubscription, if any, in the Non-Institutional Bidder and Retail Individual
Bidder categories, would be allowed to be met with spill over from other categories, at the discretion of the Company in consultation with the
BRLMs.
(3)
In the event that the Bid cum Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the
same joint names and are in the same sequence in which they appear in the Bid cum Application Form.
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OFFER PROCEDURE
Book Building Procedure
The Offer is being made through the 100% Book Building Process wherein at least 60% of the Net Offer shall be
allocated on a discretionary basis to Qualified Institutional Buyers. Further, up to 15% of the Net Offer shall be
available for allocation on a proportionate basis to Non Institutional Bidders and up to 25% of the Net Offer shall be
available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or
above the Offer Price.
Bidders are required to submit their Bids through the Syndicate. Our Company, in consultation with the BRLMs,
reserves the right to reject any Bid procured by any or all members of the Syndicate without assigning any reasons
therefore in case of QIBs. In case of Non Institutional Bidders, Retail Individual Bidders and bids under Employee
Reservation Portion, our Company would have a right to reject the Bids only on technical grounds.
Investors should note that Equity Shares would be allotted to all successful Bidders only in dematerialized form.
Bidders will not have the option of getting Allotment of the Equity Shares in physical form. The Equity Shares on
Allotment shall be traded only in the dematerialized segment of the Stock Exchanges.
Bid cum Application Form
Bidders shall only use the Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose
of making a Bid in terms of this Draft Red Herring Prospectus. The Bidder shall have the option to make a maximum
of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the
allocation of Equity Shares, dispatch of the CAN and filing of the Prospectus with the RoC, the Bid cum Application
Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to
a member of the Syndicate, the Bidder is deemed to have authorized our Company to make the necessary changes in
this Draft Red Herring Prospectus and the Bid cum Application Form as would be required for filing the Prospectus
with the RoC and as would be required by the RoC after such filing, without prior or subsequent notice of such changes
to the Bidder.
The prescribed color of the Bid cum Application Form for various categories is as follows:
Category Colour of Bid cum Application Form
Indian Public or NRIs applying on a non-repatriation basis White
Non-residents including NRIs or FIIs applying on a repatriation basis Blue
Employees under the Employee Reservation Portion [?]
Who Cannot Bid?
• Foreign airlines, either directly or indirectly;
• Foreign financial institutions and other entities that are subsidiaries of foreign airlines;
• Foreign financial institutions and other entities that have foreign airlines as shareholders;
• OCBs; and
• Multilateral and bilateral developmental financial institutions.
Who Can Bid?
• Persons eligible to invest in an Indian domestic air transport service company under the AIC No. 4 and all
applicable laws, rules, regulations and guidelines;
• Indian Nationals resident in India who are majors, in single or joint names (not more than three);
• Hindu undivided families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid
is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First
Bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by
HUFs would be considered at par with those from individuals;
• Companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest
in Equity Shares;
• Indian mutual funds registered with SEBI;
• Indian financial institutions, scheduled commercial banks, regional rural banks, co-operative banks (subject to
RBI permission, as applicable);
145
• Venture capital funds registered with SEBI;
• Foreign venture capital investors registered with SEBI, subject to compliance with applicable laws, rules,
regulations, guidelines and approvals in the Fresh Issue;
• State Industrial Development Corporations;
• Insurance companies registered with Insurance Regulatory and Development Authority;
• Provident funds with minimum corpus of Rs.250 million and who are authorized under their constitution to
invest in Equity Shares;
• Pension funds with minimum corpus of Rs.250 million and who are authorized under their constitution to invest
in Equity Shares;
• Trusts registered under the Societies Registration Act, 1860, as amended, or under any other law relating to
trusts and who are authorized under their constitution to hold and invest in the Equity Shares;
• Eligible NRIs subject to compliance with applicable laws, rules, regulations, guidelines and approvals in the
Offer for Sale;
• Eligible FIIs and QIBs registered with SEBI, subject to compliance with all applicable laws, rules, regulations,
guidelines and approvals in the Fresh Issue. and
• Scientific and/or industrial research organizations in India authorized under their constitution to invest in Equity
Shares.
Note:
The BRLMs and the Syndicate Members and any associates of the BRLMs and the Syndicate Members (except asset
management companies on behalf of mutual funds, Indian financial institutions and public sector banks) cannot
participate in that portion of the Offer where allocation is discretionary and are not eligible QIBs for this Offer.
Further, the BRLMs and the Syndicate Members shall not be entitled to subscribe to this Offer in any manner except
towards fulfilling their underwriting obligation.
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic
airline. No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity
Shares of the Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA, and
all other applicable laws, rules, regulations, guidelines and approvals.
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign
Ownership Restrictions” on page 111 of this Draft Red Herring Prospectus.
Bidders should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs
and QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental
financial institutions or any other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and
NRIs.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable law, rules, regulations, guidelines and
approvals.
In accordance with the current regulations, the following restrictions are applicable for investments by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related
instruments of any company provided that the limit of 10% shall not be applicable for investments by index funds or
sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any company’s
paid-up capital carrying voting rights.
In accordance with the current regulations, the following restrictions are applicable for investments by FIIs:
No single FII can hold more than 10% of the post-Offer paid up capital of our Company (i.e. 10% of 86,334,011 Equity
Shares). In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of
each sub-account shall not exceed 10% of our total paid up capital or 5% of our total paid up capital in case such sub-
account is a foreign corporate or an individual. As of now, the aggregate FII holding in the Company cannot exceed
24% of our total paid up capital.
146
Subject to compliance with the terms of AIC No. 4 and all applicable Indian laws, rules, regulations guidelines and
approvals in terms of regulation 15A(1) of the Securities Exchange Board of India (Foreign Institutional Investors)
Regulations 1995 an FII or its sub account may issue, deal or hold, off shore derivative instruments such as
Participatory Notes, equity-linked notes or any other similar instruments against underlying securities listed or
proposed to be listed in any stock exchange in India only in favour of those entities which are regulated by any relevant
regulatory authorities in the countries of their incorporation or establishment subject to compliance of “know your
client” requirements. An FII or sub-account shall also ensure that no further downstream issue or transfer of any
instrument referred to hereinabove is made to any person other than a regulated entity.
There are certain additional restrictions on investments by foreign financial institutions and other entities seeking to
invest in domestic air transport providers, including the following restrictions specified by AIC No. 4:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of our Company must be vested in Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
In accordance with the current regulations, the following restrictions are applicable for investments by SEBI registered
VCFs and FVCIs:
The SEBI (Venture Capital) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulations, 2000
prescribe investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI.
Accordingly, the holding by any venture capital fund or foreign venture capital investor should not exceed 25% of the
corpus of the venture capital fund or of the foreign venture capital investor.
The above information is given for the benefit of the Bidders. Our Company, the Selling Shareholder and the BRLMs
are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after
the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure
that the number of Equity Shares bid for do not exceed the applicable limits under laws or regulations.
Maximum and Minimum Bid Size
For Retail Individual Bidders
The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Shares thereafter, so as to ensure
that the Bid Amount payable by the Bidder does not exceed Rs.50,000. In case of revision of Bids, the Retail
Individual Bidders have to ensure that the Bid Amount does not exceed Rs.50,000. In case the Bid Amount is over
Rs.50,000 due to revision or on exercise of Cut-off option, the Bid would be considered for allocation under the Non
Institutional Bidders category. The Cut-off option is an option given only to the Retail Individual Bidders indicating
their agreement to bid and purchase at the final Offer Price as determined at the end of the Book Building Process.
For Non Institutional Bidders and QIB Bidders
The Bid must be for a minimum of such number of Equity Shares and in multiples of [•] Equity Shares thereafter, so as
to ensure that the Bid Amount exceeds Rs.50,000. A Bid cannot be submitted for more than the size of the Offer.
However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them under
applicable laws, regulations and guidelines. Under existing SEBI Guidelines, a QIB Bidder cannot withdraw its
Bid after the Bid/Offer Closing Date. In case of revision in Bids, the Non-Institutional Bidders who are individuals
will have to ensure that the Bid amount is greater than Rs.50,000 for being considered for allocation in the Non-
Institutional Bidders category. In case the Bid amount reduces to Rs.50,000 or less due to a revision in Bids or revision
of the Price Band. Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Individual Bidder
category would be considered for allocation under the Retail Portion. Non-Institutional Bidders and QIB Bidders are
not allowed to bid at “cut off”.
147
For Bidders in the Employee Reservation Portion
The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Shares thereafter. Bidders under
the Employee Reservation Portion applying for a maximum Bid in any of the bidding options not exceeding Rs.50,000
may bid at Cut off Price. The allotment in the Employee Reservation Portion will be on a proportionate basis.
However, in case of an oversubscription in the Employee Reservation Portion, the maximum allotment to any
Employee will be capped at Rs.[•] million.
Information for the Bidders
1. Our Company will file the Red Herring Prospectus with the RoC at least 3 days before the Bid/Offer Opening
Date.
2. The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum
Application Form to potential investors.
3. Any investor (who is eligible to invest in our Equity Shares) who would like to obtain the Red Herring
Prospectus along with the Bid cum Application Form can obtain the same from our registered office or from
any of the members of the Syndicate.
4. Eligible investors who are interested in subscribing for our Equity Shares should approach any of the BRLMs
or Syndicate Members or their authorized agent(s) to register their Bids.
5. The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms
should bear the stamp of the members of the Syndicate. Bid cum Application Forms that do not bear the
stamp of the members of the Syndicate will be rejected.
Method and Process of Bidding
1. Our Company and the BRLMs shall declare the Bid/Offer Opening Date, Bid/Offer Closing Date and Price
Band in the Red Herring Prospectus filed with RoC and publish the same in two national newspapers (one
each in English and Hindi) and a regional newspaper (Marathi). This advertisement shall contain the salient
features of the Red Herring Prospectus as specified under Form 2A of the Companies Act, the method and
process of bidding and the names and addresses of the members of the Syndicate and their Bidding centers.
The members of the Syndicate shall accept Bids from the Bidders during the Bidding/Offer Period (in
accordance with the terms of the Syndicate Agreement).
2. The Bidding Period shall be open for at least five days and not more than 10 days. In case the Price Band is
revised, the revised Price Band and the Bidding/Offer Period will be published in two national newspapers
(one each in English and Hindi) and one regional newspaper (Marathi) and the Bidding/Offer Period shall be
extended for a further period of three days, subject to the total Bidding/Offer Period not exceeding 13 days.
3. During the Bidding/Offer Period, the Bidders may approach the members of Syndicate to submit their Bid.
Every member of the Syndicate shall accept Bids from investors who place orders through them and shall have
the right to vet the Bids.
4. Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for
details refer to the paragraph entitled “Bids at Different Price Levels” on page 148 of this Draft Red Herring
Prospectus) within the Price Band and specify the demand (i.e., the number of Equity Shares bid for). The
price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional
demands from the Bidder and will not be cumulated. After determination of the Offer Price, the maximum
number of Equity Shares bid for by a Bidder at or above the Offer Price will be considered for allocation and
the rest of the Bid(s), irrespective of the Bid price, will become automatically invalid.
5. The Bidder cannot bid on another Bid cum Application Form after Bid(s) on one Bid cum Application Form
have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to
either the same or to another member of the Syndicate will be treated as multiple bidding and is liable to be
rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the
Allotment of Equity Shares in this Offer. However, the Bidder can revise the Bid through the Revision Form,
the procedure for which is detailed in the paragraph “Build up of the Book and Revision of Bids” on page 150
of this Draft Red Herring Prospectus.
148
6. The members of the Syndicate will enter each option into the electronic bidding system as a separate Bid and
generate a Transaction Registration Slip (TRS), for each price and demand option and give the same to the
Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.
7. Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the
paragraph “Terms of Payment and Payment into Escrow Account” on page 149 of this Draft Red Herring
Prospectus.
Bids at Different Price Levels
1. The Price Band has been fixed at Rs.[•] to Rs.[•] per Equity Share, Rs.[•] being the floor of the Price Band
and Rs.[•] being the cap of the Price Band. The Bidders can bid at any price within the Price Band, in
multiples of Rs.[•].
2. Our Company, in consultation with the BRLMs, can revise the Price Band during the Bidding/Offer Period, in
which case the Bidding/Offer Period shall be extended further for a period of three days, subject to the total
Bidding/Offer Period not exceeding 13 days. The cap on the Price Band will not be more than 20% of the
floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of Price
Band can move up or down to the extent of 20% of the floor of the price band disclosed in the Red Herring
Prospectus.
3. Any revision in the Price Band will be widely disseminated by informing the stock exchanges, by issuing a
public notice in two national newspapers (one each in English and Hindi), and one regional newspaper
(Marathi) and also indicating the change on the web site of the BRLMs and at the terminals of the members of
the Syndicate.
4 Our Company, in consultation with the BRLMs, can finalize the Offer Price within the Price Band without the
prior approval of, or intimation, to the Bidders.
5. The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number of Equity
Shares at a specific price. Retail Individual Bidders and Employees applying for a maximum Bid in any of the
bidding options not exceeding up to Rs.50,000 may bid at “Cut-off”. However, bidding at “Cut-off” is
prohibited for QIB or Non Institutional Bidders and Employees who bid for an amount exceeding Rs.50,000,
and such Bids shall be rejected.
6. Retail Individual Bidders/Employees who bid at the Cut-Off agree that they shall purchase the Equity Shares
at the Offer Price, as finally determined which will be any price within the Price Band. Retail Individual
Bidders/Employees bidding at Cut-Off shall deposit in the Escrow Account the Bid Amount based on cap of
the Price Band. In the event the Bid Amount is higher than the Allocation Amount payable by the Retail
Individual Bidders/Employees (i.e., the total number of Equity Shares allocated in the Offer multiplied by the
Offer Price), Retail Individual Bidders/Employees shall receive the refund of the excess amounts from the
Escrow Account.
7. In case of an upward revision in the Price Band announced as above, Retail Individual Bidders / Employees
who had bid at Cut-Off could either (i) revise their Bid or (ii) make additional payment based on the Cap of
the Revised Price Band, with the member of the Syndicate to whom the original Bid was submitted. In case
the total amount (i.e. original Bid Amount plus additional payment) exceeds Rs.50,000, the Bid will be
considered for allocation under the Non Institutional category in terms of this Draft Red Herring Prospectus.
If, however, the Bidder does not either revise the Bid or make additional payment and the Offer Price is higher
than the Cap of the Price Band prior to revision, the number of Equity Shares bid for shall be adjusted
downwards for the purpose of allocation, such that the no additional payment would be required from the
Bidder.
8. In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders or
Employees who have bid at Cut-off could either revise their Bid or the excess amount paid at the time of
bidding would be refunded from the Escrow Account.
9. In the event of any revision in the Price Band whether upwards or downwards the minimum application size
shall remain [•] Equity Shares irrespective of whether the Bid Amount payable on such minimum application
is not in the range of Rs.5,000 to Rs.7,000.
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Escrow Mechanism
Our Company and the members of the Syndicate shall open Escrow Accounts with one or more Escrow Collection
Banks in whose favor the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision
of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a certain category would be
deposited in the Escrow Account. The Escrow Collection Banks will act in terms of the Draft Red Herring Prospectus
and the Escrow Agreement. The monies in the Escrow Account shall be maintained by the Escrow Collection Banks
for and on behalf of the Bidders. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies
deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow
Collection Banks shall transfer the monies from the Escrow Account to the Public Offer Account as per the terms of the
Escrow Agreement with our Company. Payments of refund to the Bidders shall also be made from the Escrow
Accounts as per the terms of the Escrow Agreement and this Draft Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an
arrangement between our Company, the Syndicate, the Escrow Collection Banks and the Registrar to the Offer to
facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Account
Each Bidder shall, with the submission of the Bid cum Application Form draw a cheque or demand draft for the
maximum amount of the Bid in favor of the Escrow Account of the Escrow Collection Bank (for details refer to the
paragraph “Payment Instructions” on page 156 of this Draft Red Herring Prospectus) and submit the same to the
member of the Syndicate with whom the Bid is being deposited. Bid cum Application Forms accompanied by
cash/stock invest/money order shall not be accepted. The maximum Bid Amount has to be paid at the time of
submission of the Bid cum Application Form based on the highest bidding option of the Bidder.
The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Banks. The
Escrow Collection Banks will hold all monies collected for the benefit of the Bidders until the Designated Date. On the
Designated Date, the Escrow Collection Banks shall transfer the funds in respect of those Bidders whose Bids have
been accepted from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Offer Account.
The balance amounts after the transfer to the Public Offer Account, lying credited with the Escrow Collection Banks
shall be held for the benefit of the Bidders who are entitled to a refund. On the Designated Date and no later than 15
days from the Bid/Offer Closing Date, the Escrow Collection Banks shall also refund all amounts payable to
unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for allocation, to the Bidders.
Each category of Bidders (i.e., QIBs, Non Institutional Bidders and Retail Individual Bidders and Employees would be
required to pay their applicable Margin Amount at the time of the submission of the Bid-cum-Application Form. The
details of the Margin Amount payable is mentioned under the section entitled “Offer Structure” on page 142 of this
Draft Red Herring Prospectus and will be available with the Syndicate and will be as per the Syndicate Agreement.
Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Amount, any difference between the
amount payable by the Bidder for Equity Shares allocated at the Offer Price and the Margin Amount paid at the time of
Bidding, shall be payable by the Bidder no later than the Pay-in-Date, which shall be a minimum period of two days
from the date of communication of the allocation list to the members of the Syndicate by the BRLMs. If the payment is
not made favoring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled.
However, if the applicable Margin Rate for Bidders is 100%, the full Bid Amount has to be paid at the time of
submission of the Bid cum Application Form.
Where the Bidder has been allocated lesser number of equity shares than such bidder had bid for the excess amount
paid on bidding, if any, after adjustment for allocation will be refunded to such bidder within 15 days from the
Bid/Offer Closing Date, failing which we shall pay interest at 15% per annum for any delay beyond the period
mentioned above.
Electronic Registration of Bids
1. The members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE. There will
be at least one on-line connectivity in each city where a stock exchange centre is located in India, and where
Bids are accepted.
2. NSE and BSE will offer a screen-based facility for registering Bids for the Offer. This facility will be
available on the terminals of the members of the Syndicate and their authorized agents during the
Bidding/Offer Period. Members of the Syndicate can also set up facilities for off-line electronic registration of
Bids subject to the condition that they will subsequently download the off-line data file into the on-line
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facilities for book building on a half hourly basis. On the Bid/Offer Closing Date, members of the Syndicate
will upload the Bids until such time as permitted by the Stock Exchanges.
3. The aggregate demand and price for Bids registered on each of the electronic facilities of NSE and BSE will
be consolidated on half hourly basis. A graphical representation of consolidated demand and price would be
made available at the bidding centers during the Bidding/Offer Period.
4. At the time of registering each Bid, the members of the Syndicate shall enter the following details of the
investor in the on-line system:
• Name of the investor;
• Investor Category — Employee, Individual, Corporate, NRI, FII, or QIBs, etc.;
• Numbers of Equity Shares bid for;
• Bid price;
• Bid cum Application Form number;
• Whether payment is made upon submission of Bid cum Application Form; and
• Depository participant Identification number and Client Identification number of the demat account of
the Bidder.
5. A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding
options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The
registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be
allocated either by the members of the Syndicate or our Company.
6. Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
7. The members of the Syndicate have the right to review the Bid. Consequently, a member of the Syndicate
also has the right to accept or reject a Bid without assigning any reasons in case of QIBs. In case of Non
Institutional Bidders and Retail Individual Bidders and Bids under the Employee Reservation Portion, their
Bids shall not be rejected except on the technical grounds listed elsewhere in this Draft Red Herring
Prospectus.
8. It is to be distinctly understood that the permission given by NSE and BSE to use their network and software
of the online IPO system should not in any way be deemed or construed that the compliance with various
statutory and other requirements by our Company or the BRLMs are cleared or approved by NSE or BSE; nor
does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance
with the statutory and other requirements nor does it take any responsibility for the financial or other
soundness of our Company, our promoters, our management or any scheme or project of our Company.
9. It is also to be distinctly understood that the approval given by NSE and BSE should not in any way be
deemed or construed that this Draft Red Herring Prospectus has been cleared or approved by NSE or BSE; nor
does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this
Draft Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be
listed on the NSE and BSE.
Build Up of the Book and Revision of Bids
1. Bids registered by various Bidders through the members of the Syndicate shall be electronically transmitted to
the NSE or BSE mainframe on half hourly basis.
2. During the Bidding/Offer Period, any Bidder who has registered an interest in the Equity Shares at a particular
price level is free to revise the Bid within the Price Band using the printed Revision Form that is a part of the
Bid cum Application Form.
3. Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision
Form. The Bidder must complete the details of all the options in the Bid cum Application Form or earlier
Revision Form and revisions for all the options as per the Bid cum Application Form or earlier Revision Form.
For example, if a Bidder has bid for three options in the Bid cum Application Form or the earlier Revision
Form and is changing only one of the options in the Revision Form, the Bidder must still complete the details
of the other two options that are not being revised in the Revision Form. Incomplete or inaccurate Revision
Forms will not be accepted by the members of the Syndicate.
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6. The Bidder can make this revision any number of times during the Bidding Period. However, for any
revisions in the earlier Bid, the Bidders will have to use the services of the same member of the Syndicate
through whom the original Bid was placed. Bidders are advised to retain copies of the blank Revision
Form and the revised Bid must only be made on that Revision Form (or copies thereof).
7. Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the
incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if
any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in
accordance with the terms of this Draft Red Herring Prospectus. In case of QIB Bidders, the members of the
Syndicate may at their sole discretion waive the payment requirement at the time of one or more revisions by
the QIB Bidders.
8. When a Bidder revises a Bid, the Bidder shall surrender the earlier TRS and get a revised TRS from the
member of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS,
which will act as proof of having revised the Bid.
9. In case of discrepancy of data between the electronic book and the physical book, the decision of the BRLMs,
based on the physical records of the Bid cum Application Forms, shall be final and binding on all concerned.
Price Discovery and Allocation
1. After the Bid/Offer Closing Date, the BRLMs shall analyze the demand generated at various price levels and
discuss pricing strategy with our Company.
2. Our Company, in consultation with the BRLMs, shall finalize the “Offer Price” and the number of Equity
Shares to be allotted and the allotment to successful QIB Bidders. The allocation to QIBs will be decided
based on the quality of the QIB Bidder determined broadly by the size, price and time of the Bid.
3. The allocation to QIBs of at least 60% of the Net Offer would be discretionary. The allocation to Non
Institutional Bidders and Retail Individual Bidders of up to 15% and up to 25% of the Net Offer, respectively,
would be on a proportionate basis, in consultation with the Designated Stock Exchange and subject to valid
Bids being received at or above the Offer Price.
4. Under subscription, if any, in any category, would be allowed to be met with spill over of demand from any of
the other categories, at the sole discretion of our Company, in consultation with the BRLMs. Any under
subscription in the Equity Shares reserved for allocation to Employees would be treated as part of the Net
Offer to the public and allocation in accordance with the Basis of Allocation described in the section
“Statutory and Other Information” beginning on page 165 of this Draft Red Herring Prospectus.
5. Allocation to eligible NRIs, FIIs registered with SEBI or FVCIs registered with SEBI will be subject to
applicable laws, rules, regulations, guidelines and approvals.
6. The BRLMs and our Company shall notify the members of the Syndicate of the Offer Price and allocations to
their respective Bidders where the full Bid Amount has not been collected from the Bidders.
7. Our Company and the Selling Shareholder reserves the right to cancel the Offer any time after the Bid/Offer
Opening Date without assigning any reason therefore, but before allotment.
8. QIB Bidders shall not be allowed to withdraw their Bid after Bid/Offer Closing Date.
Signing of Underwriting Agreement and RoC Filing
1. Our Company, the Selling Shareholder (acting through the Company, its duly constituted attorney), the
BRLMs, and the Syndicate Members shall enter into an Underwriting Agreement on finalization of the Offer
Price and allocation(s) to the QIB Bidders.
2. After the Underwriting Agreement is signed, we will file the Red Herring Prospectus with the RoC, which
then would be termed ‘Prospectus’. The Prospectus would have details of the Offer Price, size of the Offer,
underwriting arrangements and would be complete in all material respects.
Advertisement regarding Offer Price and Prospectus
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A statutory advertisement will be issued by us after the filing of the Prospectus with the RoC. This advertisement, in
addition to the information that has to be set out in the statutory advertisement, shall indicate the Offer Price. Any
material updates between the Draft Red Herring Prospectus and the Prospectus will be included in such statutory
advertisement.
Issuance of Confirmation of Allocation Note
1. The BRLMs or Registrar to the Offer shall send to the members of the Syndicate a list of their Bidders who
have been allocated Equity Shares in the Offer.
2. The Members of the Syndicate would then send the CAN to their Bidders who have been allocated Equity
Shares in the Offer. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the
Bidder to pay the entire Offer Price for all the Equity Shares allocated to such Bidder. Those Bidders who
have not paid the full Bid Amount into the Escrow Account at the time of submitting the Bid cum Application
Form shall pay the full amount into the Escrow Account on or prior to the Pay-in Date specified in the CAN.
3. Bidders who have been allocated Equity Shares and who have already paid the full Bid Amount into the
Escrow Account at the time of submitting the Bid cum Application Form shall directly receive the CAN from
the Registrar to the Offer subject, however, to realization of their cheque or demand draft paid into the Escrow
Account. The dispatch of a CAN shall be deemed to be a valid, binding and irrevocable contract for the
Bidder to pay the entire Offer Price for all the Equity Shares allotted to such Bidder.
Designated Date and Transfer of Funds to Public Offer Account
After the funds are transferred from the Escrow Account to the Public Offer Account on the Designated Date our
Company would allot/transfer the Equity Shares to the allottees. Successful Bidders will receive credit for the Equity
Shares directly in their Depository Accounts. Equity Shares will be allotted only in the dematerialized form to the
allottees. Successful Bidders will have the option to rematerialize the Equity Shares so allotted/transferred if they so
desire as per the provisions of the Companies Act and the Depositories Act.
Our Company will ensure the Allotment of Equity Shares within 15 days of the Bid/Offer Closing Date. After the
funds are transferred from the Escrow Account to the Public Offer Account on the Designated Date, our Company
would ensure that credit is given to the successful Bidders’ depository accounts within two working days from the date
of Allotment.
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be Allotted to them
pursuant to this Offer.
General Instructions
Dos:
• Check if you are eligible to apply in particular having regard to the AIC No. 4, and applicable laws, rules,
regulations, guidelines and approvals;
• Read all the instructions carefully and complete the Resident Bid cum Application Form (white in color) or
Non-Resident Bid cum Application Form (blue in color) or Employee Bid Application Form ([•] in color), as
the case may be;
• Ensure that you Bid only within the Price Band;
• Ensure that the details about Depository Participant and beneficiary account are correct as Allotment of
Equity Shares will be in dematerialized form only;
• Ensure that the Bids are submitted at the bidding centers only on forms bearing the stamp of a member of the
Syndicate;
• Ensure that you have collected a TRS for all your Bid options;
• Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and
obtain a revised TRS;
• Investors should ensure that the name given in the Bid cum Application Form is exactly the same as the
name in which the depository account is held. In case the Bid cum Application Form is submitted in
joint names, investors should ensure that the depository account is also held in the same joint names
and such joint names are in the same sequence in which they appear in the Bid cum Application Form.
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• Ensure that you mention your Permanent Account Number (PAN) allotted under the I.T. Act where the
maximum bid for Equity Shares by a Bidder is of a total value of Rs.50,000 or more. In case neither the PAN
nor the GIR number has been allotted mention “Not allotted” in the appropriate place.
Don’ts:
• Do not Bid for lower than the minimum Bid size;
• Do not Bid/ revise the Bid to a price that is less than the floor of the Price Band or higher than the cap of the
Price Band;
• Do not Bid on another Bid cum Application Form after you have submitted the Bid to the members of the
Syndicate;
• Do not pay the Bid Amount in cash;
• Do not send Bid cum Application Forms by post; instead hand them over to a member of the Syndicate only;
• Do not Bid at Cut-off price (for Non Institutional, QIB Bidders and Employees for whom the Bid Amount
exceeds Rs.50,000);
• Do not fill up the Bid cum Application Form for an amount that exceeds the investment limit or maximum
number of Equity Shares that can be held by a Bidder under applicable laws or regulations;
• Do not submit Bids accompanied by stockinvest/cash/money order.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM
Bidders can obtain Bid cum Application Forms and/or Revision Forms from the members of the Syndicate.
Bids and Revision of Bids
Bids and revision of Bids must be:
1. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white color for
Resident Indians and NRIs applying on non-repatriation basis and blue color for eligible NRIs, FIIs registered
with SEBI, foreign venture capital investors registered with SEBI applying on repatriation basis and [•] color
for Employees).
2. Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained
herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or
Revision Forms are liable to be rejected.
3. For Retail Individual Bidders, the Bids must be for a minimum of [•] Equity Shares and in multiples of [•]
thereafter subject to a maximum Bid Amount of Rs.50,000.
4. For Non Institutional and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the
Bid Amount exceeds Rs.50,000 and in multiples of [•] Equity Shares thereafter. Bids cannot be made for
more than the size of the Offer. Bidders are advised to ensure that a single Bid from them should not exceed
the investment limits or maximum number of Equity Shares that can be held by them under applicable laws
and regulations.
5. For Employees the bid must be for a minimum of [•] Equity Shares and shall be in multiples of [•] Equity
Shares thereafter. The Allotment in the Employee Reservation Portion will be on a proportionate basis.
However, in case of an oversubscription in the Employee Reservation Portion, the maximum Allotment to any
Employee will be capped at Rs.2.5 million.
6. In single name or in joint names (not more than three) and in the same order as their Depository Participant
details).
7. Thumb impressions and signatures other than in the languages specified in the Eight Schedule in the
Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate
under official seal.
Bid by Employees
For the sake of clarity, the term “Employees” shall mean all or any of the following :
(i) a permanent employee of the Company or of Tail Winds, working in India; and
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(ii) a director of the Company or of Tail Winds, whether a whole time director, part time director or
otherwise,
all of whom are Indian Nationals, are based in India and are physically present in India on the date of submission
of the Bid cum Application Form.
1. Bids by Employees shall be made only in the prescribed Bid cum Application Form or Revision Form (i.e. [•]
colour form).
2. Employees should mention their Employee Number at the relevant place in the Bid cum Application Form.
3. The sole/First Bidder should be an Employee as defined above. In case the Bid cum Application Form is submitted
in joint names, it should be ensured that the Depository Account is also held in the same joint names and in the
same sequence in which they appear in the Bid cum Application Form.
4. Only Employees on the rolls of our Company as on the cut-off date i.e. [•] 2004 would be eligible to apply in this
Offer under reservation for Employees on a competitive basis.
5. Employees will have to Bid like any other Bidder. Only those Bids, which are received at or above the Offer Price,
would be considered for allotment under this category.
6. If the aggregate demand in this category is less than or equal to [•] Equity Shares at or above the Offer Price, full
allocation shall be made to the Employees to the extent of their demand. Any under subscription in Equity Shares
reserved for Employees would be treated as part of the Net Offer and Allotment in accordance with the description
in Basis of Allocation in the section “Statutory and Other Information” beginning on page 165 of this Draft Red
Herring Prospectus.
7. If the aggregate demand in this category is greater than 1,200,000 Equity Shares at or above the Issue Price, the
allocation shall be made on a proportionate basis subject to maximum Allotment to any Employee of Rs.2.5
million.
8. Bidding at Cut-off is allowed only for Employees whose Bid Amount is less than or equal to Rs. 50,000.
Bidder’s Bank Account Details
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant
identification number and beneficiary account number provided by them in the Bid cum Application Form, the
Registrar to the Offer will obtain from the Depository the Bidder’s bank account details. These bank account details
would be printed on the refund order, if any, to be sent to Bidders. Hence, Bidders are advised to immediately
update their bank account details as appearing on the records of the Depository Participant. Please note that
failure to do so could result in delays in credit of refunds to Bidders at the Bidder’s sole risk.
Bidder’s Depository Account Details
IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALISED
FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME,
DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER
IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN
THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE
DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN
JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN
THE SAME JOINT NAMES AND SUCH JOINT NAMES ARE IN THE SAME SEQUENCE IN WHICH
THEY APPEAR IN THE BID CUM APPLICATION FORM.
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant Identification number and beneficiary account number provided by them in the Bid cum
Application Form, the Registrar to the Offer will obtain from the Depository demographic details of the Bidders
such as address, bank account details for printing on refund orders and occupation (hereinafter referred to as
Demographic Details). Hence, Bidders should carefully fill in their Depository Account details in the Bid cum
Application Form.
These demographic details would be used for all correspondence with the Bidders including mailing of the refund
orders/CANs/allocation advice and printing of bank particulars on the refund order and the demographic details given
by Bidders in the Bid cum Application Form would not be used for these purposes by the Registrar. Hence, Bidders are
advised to update their Demographic Details as provided to their Depository Participants.
By signing the Bid cum Application Form, each Bidder will be deemed to have authorized the Depositories to provide,
upon request, to the Registrar to the Offer, the required Demographic Details as available on its records.
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Refund orders/allocation advice/CANs would be mailed at the address of the Bidder as per the Demographic Details
received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs may get
delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event,
the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure
dispatch of CANs/refund orders. Please note that any such delay shall be at the Bidder’s sole risk.
In case no corresponding record is available with the Depositories that match three parameters, i.e., name of the Bidder
(including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s
identity, then such Bids are liable to be rejected.
Bids under Power of Attorney
In case of Bids made pursuant to a Power of Attorney or by limited companies, eligible corporate bodies, registered
societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along
with a certified copy of the Memorandum and Articles of Association and/or bye laws must be submitted with the Bid
cum Application Form. Failing this, we reserve the right to accept or reject any Bid in whole or in part, in either case,
without assigning any reason therefore
In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the Power of Attorney or the relevant
resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be
submitted with the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid
in whole or in part, in either case, without assigning any reason therefore.
In case of Bids made by Insurance Companies registered with the Insurance Regulatory and Development Authority, a
certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged
along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in
whole or in part, in either case without assigning any reason therefore.
In case of Bids made by provident funds with minimum corpus of Rs.250 million and pension funds with minimum
corpus of Rs.250 million, a certified copy of certificate from a chartered accountant certifying the corpus of the
provident fund/pension fund must be lodged along with the Bid-cum-Application Form. Failing this, our Company
reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefor.
We, in our absolute discretion, reserve the right to relax the above condition of simultaneous lodging of the Power of
Attorney along with the Bid cum Application Form, subject to such terms and conditions as we may deem fit.
Bids by NRIs
NRI Bidders to comply with the following:
1. Individual NRI Bidders can obtain the Bid cum Application Forms from our registered office at SM Centre,
Andheri Kurla Road, Andheri (East), Mumbai 400 059, India, the BRLMs, members of the Syndicate or the
Registrar to the Offer.
2. NRI Bidders may please note that only such Bids as are accompanied by payment in free foreign exchange
shall be considered for allotment. NRIs who intend to make payment through Non-Resident Ordinary (NRO)
accounts shall use the Bid cum Application Form meant for resident Indians (white in color).
Bids by NRIs, FIIs registered with SEBI and Foreign Venture Capital Investors registered with SEBI on a repatriation
basis
Bids and revision to Bids must be made:
1. On the Bid cum Application Form or the Revision Form, as applicable (blue in color), and completed in full in
BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.
2. In a single name or joint names (not more than three).
3. By NRIs -Bids for a Bid Amount of up to Rs.50,000 would be considered under the Retail Portion for the
purposes of allocation and Bids for a Bid Amount of more than Rs.50,000 would be considered under Non
Institutional Bidder Portion for the purposes of allocation; By FIIs — for a minimum of such number of
Equity Shares and in multiples of [•] thereafter that the Bid Amount exceeds Rs.50,000 for further details see
“Offer Procedure - Maximum and Minimum Bid Size”.
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4. In the names of individuals, or in the names of FIIs or in the name of FVCIs . but not in the names of
multilateral and bilateral development institutions, minors, OCBs, firms or partnerships, foreign nationals
excluding NRIs or their nominees.
5. Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank
charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts purchased
abroad, such payments in Indian Rupees will be converted into U.S. Dollars or any other freely convertible
currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will
be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of
which should be furnished in the space provided for this purpose in the Bid cum Application Form. We will
not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.
Payment Instructions
Our Company shall open Escrow Accounts with the Escrow Collection Banks for the collection of the Bid Amounts
payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Offer.
Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the
following terms:
Payment into Escrow Account:
1. The Bidders for whom the applicable margin is equal to 100%, shall, with the submission of the Bid-cum-
Application form, draw a payment instrument for the Bid Amount in favor of the Escrow Account and submit
the same to the members of the Syndicate along with the Bid cum Application Form.
2. In case the Margin Amount paid by the Bidders during the Bidding/Offer Period is less than the Offer Price
multiplied by the Equity Shares allotted to the Bidder, the balance amount shall be paid by the Bidders into the
Escrow Account within the period specified in the CAN, which shall be subjected to a minimum period of two
days from the date of communication of the allottment list to the Syndicate Member(s) by the BRLMs.
3. In case the payment of the Bid Amount has been waived by a member of the Syndicate during the Bidding
Period, on receipt of the CAN, an amount equal to the Offer Price multiplied by the Equity Shares allocated to
the Bidder, shall be paid by the Bidders into the Escrow Account within the period specified in the CAN
which shall be a minimum period of two days from the date of communications of the allocation list to the
members of the Syndicate by the BRLMs.
4. The payment instruments for payment into the Escrow Account should be drawn in favor of:
(a) In case of Resident Bidders: “Escrow Account — Jet Airways Public Offer”
(b) In case of Non Resident Bidders: “Escrow Account — Jet Airways Public Offer -NR”
(c) In case of Employees, “Escrow Account – Jet Airways Public Offer – Employees”
• In case of Bids by NRIs applying on repatriation basis, the payments must be made through
Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on
application remitted through normal banking channels or out of funds held in Non-Resident
External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained
with banks authorized to deal in foreign exchange in India, along with documentary
evidence in support of the remittance. Payment will not be accepted out of a Non-Resident
Ordinary (NRO) Account of a Non-Resident Bidder bidding on a repatriation basis.
Payment by drafts should be accompanied by a bank certificate confirming that the draft has
been issued by debiting an NRE or FCNR Account.
• In case of Bids by NRIs applying on non-repatriation basis, the payments must be made
through Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount
payable on application remitted through normal banking channels or out of funds held in
Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR)
Accounts, maintained with banks authorized to deal in foreign exchange in India, along with
documentary evidence in support of the remittance or out of a Non-Resident Ordinary
(NRO) Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by
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drafts should be accompanied by a bank certificate confirming that the draft has been issued
by debiting an NRE or FCNR or NRO Account.
• In case of Bids by FIIs, the payment should be made out of funds held in a Special Rupee
Account along with documentary evidence in support of the remittance. Payment by drafts
should be accompanied by a bank certificate confirming that the draft has been issued by
debiting the Special Rupee Account.
5. Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess
amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares
allocated, will be refunded to the Bidder from the Escrow Account.
6. The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated
Date.
7. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account, as
per the terms of the Escrow Agreement, into the Public Offer Account with the Bankers to the Offer.
8. No later than 15 days from the Bid/Offer Closing Date, the Escrow Collection Bank shall refund all amounts
payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for
allocation to the Bidders
Payments should be made by cheque or demand draft drawn on any bank (including a Co-operative bank) which is
situated at and is a member of, or sub-member of the bankers clearing house, located at the centre where the Bid cum
Application Form is submitted. Outstation cheques/bank drafts on banks not participating in the clearing process will
not be accepted and applications accompanied by such cheques/bank drafts are liable to be rejected. Cash/money
orders/postal orders will not be accepted.
Payment by Stockinvest
In terms of RBI Circular DBOD No. FSC BC 42/24.47.001/2003-04 dated November 5, 2003, the Stockinvest Scheme
was withdrawn with immediate effect. Hence, payment through Stockinvest will not be accepted in this Offer.
Submission of Bid cum Application Form
All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or
drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid cum Application Forms.
A member of the Syndicate may, at its discretion, waive the requirement of payment at the time of submission of the
Bid cum Application Form and the Revision Form in the case of QIB Bidders.
The collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms
or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will
serve as the duplicate of the Bid cum Application Form for the records of the Bidder. No separate receipts shall be
issued for the money paid on the submission of Bid cum Application Form or Revision Form.
Other Instructions
Joint Bids in the case of Individuals
Individuals may make bids in single or joint names (not more than three). In the case of joint Bids, all refund amounts
will be made only in favor of the Bidder whose name appears first in the Bid cum Application Form or Revision Form
(“First Bidder”). All communications will be addressed to the First Bidder and will be dispatched to his or her address.
Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or
more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI
and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that
the Bids clearly indicate the scheme concerned for which the Bid has been made.
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Bids made by Employees both under Employee Reservation Portion as well as in the Net Offer shall not be treated as
multiple bids.
We reserve the right to reject, in our absolute discretion, all or any multiple Bids in all or any categories.
‘PAN’ or ‘GIR’ Number
Where the maximum Bid for Equity Shares by a Bidder is for a total value of Rs.50,000 or more, i.e., the actual
numbers of Equity Shares Bid for multiplied by the Bid Amount is Rs.50,000 or more, the Bidder or, in the case of a
Bid in joint names, each of the Bidders should mention his or her Permanent Account Number (PAN) allotted under the
I.T. Act, as amended or where the same has not been allotted, the General Index Register (GIR) Number and the
Income-Tax Circle, Ward or District. In case neither the PAN nor the GIR number has been allotted, the Bidders must
mention “Not allotted” in the appropriate place. Bid cum Application Forms without this information will be
considered incomplete and are liable to be rejected.
Our Right to Reject Bids
Our Company and the BRLMs reserve the right to reject any Bid without assigning any reason therefore in case of QIB
Bidders. In case of Non Institutional Bidders and Retail Individual Bidders and Employees, our Company would have
the right to reject Bids only on technical grounds. Consequent refunds shall be made by cheque or pay order or draft
and will be sent to the Bidder’s address at the Bidder’s risk.
Grounds for Technical Rejections
Bidders are advised to note that Bids are liable to be rejected on technical grounds, including the following:
1. Amount paid does not tally with the amount payable for the highest value of Equity Shares bid for;
2. Bank account details (for refund) are not given;
3. Age of First Bidder not given;
4. Bids by minors;
5. PAN or GIR Number not given if Bid is for Rs.50,000 or more;
6. Bids for lower number of Equity Shares than specified for that category of investor;
7. Bids at a price less than the floor of the Price Band and higher than the cap of the Price Band;
8. Bids at Cut-off price by a QIB or a Non Institutional Bidder and Employees under the Employee Reservation
Portion where Bid Amount exceeds Rs.50,000;
9. Bids for number of Equity Shares, which are not multiples of [•];
10. Category not ticked;
11. Multiple Bids;
12. In case of Bid under power of attorney or by limited companies, corporate, trust, etc., relevant documents are
not submitted;
13. Bid cum Application Form does not have the stamp of a member of the Syndicate;
14. Bid cum Application Form does not have the Bidder’s depository account details, including as specified
below;
15. Bid cum Application Forms are not submitted by the Bidders within the time prescribed as per the Bid cum
Application Form, Bid/Offer Opening Date advertisement and this Draft Red Herring Prospectus and as per
the instructions in this Draft Red Herring Prospectus and the Bid cum Application Form;
16. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations see the details
regarding the same at page 146 of this Draft Red Herring Prospectus;
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17. Bids not duly signed by the sole/joint Bidders;
18. Bids by OCBs or multilateral and bilateral development financial institutions;
19. Bids accompanied by stockinvest/cash/money order;
20. Bids by U.S. residents or U.S. persons other than “qualified institutional buyers” as defined in Rule 144A of
the U.S. Securities Act of 1933;
21. In case no corresponding record is available with the Depositories that matches three parameters, i.e., name of
the Bidder (including the sequence of names of joint holders), the depository participant’s ID (DP ID) and the
beneficiary’s identity;
22. Bids by persons who are not eligible to acquire Equity Shares of our Company, in terms of the AIC No. 4, and
other applicable laws, rules, regulations, guidelines and approvals.
Equity Shares in Dematerialized Form with NSDL or CDSL
In terms of Section 68B of the Companies Act, the Equity Shares in this Offer shall be allotted only in dematerialized
form (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through
electronic mode).
In this context, two tripartite agreements have been signed between the Registrar to the Offer, the Depositories and the
Company:
1. An agreement dated [•], 2004 among NSDL, the Company and the Registrar to the Offer for offering the
Depository option to the investors; and.
2. An agreement dated [•], 2004 between CDSL, the Company and the Registrar to the Offer for offering the
Depository option to the investors.
Bidders will be allotted Equity Shares only in the demateralized mode.
Bids from any Bidder without the following details of his or her depository account are liable to be rejected.
1. A Bidder applying for Equity Shares must have at least one beneficiary account with either of the depository
participants of NSDL or CDSL prior to making the Bid.
2. The Bidder must necessarily fill in the details (including the beneficiary account number and depository
participant’s identification number) appearing in the Bid cum Application Form or Revision Form.
3. Equity Shares allotted to a Bidder will be credited in electronic form directly to the beneficiary account (with
the depository participant) of the Bidder.
4. Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the
account details in the depository. In case of joint holders, the names should necessarily be in the same
sequence as they appear in the depository account of the Bidder(s).
5. If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the Bid
cum Application Form or Revision Form, it is liable to be rejected.
6. The Bidder is responsible for the correctness of his or her demographic details given in the Bid cum
Application Form vis-à-vis those with his or her depository participant.
7. It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges having
electronic connectivity with NSDL and CDSL. All the stock exchanges where our Equity Shares are proposed
to be listed are connected to NSDL and CDSL.
8. The trading of our Equity Shares would be in dematerialized form only and for all investors in the demat
segment of the respective stock exchange.
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9. Non-transferable allotment advise or refund orders will be directly sent to the Bidder by the Registrar to the
Offer.
Communications
All future communications in connection with Bids made in the Offer should be addressed to the Registrar to the Offer
quoting the full name of the sole or First Bidder, Bid cum Application Form number, number of Equity Shares applied
for, date of Bid form, name and address of the member of the Syndicate where the Bid was submitted and cheque or
draft number and issuing bank thereof.
Undertakings by our Company
The Company undertakes as follows:
• that the complaints received in respect of this Offer shall be attended to by us expeditiously;
• that we shall take all steps for the completion of the necessary formalities for listing and commencement of
trading at all the Stock Exchanges where the Equity Shares are to be listed within seven working days of
finalization of the basis of allotment;
• that the funds required for dispatch of refund orders or allotment advice by registered post or speed post shall be
made available to the Registrar to the Offer by us;
• that the refund orders or allotment advice to the Bidders shall be dispatched within specified time; and
• that no further offer of Equity Shares shall be made until the Equity Shares offered through this Draft Red
Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription,
etc.
Undertakings by the Selling Shareholder
The Selling Shareholder undertakes as follows:
• the Equity Shares being sold pursuant to the Offer for Sale are free and clear of any liens or encumbrances,
and shall be transferred to the successful Bidders within the specified time; and
• that no further offer of Equity Shares shall be made till the Equity Shares offered through this Draft Red
Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-
subscription etc.
Utilization of Offer Proceeds
The Board of Directors of the Company certify that:
• all monies received out of the Fresh Issue shall be transferred to a separate bank account other than the bank
account referred to in sub-section (3) of Section 73 of the Companies Act;
• details of all monies utilized out of Fresh Issue referred above shall be disclosed under an appropriate separate
head in the balance sheet of the Company indicating the purpose for which such monies have been utilized; and
• details of all unutilized monies out of the Fresh Issue, if any, shall be disclosed under the appropriate separate
head in the balance sheet of the Company indicating the form in which such unutilized monies have been
invested.
Disposal of Applications and Application Money
We shall ensure dispatch of allotment advice or refund orders and giving of benefit to the beneficiary account with
depository participants and submission of the allotment and listing documents to the Stock Exchanges within two
working days of finalization of the basis of allotment of Equity Shares. We shall ensure the dispatch of refund orders,
if any, of value up to Rs.1,500, “Under Certificate of Posting”, and dispatch of refund orders above Rs.1,500, if any, by
Registered Post or Speed Post at the sole or First Bidder’s sole risk.
We shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and
commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed are taken within
seven working days of finalization of the basis of allotment.
In accordance with the Companies Act, the requirements of the stock exchanges and SEBI Guidelines, the Company
further undertakes that:
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• Allotment/transfer of Equity Shares shall be made only in dematerialized form within 15 days of the Bid/Offer
Closing Date;
• The Company would ensure dispatch of refund orders within 15 days of the Bid/Offer Closing Date; and
• The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned
above), if Allotment is not made, refund orders are not dispatched and/or demat credits are not made to
investors within 15 days from the Bid/Offer Closing Date as per the Guidelines issued by the Ministry of
Finance, Government of India, pursuant to their letter no. F-8/6/SE/79 dated July 31, 1983, as amended by
their letter no. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further
modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.
Our Company will provide adequate funds required to the Registrar to the Offer for dispatch of refund orders or
allotment advice.
Refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at
par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at
other centers will be payable by the Bidders.
The Company and the Selling Shareholder shall not have recourse to the Offer proceeds until the approvals for trading
of the Equity Shares has been received from the Stock Exchanges.
The Company shall transfer to the Selling Shareholder, the proceeds from the Offer for Sale, on the same being
permitted to be released in accordance with applicable laws.
Restrictions on Foreign Ownership of Indian Securities
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign Ownership
Restrictions” on page 111 of this Draft Red Herring Prospectus.
No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA and all other applicable
laws, rules, regulations, guidelines and approvals.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to
acquire Equity Shares of the Company.
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BASIS FOR OFFER PRICE
We shall determine the Offer Price in consultation with the BRLMs on the basis of assessment of market demand for
the offered Equity Shares by way of Book Building Process.
You should read the following summary with the section entitled “Risk Factors” beginning on page xi of this Draft Red
Herring Prospectus and the details about us and our financial statements included in this Draft Red Herring Prospectus.
The trading price of our Equity Shares could decline due to these risks and you may lose all or part of your investments.
QUALITATIVE FACTORS
Factors external to the Company
• Healthy Market Growth Rate
The Indian aviation industry has been growing at a healthy rate when compared to certain other countries in
the world. The domestic air traffic in India has grown at a CAGR of 8.6% over fiscal 2002 to fiscal 2004 while
the international traffic has grown at a CAGR of 8.5% during the same period.
• Under-penetrated Indian Market
Indian aviation market is still highly under-penetrated when compared to other developed economies. The
average air travel in India is estimated at 0.014 trips per person per year, which is low when compared to an
average of 2.02 trips per person per year in the United States.
Factors internal to the Company
• Largest domestic airline in the country
We are the largest domestic airline in India in terms of passengers carried in fiscal 2004 and the six months
ended September 30, 2004, and enjoyed a market share of 42.3% for the six months ended September 30,
2004. Our market share (in terms of revenue passengers) has grown from 6.4% in fiscal 1994 to 42.3% in the
six months ended September 30, 2004.
• Strong brand and customer service
We have established a strong brand that helps to distinguish us from our competitors by identifying us as a
safe and reliable airline that is focused on customer service. We have received numerous awards in recognition
of our service, including the Business World award for the most respected company in the travel and
hospitality sector in 2003 as well as 2004, the Best Domestic Airline of Asia by Asian readers of Travel Trade
Gazette for the year 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline
Category) for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004. We
were also rated as one of the ten most respected companies in India by Business World. Our brand has been
selected as a “superbrand” by the Indian Superbrands Council in August 2003.
During the six month ended September 30, 2004, we have been rated either “good” or “excellent” by
approximately 95% of our customers who have completed our service tracker questionnaire.
• Focus on business travellers
We offer several services directed towards the convenience of the business traveler, including telephone
check-in facilities, through and “in-city” check-in facilities, priority baggage service, providing flight
information on cellular phones of customers, frequent flyer programs, customer loyalty programs, business
class section on almost all flights and business class airport lounges. In addition to these facilities, our ability
to deliver high levels of “on-time” departures and our focus on providing high quality service have enabled us
to become the preferred airline for business travellers.
We estimate that in fiscal 2004 and the six months ended September 30, 2004, approximately 80% to 85% of
our passengers were business travelers in India.
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• Management team
Our Board of Directors and the management team comprises people who have extensive knowledge and
experience in the airline industry, in India as well as abroad.
• Strong marketing, sales and distribution network
We have an extensive marketing and distribution network, both in India and abroad. We currently have
general sales agent representation in 69 locations in India and 74 countries overseas. Besides, we have a
popular frequent flyer programme with approximately 413,970 members as of November 30, 2004.
• Young fleet of aircraft and high utilization rate
We have a young fleet of aircraft with a current average age of 4.5 years. In fiscal 2004 and the six months
ended September 30, 2004, our aircraft operated an average of 9.46 and 9.84 hours per day, respectively. By
achieving high utilization, we are able to optimize crew movement, spread our fixed costs over a greater
number of flights and available seat kilometers.
• Infrastructural facilities
Our main hubs of operations are Mumbai, Delhi, Chennai, Kolkata and Bangalore, which are key markets for
us. Our presence in these cities in terms of parking bays and landing slots provide us with a strong competitive
advantage over our competitors. We own a hangar facility in Delhi and have leased one in Bangalore, which
provides us the capability of undertaking up to C checks in-house.
QUANTITATIVE FACTORS
1. Adjusted earning per share (EPS)
Year EPS (Rs.) Weight
Fiscal 2002 (5.34) 1
Fiscal 2003 (17.84) 2
Fiscal 2004 19.44 3
Weighted Average 2.88
(i) EPS has been calculated as per the following formula:
(Net Profit attributable to equity shareholders) / (Total No. of equity shares outstanding during the
year/period)
(ii) Net Profit, as restated and appearing in the statement of profits and losses has been considered for the
purpose of computing the above ratio. The net profit is based on the restated financial statements of
the Company.
(iii) EPS calculations have been done in accordance with Accounting Standard 20 – “Earnings per share”
issued by the Institute of Chartered Accountants of India”.
2. Price/Earning Ratio (P/E) in relation to Offer Price of Rs. [?]
(i) Based on the year ended March 31, 2004 EPS of Rs. 19.44 is [?].
(ii) There are no listed comparables in the Indian airline industry, hence there is no industry P/E.
3. Average Return on Net Worth (RONW)
Year Average RONW Weight
Fiscal 2002 -15.00% 1
Fiscal 2003 -94.17% 2
Fiscal 2004 105.17% 3
Weighted Average
18.70%
(i) Average RONW has been calculated as per the following formula:
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(Net Profit after tax )/ (Average Net Worth excluding revaluation reserve during the year/period)
(ii) Net worth computations in the above workings include ‘Cumulative Convertible Redeemable
Preference Shares’.
4. Minimum Return on total Net Worth after the Offer required to maintain pre-Offer EPS of [?] is [?]%
5. Net Asset Value (NAV) per Equity Share
(a) As of September 30, 2004: Rs. 26.46; After the Offer: Rs. [?]
(b) Offer Price - Rs. [?]
(i) NAV has been calculated as per the following formula:
(Net worth excluding revaluation reserve, preference share capital including annualized return in arrears
thereon at the end of the year/period) / (Total no. of Equity Shares outstanding during the year/period)
6. Comparison with Industry Peers
There are no listed comparables in the Indian airline industry, hence this comparison is not possible.
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STATUTORY AND OTHER INFORMATION
Consents
Consents in writing of: (a) the Directors, the Company Secretary and Compliance Officer, the Auditors, Legal Advisors
to the Company, Bankers to the Company and Bankers to the Offer; and (b) Book Running Lead Managers to the
Offer, Syndicate Members, Escrow Collection Bankers, Registrar to the Offer and Legal Advisors to the Underwriters,
to act in their respective capacities, have been obtained and filed along with a copy of the Prospectus with the Registrar
of Companies, Maharashtra located at Mumbai, as required under Sections 60 and 60B of the Companies Act and such
consents have not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with
the RoC.
Deloitte, Haskins & Sells, Chartered Accountants, and Chaturvedi & Shah, Chartered Accountants, our statutory
auditors have given their written consent to the inclusion of their report in the form and context in which it appears in
this Draft Red Herring Prospectus and such consent and report has not been withdrawn up to the time of delivery of the
Draft Red Herring Prospectus for registration with the RoC.
Chaturvedi & Shah, Chartered Accountants, have given their written consent to the tax benefits accruing to our
Company and its members in the form and context in which it appears in this Draft Red Herring Prospectus and such
consent has not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with the
RoC.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Fresh Issue less the Employee Reservation
Portion to the extent of [•] amount including devolvement of the members of the Syndicate, if any, within 60 days from
the Bid/Offer Closing Date, the Company shall forthwith refund the entire subscription amount received. If there is a
delay beyond eight days after the Company becomes liable to pay the amount, the Company shall pay interest as per
Section 73 of the Companies Act. The requirement for minimum subscription is not applicable to the Offer for Sale.
Expert Opinion
Except as stated elsewhere in this Draft Red Herring Prospectus, we have not obtained any expert opinions.
Changes in Auditors
There have been no changes of the auditors in the last three years except as detailed below
Name of Auditor Date of Appointment Date of resignation Reasons for change
C.C. Chokshi & Co. September 29, 2004 Did not seek re-appointment
Deloitte Haskins & Sells September 29, 2004 Appointed
Chaturvedi & Shah September 29, 2004 Appointed
Basis of Allotment or Allocation
A. For Retail Individual Bidders
• Bids received from the Retail Individual Bidders at or above the Offer Price shall be grouped together
to determine the total demand under this category. The allotment to all the successful Retail Individual
Bidders will be made at the Offer Price.
• The Net Offer size less allotment to Non Institutional and QIB Bidders shall be available for allotment
to Retail Individual Bidders who have bid in the Offer at a price that is equal to or greater than the
Offer Price.
• If the aggregate demand in this category is less than or equal to 4,016,700 Equity Shares at or above the
Offer Price, full allotment shall be made to the Retail Individual Bidders to the extent of their demand.
• If the aggregate demand in this category is greater than 4,016,700 Equity Shares at or above the Offer
Price, the allotment shall be made on a proportionate basis up to a minimum of [•] Equity Shares. For
the method of proportionate basis of allotment, refer below and in multiples of [•] Equity Shares
thereafter.
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B. For Non Institutional Bidders
• Bids received from Non institutional Bidders at or above the Offer Price shall be grouped together to
determine the total demand under this category. The allotment to all successful Non Institutional
Bidders will be made at the Offer Price.
• The Net Offer size less allotment to QIBs and Retail Portion shall be available for allotment to Non
Institutional Bidders who have bid in the Offer at a price that is equal to or greater than the Offer Price.
• If the aggregate demand in this category is less than or equal to 2,410,020 Equity Shares at or above the
Offer Price, full allotment shall be made to Non Institutional Bidders to the extent of their demand.
• In case the aggregate demand in this category is greater than 2,410,020 Equity Shares at or above the
Offer Price, allotment shall be made on a proportionate basis up to a minimum of [•] Equity Shares.
For the method of proportionate basis of allotment refer below and in multiples of [•] equity share
thereafter.
The aggregate allotment to Retail and Non Institutional Bidders shall not exceed 6,426,720 Equity Shares.
C. For QIB Bidders
• Bids received from the QIB Bidders at or above the Offer Price shall be grouped together to determine
the total demand under this category. The allotment to all the QIBs will be made at the Offer Price.
• The Net Offer size less allotment to Non Institutional Portion and Retail Portion shall be available for
allotment to QIBs who have bid in the Offer at a price that is equal to or greater than the Offer Price.
• The allotment would be decided by the Company in consultation with the BRLMs and would be at our
sole discretion, based on various factors, such as quality of the Bidder, size, price and date of the Bid.
The aggregate allotment to QIB Bidders shall not be less than 9,640,081 Equity Shares.
D. For Employee Reservation Portion
(the “Employees” for purposes of this paragraph)
• Bids received from the Employees at or above the Offer Price shall be grouped together to determine
the total demand under this category. The allocation to all the successful Employees will be made at the
Offer Price.
• If the aggregate demand in this category is less than or equal to 1,200,000 Equity Shares at or above the
Offer Price, full allocation shall be made to the Employees to the extent of their demand.
• If the aggregate demand in this category is greater than 1,200,000 Equity Shares at or above the Offer
Price, the allocation shall be made on a proportionate basis subject to a maximum allotment of any
employee of Rs.2.5 million. For the method of proportionate basis of allocation, refer below.
The unsubscribed portion, if any, out of the Equity Shares in the Employee Reservation Portion will be added back to
the categories of Non Institutional Bidders and Retail Individual Bidders in the ratio 50:50. Undersubscription, if any,
in the Non-Institutional Bidder and Retail Individual Bidder categories, would be allowed to be met with spill over
from other categories, at the discretion of the Company in consultation with the BRLMs.
Method of Proportionate Basis of Allotment
In the event of the Offer being over-subscribed, the basis of allotment to Retail and Non Institutional Bidders shall be
finalized by us in consultation with the Designated Stock Exchange. The Executive Director or Managing Director (or
any other senior official nominated by them) of the Designated Stock Exchange along with the BRLMs and the
Registrar to the Offer shall be responsible for ensuring that the basis of allotment is finalized in a fair and proper
manner.
The allotment shall be made in marketable lots, on a proportionate basis as explained below:
a) Bidders will be categorized according to the number of Equity Shares applied for.
b) The total number of Equity Shares to be allotted to each category as a whole shall be arrived at on a
proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders
in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-
subscription ratio.
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c) Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate basis,
which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of
the over-subscription ratio, in that category subject to a minimum allotment of [•] Equity Shares. The allotment
lot shall be the same as the minimum application lot irrespective of any revisions to the price band.
d) In all Bids where the proportionate allotment is less than [•] Equity Shares per Bidder, the Allotment shall be
made as follows:
• Each successful Bidder shall be allotted a minimum of [•] Equity Shares; and
• The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a
manner such that the total number of Equity Shares allotted in that category is equal to the number of
Equity Shares calculated in accordance with (b) above.
e) If the proportionate Allotment to a Bidder is a number that is more than [•] but is not a multiple of [•] (which is
the marketable lot), the number in excess of the multiple of [•] would be rounded off to the higher multiple of [•]
if that number is [•] or higher. If that number is lower than [•], it would be rounded off to the lower multiple of
[•]. All Bidders in such categories would be allotted Equity Shares arrived at after such rounding off.
f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares allotted
to the Bidders in that category, the remaining Equity Shares available for allotment shall be first adjusted against
any other category, where the allotted Equity Shares are not sufficient for proportionate allotment to the
successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be
added to the category comprising Bidders applying for minimum number of Equity Shares.
Expenses of the Offer
The expenses of this Offer include, among others, underwriting and management fees, selling commission, printing and
distribution expenses, legal fees, statutory advertisement expenses and listing fees. The total expenses of the Offer are
estimated to be approximately Rs.[•] million.
Other than listing fees which will be paid by us, all expenses with respect to the Offer will be shared between the
Company and the Selling Shareholder on a pro-rata basis, in the ratio of the Equity Shares issued by the Company in
the Fresh Issue and the Equity Shares sold by the Selling Shareholder in the Offer for Sale.
Fees Payable to the Book Running Lead Managers, Syndicate Member(s) and Advisor
The total fees payable to the BRLMs and Syndicate Member(s) (including underwriting commission and selling
commission) will be as per the Engagement Letter executed with the Company and the Selling Shareholder dated
January 3, 2005, a copy of which is available for inspection at our registered office. The fees payable to the Advisor
will be as per an engagement letter to be entered into with the Company, a copy of which will be available for
inspection at our registered office.
Fees Payable to the Registrar to the Offer
The fees payable to the Registrar to the Offer for processing fee per application, data entry charges, processing of
application(s) opted for Demat, over printing of CAN/Refund order, preparation of refund data on magnetic tape,
hosting investor allotment/non allotment information on website, printing of bulk mailing register will be as per the
Memorandum of Understanding to be signed with the Company, copies of which will be available for inspection at our
registered office.
The Registrar will be reimbursed for all relevant out-of-pocket expenses including such as cost of stationery, postage,
stamp duty, communication expenses. Adequate funds will be provided to the Registrar to the Offering to enable them
to send fund orders or allotment advice by registered post/speed post/under certificate of posting.
Commission and Brokerage on Previous Issues
Since this is an initial public offer, no sum has been paid or is payable as commission or brokerage for subscribing to or
procuring or agreeing to procure subscription for any of our Equity Shares since our inception.
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Previous Rights and Public Issues
We have not made any previous rights and public issues except as stated in the section entitled “Capital Structure” on
page 22 of this Draft Red Herring Prospectus.
Outstanding Debentures or Bond Issues or Preference Shares
We have no outstanding debentures or bond issues or any preference shares, save and except for 69,828,750 CCRPS of
Rs.10 each issued to IFC. IFC has by its letter dated December 6, 2004, advised our Company that it has decided not to
exercise its conversion rights, but that it will instead opt for mandatory redemption in terms of Section 4.02(f)(i) of its
Subscription, Conversion and Redemption Agreement dated February 8, 2001 with our Company.
Capitalization of Reserves or Profits
We have not capitalized our reserves or profits at any time, except as stated in the section entitled “Capital Structure”
on page 22 of this Draft Red Herring Prospectus.
Issues otherwise than for Cash
Except as stated in “Capital Structure” on page 22 of this Draft Red Herring Prospectus, we have not issued any Equity
Shares for consideration otherwise than for cash.
Application in Offer
Equity Shares being issued through this Draft Red Herring Prospectus can be applied for in the dematerialized form
only.
Option to Subscribe in the Offer
IDFC is not our existing promoter or shareholder of our Company. As of the date of this Draft Red Herring Prospectus,
there are no outstanding warrants, options or rights to subscribe to our Equity Shares save and except for the conversion
right accorded to IDFC pursuant to the Subordinated Rupee Debt Agreement dated August 20, 2001 which IDFC has
conditionally waived pursuant to its letter dated December 17, 2004.
Purchase of Property
Except as disclosed in this Draft Red Herring Prospectus, there is no property which we have purchased or acquired or
propose to purchase or acquire which is to be paid for wholly, or in part, from the net proceeds of the present Offer or
the purchase or acquisition of which has not been completed on the date of this Draft Red Herring Prospectus, other
than property in respect of which:
• the contracts for the purchase or acquisition were entered into in the ordinary course of business, and the
contracts were not entered into in contemplation of the Offer nor is the Offer contemplated in consequence of
the contracts; or
• the amount of the purchase money is not material.
Remuneration of Executive Director
The salient features of the remuneration terms for Mr. Saroj Datta, Executive Director are detailed as under:
• Basic salary: Rs.1,92,500 per month;
• Other allowances not exceeding Rs.88,000 per month; and
• The Company to provide a suitable fully furnished four-bed room residential accommodation.
In addition to the above, other entitlements for our Executive Director includes a car with all expenses paid for,
telephone and telefax facilities, leave, medical and travel benefits in accordance with the Company’s rules and
regulations and provident fund, gratuity and such other retirement benefits.
The employment can be terminated either by our Executive Director or our Company by giving three months’ notice,
provided that the Company has the option of paying three months’ salary in lieu of notice.
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Remuneration of other Directors
There is no remuneration except sitting fees that is payable to the other Directors of our Company.
Interest of Promoters and Directors
Promoters
Tail Winds and Mr. Naresh Goyal are our promoters.
Mr. Goyal is an interested party in the currently subsisting contracts between the Company and the following promoter
group companies:
• Jetair Private Limited – GSA in India for the Company;
• Jet Enterprises Private Limited – licensor of trademarks to the Company;
• Jet Airways LLC, UAE – global GSA for the Company;
• Jet Airways of India Inc. – GSA in USA and Canada for the Company;
• India Jet Airways (Pty) Limited – GSA in South Africa for the Company; and
• Transmodal Service Private Limited – ground transport provider for the Company.
Tail Winds is an interested party in:
• The proceeds of the secondary sale; and
• any dividend and distributions made by the Company.
Tail Winds and/or Mr. Goyal will be interested parties to the extent of future contracts that we may enter into with any
promoter group companies.
Directors
All the Directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for
attending meetings of the Board or committee thereof. With regard to Mr. Saroj K. Datta, Executive Director, please
see “Statutory and Other Information - Remuneration of Executive Director” on page 168 of this Draft Red Herring
Prospectus.
The Directors may also be regarded as interested in the Equity Shares, if any, held by or that may be subscribed by and
allotted to the companies, firms and trusts, in which they are interested as directors, members, partners and/or trustees.
The following Directors are the interested to the extent of the contracts / relationship with the Company
• Mr. J.R. Gagrat is:
• a partner of the law firms of M/s. Gagrat & Co., in India and M/s. Gagrat and Gardi in Dubai who are
legal advisors to the Company; and
• Director on the board of Tail Winds.
• Mr. P.R.S. Oberoi as the Chairman of EIH Hotels Ltd., whose flight services division (Oberoi Flight Services)
is a catering supplier to the Company.
• Mr. Ali Ghandour, as a director on the board of Tail Winds.
• Mr. Victoriano P. Dungca, as a director on the board of Tail Winds and of Jet Airways of India, Inc.
• Mr. Saroj K. Datta, as a director on the board of Jetair Private Limited and Jet Enterprises Private Limited.
Revaluation of Assets
We have revalued our aircraft as on March 31, 2002, with reference to the then existing prices, in order to relate these
aircraft more closely to existing replacement values. The resulting appreciation aggregating to Rs.7,299.67 million has
been added to the gross block and the corresponding credit taken to the revaluation reserves. As of September 30, 2004,
the balance in the revaluation reserve was Rs.3,011.58 million.
Classes of Shares
Our authorized capital is Rs.2,000 million, which is divided into 130 million Equity Shares of Rs.10 each and 70
million preference shares of Rs.10 each.
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Payment or Benefit to Promoters or Officers of our Company
Except as stated otherwise in this Draft Red Herring Prospectus, no amount or benefit has been paid or given within the
two preceding years or is intended to be paid or given to our promoters or officers except the normal remuneration for
services rendered as Directors, officers or employees.
None of the beneficiaries of loans and advances, and sundry debtors are related to the Directors of the Company.
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MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF JET AIRWAYS (INDIA) LIMITED
Capitalized terms used in the section have the meaning given to such terms in the Articles of Association of our
Company. Note that capitalized terms used elsewhere in this Draft Red Herring Prospectus may be defined differently
than in this section.
Pursuant to Schedule II to the Companies Act, 1956, and the SEBI Guidelines, the main provisions of the Articles of
Association of Jet Airways (India) Limited are set forth below:
The regulations contained in Table “A” of Schedule I to the Companies Act (Act 1 of 1956) shall apply only in so far as
the same are not provided for or are inconsistent with these Articles and the regulations for the management of the
Company and for observance of the members thereof and their representatives shall, subject to any exercise of the
statutory powers of the Company with reference to repeal or alteration of or addition to, its regulations by Special
Resolution, as prescribed by the Companies Act, 1956, be such as are contained in these Articles.
NG means Mr. Naresh Goyal. The "NG Group" means NG, Tail Winds Limited and their respective affiliates(as
defined in our Articles), as the case may be.
Our Articles provide that, where the articles require that a decision is to be made or a right exercised by a member of
the NG Group, it is sufficient if that decision is taken by: (a) NG if he has capacity to act; or (b) any person who is
authorised to take such decisions on behalf of the NG Group and which person has been notified in writing to our
Company; or (c)failing (a) and (b) above, such members of the NG Group, who hold the majority of Shares of our
Company.
NAME PROTECTION
Article 3 provides that:
(a) Jet Enterprises has pursuant to certain trademark license agreements granted to the Company and the
Company has accepted from Jet Enterprises non-assignable, exclusive licenses to use certain trademarks on
the terms more particularly stipulated therein. Upon expiration or termination of any or all of these license
agreements, in accordance with their terms the Company will, inter alia, discontinue the use of the name and
the marks, and shall not thereafter use the same in any form or manner as a part of the Company’s corporate
name or trade name and shall change its name in such a manner as to delete the word “JET AIRWAYS” or its
logo or trademarks appearing in the name of the Company and:
(1) cease and desist from and discontinue the use of the word “JET AIRWAYS” or its logo as part of its
corporate name and/or its the trade name and from using all trademarks, service marks, copyrights,
domain names and designs bearing the name “JET AIRWAYS” or any variation thereof.
(2) take all steps as may be necessary for the purpose of changing its corporate name as aforesaid.
(3) undertake at all times that the Company’s corporate name shall not comprise of any word or
expression or logo or trademarks similar to the word “JET AIRWAYS” or its logo or any variation
thereof.
(4) assign any and all trademarks, service marks, copyrights, domain name and designs bearing the name
“JET AIRWAYS” to Jet Enterprises, at the Company’s cost.
(5) cancel and terminate all agreements, licenses and writings entered into with any Persons which relate
to any and all trademarks, service marks, copyrights, domain names and designs bearing the name
“JET AIRWAYS” at the Company’s cost .
(b) The Members will at all times exercise their voting rights to carry out and implement the provisions of this
Article.
(c) Without prejudice to any provisions contained in the Act, (including Sections 87 and 92(2) of the Act), the
Members further agree of their own free will and volition that they will at all times exercise their voting rights
to vote in favour of all resolutions if required to effectuate what is provided for by this Article.
(d) This Article shall be binding on both the Company and the Members and every Member shall be deemed to
have joined the Company on the foregoing basis.
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SHARE CAPITAL
Article 4 provides that:
(a) The Authorised Share Capital of the Company is Rs. 2000,000,000(Rupees Two Thousand Million only)
divided into 130,000,000 (One Hundred and Thirty Million) Equity Shares of Rs.10 (Rupees Ten only) each
and 70,000,000 (Seventy Million) Preference Shares of Rs.10 (Rupees Ten only) each.
(b) The Paid-up Share Capital shall be at all times a minimum of Rs.500,000 (Rupees Five Hundred Thousand
only) as required under the Act.
(c) The Company has power from time to time to increase its authorised or issued and Paid up Share Capital only
if the NG Group vote in favour of any or all such resolutions required to be passed.
(d) In the event it is permitted by law, the Share Capital of the Company may be classified into Shares with
differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such
conditions as may be prescribed.
(e) Subject to Article 4(d) all Shares shall be of the same class and shall be alike in all respects and the holders
thereof shall be entitled to identical rights and privileges including without limitation to identical rights and
privileges with respect to dividends, voting rights, and distribution of assets in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Company.
(f) The Company in General Meeting may from time to time by an Ordinary Resolution, increase the Capital by
the creation of new Shares, such increase to be of such aggregate amount and to be divided into Shares of such
respective amounts as the resolution shall prescribe. The new Shares shall be issued upon such terms and
conditions and with such rights and privileges annexed thereto, as by the General Meeting creating the same
shall be directed and if no direction be given by the General Meeting, as the Board shall determine; and, in
particular, such Shares may be issued with a preferential or qualified right to Dividends and in the distribution
of the assets of the Company and with a right of voting at General Meetings of the Company in conformity
with Sections 87 of the Act. Whenever the Capital of the Company has been increased under the provisions of
this Article, the Directors shall comply with the provisions of Section 97 of the Act.
(g) Except so far as otherwise provided by the conditions of issue or by these presents, any Capital raised by the
creation of new Shares, shall be considered as part of the existing Capital and shall be subject to the provisions
herein contained with reference to the payment of calls and instalments, forfeiture, lien, surrender, transfer and
transmission, voting and otherwise.
(h) All of the provisions of these Articles shall apply to all of the Members of the Company.
ADRs/GDRs
Article 8 provides that:
The Company shall, subject to the provisions of the Act, compliance with all applicable laws, rules and regulations and
the consent of the Board, have power to issue ADRs or GDRs on such terms and in such manner as the Board deems fit
including their conversion and repayment. Such terms may include, at the discretion of the Board, limitations on voting
by holders of ADRs or GDRs, including without limitation, exercise of voting rights in accordance with the directions
of the Board.
ALTERATION OF SHARE CAPITAL
Article 9 provides that:
The Company may, by Ordinary Resolution in General Meeting from time to time alter the conditions of its
Memorandum as follows, that is to say, it may:
(a) increase its Share Capital by such amount as it thinks fit and expedient by issuing new Shares of such amount
as may be deemed expedient and the new Shares shall be issued on such terms and conditions and with such
rights and privileges annexed thereto, as the General Meeting resolving upon the creation thereof, shall direct
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and if no direction be given, as the Board of Directors shall determine, and in particular such Shares maybe
issued with a preferential right to Dividends and in the distribution of the assets of the Company;
(b) consolidate and divide all or any of its Share Capital into Shares of larger amount than its existing Shares;
(c) convert all or any of its fully Paid up Shares into stock and reconvert that stock into fully Paid up Shares of
any denomination
(d) sub-divide its Shares, or any of them, into Shares of smaller amount than is fixed by the Memorandum, so
however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on
each reduced Share shall be the same as it was in the case of the Share from which the reduced Share is
derived;
(e) cancel Shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to
be taken by any person, and diminish the amount of its Share Capital by the amount of the Shares so
cancelled. A cancellation of Shares in pursuance of this Article shall not be deemed to be a reduction of Share
Capital within the meaning of the Act.
REDUCTION OF SHARE CAPITAL
Article 10 provides that:
The Company may (subject to the provisions of Sections 78, 80 and 100 to 105 [both inclusive] of the Act), from time
to time by Special Resolution, reduce its Capital, any Capital Redemption Reserve Account and the Securities Premium
Account in any manner for the time being authorised by law, and in particular, Capital may be paid off on the footing
that it may be called up again or otherwise. This Article is not to derogate any power the Company would have, if it
were omitted.
POWER OF COMPANY TO PURCHASE ITS OWN SHARES
Article 11 provides that:
Pursuant to a resolution of the Board of Directors, the Company may purchase its own Shares by way of a buy-back
arrangement, in accordance with Section 77A of the Act and the Securities and Exchange Board of India (Buy-Back of
Securities) Regulations, 1998, subject to compliance with all applicable Requirements of Law.
POWER TO MODIFY RIGHTS
Article 12 provides that:
Where, the Capital, by reason of the issue of Preference Shares or otherwise, is divided into different classes of Shares,
all or any of the rights and privileges attached to each class may, subject to the provisions of Sections 106 and 107 of
the Act, be modified, commuted, affected or abrogated or dealt with by agreement between the Company and any
Person purporting to contract on behalf of that class, provided the same is affected with the sanction of a Special
Resolution passed at a separate meeting of the holders of the issued Shares of that class and all the provisions hereafter
contained as to General Meetings (including the provisions relating to quorum at such meetings) shall mutatis mutandis
apply to every such meeting.
FURTHER ISSUE OF SHARES
Article 14 provides that:
(a) The Share Capital of the Company shall be in accordance with Requirements of Law, as in force from time to
time.
(b) Where it is proposed to increase the subscribed Capital of the Company by allotment of further Shares,
whether out of un-issued Share Capital or out of increased Share Capital, then such further Shares shall be
offered to the Persons who at the date of the offer are holders of the Shares of the Company, in proportion as
nearly as circumstances admit, to the Capital Paid up on those Shares at that date. Such offer shall made by a
notice specifying the number of Shares offered and limiting a time not being less than thirty days from the date
of the offer within which the offer if not accepted will be deemed to have been declined. After the expiry of
the time specified in the notice aforesaid or on receipt of earlier intimation from the person to whom such
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notice is given that he declined to accept the Shares offered, the Board may dispose of them in such manner as
they think most beneficial to the Company.
(c) The offer aforesaid shall be deemed to include a right exercisable by the Person concerned to renounce the
Shares offered to them in favour of any other Person and the notice issued in relation thereto shall contain a
statement of this right. PROVIDED THAT the Board may decline, without assigning any reason to allot any
Shares to any Person in whose favour any Member may renounce the Shares offered to him.
(d) Notwithstanding anything contained in the preceding sub-article, the Company may offer further shares to any
person or persons and such person or persons may or may not include the persons who at the date of the offer,
are the holders of the equity shares of the Company:
(i) by a special resolution to that effect is passed by the Company in General Meeting, or
(ii) where no such special resolution is passed, if the votes cast (whether on a show of hands or on a poll,
as the case may be) in favour of the proposal contained in the resolution moved in the General
Meeting (including the casting vote, if any, of the Chairman) by Members who, being entitled so to
do vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the
proposal by Members so entitled and voting and the Central Government is satisfied, on an
application made by the Board of Directors in this behalf, that the proposal is most beneficial to the
Company.
(e) Notwithstanding anything contained in sub-Article (b) above, but subject however, to Section 81(3) of the Act,
if applicable, the Company may increase its subscribed capital on exercise of an option attached to the
Debentures issued or loans raised by the Company to convert such Debentures or loans into Shares or to
subscribe for Shares in the Company.
(f) Notwithstanding anything contained in Section 79 of the Act, the Company may issue sweat equity shares in
accordance with the provisions of Section 79A of the Act.
(g) Nothing in sub-article (c) above shall be deemed:
(a) To extend the time within which the offer should be accepted; or
(b) To authorise any Person to exercise the right of renunciation for a second time, on the ground that the
Person in whose favour the renunciation was first made has declined to take the Shares comprised in
the renunciation.
(h) Nothing in this Article shall apply to the increase of the subscribed Capital of the Company caused by the
exercise of an option attached to the Debentures issued or loans raised by the Company:
(i) To convert such Debentures or loans into Shares in the Company; or
(ii) To subscribe for Shares in the Company (whether such option is conferred in these Articles or
otherwise).
PROVIDED THAT the terms of issue of such Debentures or the terms of such loans include a term providing
for such option and such term:
(a) Either has been approved by the Central Government before the issue of the Debentures or the raising
of the loans or is in conformity with Rules, if any, made by that Government in this behalf; and
(b) In the case of Debentures or loans or other than Debentures issued to or loans obtained from the
Government or any institution specified by the Central Government in this behalf, has also been
approved by a Special Resolution passed by the Company in General Meeting before the issue of the
Debentures or raising of the loans.
(i) Any issue of Shares or other Securities shall be in compliance with any applicable laws, regulations or
guidelines or any Requirements of Law to Persons who can acquire Securities of a company incorporated in
India and engaged in the air transport sector.
ISSUE OF NEW CERTIFICATE IN PLACE OF ONE DEFACED, LOST OR DESTROYED
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Article 16 provides that:
(a) If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back thereof for
endorsement of transfer, then upon production and surrender thereof to the Company, a new certificate may be
issued in lieu thereof, and if any certificate is lost or destroyed then upon proof thereof to the satisfaction of
the Company and on execution of such indemnity as the Company deem adequate, being given, a new
Certificate in lieu thereof shall be given to the Member entitled to such lost or destroyed Certificate. Every
Certificate under this Article shall be issued without payment of fees if the Directors so decide, or on payment
of such fees (not exceeding Rupees two for each certificate) as the Directors shall prescribe, provided that no
fee shall be charged for issue of a new certificate in replacement of those which are old, defaced or worn out
or where there is no further space on the back thereof for endorsement of transfer.
Provided that, notwithstanding what is stated above, the Directors shall comply with such rules or regulations
or requirements of any stock exchange or the rules made under the Act or the rules made under the Securities
Contracts (Regulation) Act, 1956 or any other act or rules applicable in this behalf.
(b) The provisions of this Article shall mutatis mutandis apply to Debentures and other Securities of the Company.
(c) When a new share certificate has been issued in pursuance of sub-article (a) of this Article, it shall state on the
face of it and against the stub or counterfoil to the effect that it is “Duplicate issued in lieu of Shares
Certificate No. …….. ” or “Issued in lieu of Share Certificate No. …… Sub-divided/replaced/on
consolidation of Shares” as the case may be. The word “Duplicate” shall be stamped or punched in bold letters
across the face of the Share Certificate.
(d) Where a new share certificate has been issued in pursuance of sub-articles (a) or (b) of this Article, particulars
of every such share certificate shall be entered in a Register of Renewed and Duplicate Certificates indicating
against the name of the Member to whom the certificate is issued, the number and date of issue of the share
certificate in lieu of which the new certificate is issued and the necessary charges indicated in the Register of
Members by suitable cross reference in the “Remarks” column.
(e) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on
the authority of a Resolution of the Board. The blank forms shall be consecutively machine–numbered and the
forms and the blocks, engravings, facsimiles and hues relating to the printing of such forms shall be kept in the
custody of the Secretary or of such other person as the Board may appoint for the purpose; and the Secretary
or the other person aforesaid shall be responsible for rendering an account of these forms to the Board.
(f) The Managing Director or the Executive Director of the Company for the time being or if the Company has no
Managing Director or the Executive Director, every Director of the Company shall be responsible for the
maintenance, preservation and safe custody of all books and documents relating to the issue of share
certificates except the blank forms of the Share certificate referred to in sub-article (e) of this Article.
(g) All books referred to in sub-article (f) of this Article, shall be preserved in good order permanently.
(h) If any Share stands in the names of two or more Members, the Member first named in the Register of
Members shall as regards receipt of Dividends or bonus, or service of notices and all or any other matters
connected with the Company except voting at Meetings and the transfer of Shares, be deemed the sole holder
thereof, but the joint holders of a Share shall be severally as well as jointly liable for the payment of all
installments and calls due in respect of such Shares, and for all incidents thereof according to these Articles.
(i) Except as ordered by a Court of competent jurisdiction or as by law required, the Company shall be entitled to
treat the Member whose name appears on the Register of Members as the holder of any Share or whose name
appears as the Beneficial Owner of Shares in the records of the Depository, as the absolute owner thereof and
accordingly shall not be bound to recognise any benami, trust or equity or equitable, contingent or other claim
to or interest in such Share on the part of any other Person whether or not he shall have express or implied
notice thereof. The Board shall be entitled at their sole discretion to register any Shares in the joint names of
any two or more Persons or the survivor or survivors of them.
CALLS
Article 19 provides that:
(a) Subject to the provisions of Section 91 of the Act, the Board may, from time to time, subject to the terms on
which any Shares may have been issued and subject to the conditions of allotment, by a resolution passed at a
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meeting of the Board, (and not by circular resolution), make such call as it thinks fit upon the Members in
respect of all moneys unpaid on the Shares held by them respectively and each Member shall pay the amount
of every call so made on him to the Person or Persons and at the times and places appointed by the Board. A
call may be made payable by installments.
(b) Thirty days notice in writing at the least of every call (otherwise than on allotment) shall be given by the
Company specifying the time and place of payment and if payable to any Person other than the Company, the
name of the person to whom the call shall be paid, provided that before the time for payment of such call the
Board may by notice in writing to the Members revoke the same.
(c) A call shall be deemed to have been made at the time when the resolution of the Board authorising such call
was passed and may be made payable by the Members whose names appear on the Register of Members on
such date or at the discretion of the Board on such subsequent date as shall be fixed by the Board.
(d) A call may be revoked or postponed at the discretion of the Board.
(e) The joint holder of a Share shall be jointly and severally liable to pay all installments and calls due in respect
thereof.
(f) The Board may, from time to time at its discretion, extend the time fixed for the payment of any call and may
extend such time as to all or any of the Members who, from residence at a distance or other cause the Board
may deem fairly entitled to such extension; but no Members shall be entitled to such extension save as a matter
of grace and favour.
(g) If any Member or allottee fails to pay the whole or any part of any call or installment, due from him on the day
appointed for payment thereof, or any such extension thereof as aforesaid, he shall be liable to pay interest on
the same from the day appointed for the payment thereof to the time of actual payment at such rate as shall
from time to time be fixed by the Board but nothing in this Article shall render it obligatory for the Board to
demand or recover any interest from any such Member.
(h) Any sum, which by the terms of issue of a Share or otherwise, becomes payable on allotment or at any fixed
date or by installments at a fixed time whether on account of the nominal value of the Share or by way of
premium shall for the purposes of these Articles be deemed to be a call duly made and payable on the date on
which by the terms of issue or otherwise the same became payable, and in case of non-payment, all the
relevant provisions of these Articles as to payment of call, interest, expenses, forfeiture or otherwise shall
apply as if such sum became payable by virtue of a call duly made and notified.
(i) On the trial or hearing of any action or suit brought by the Company against any Member or his Legal
Representatives for the recovery of any money claimed to be due to the Company in respect of his Shares, it
shall be sufficient to prove that the name of the Member in respect of whose Shares the money is sought to be
recovered appears entered on the Register of Members as the holder, or one of the holders at or subsequently
to the date at which the money sought to be recovered is alleged to have become due on the Shares in respect
of which such money is sought to be recovered; that the resolution making the call is duly recorded in the
minute book; and that notice of such call was duly given to the Member or his representatives so sued in
pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made
such call nor that a quorum of Directors was present at the Board at which any call was made, nor that the
meeting at which any call was made was duly convened or constituted nor any other matters whatsoever; but
the proof of the matters aforesaid shall be conclusive evidence of the debt.
(j) Neither a judgment or decree in favour of the Company for calls, nor the receipt by the Company of a portion
of any money which shall from time to time be due from any Member to the Company in respect of his Shares,
either by way of principal or interest, nor any indulgence granted by the Company in respect of the payment of
any such money shall preclude the Company from thereafter proceeding to enforce a forfeiture of such Shares
as hereinafter provided.
(k) The Board may, if it thinks fit (subject to the provisions of Section 92 of the Act) agree to and receive from
any Member willing to advance the same, the whole or any part of the amounts due upon the Shares held by
him beyond the sums actually called up, and upon the amount so paid or satisfied in advance or upon so much
thereof as from time to time and at any time thereafter as exceeds the amount of the calls then made upon and
due in respect of the Shares in respect of which such advance has been made, the Board may pay interest , as
the Member paying such sum in advance and the Board agree upon. The Board may agree to repay at any time
any amount so advanced or may at any time repay the same upon giving to the Member three (3) months
notice in writing. Provided that the money paid in advance of calls on any Shares may carry interest but shall
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not in respect thereof confer a right to participate in profits or dividend. The Directors may at any time repay
the amount so advanced.
(l) No Member paying any such sum in advance shall be entitled to voting rights in respect of the moneys so paid
by him until the same would but for such payment, become presently payable.
(m) The provisions of these Articles shall mutatis mutandis apply to the calls on Debentures of the Company.
COMPANY’S LIEN ON SHARES:
Article 20 provides that:
(a) The Company shall have a first and paramount lien upon all the Shares/Debentures (other than fully paid-up
Shares/Debentures) registered in the name of each Member (whether solely or jointly with others) and upon
the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time
in respect of such Shares/Debentures and no equitable interest in any Share shall be created except upon the
condition that this Article will have full effect, and such lien shall extend to all Dividends and bonuses from
time to time declared in respect of such Shares and interest in respect of Debentures. Unless otherwise agreed,
the registration of a transfer of Shares/Debentures shall operate as a waiver of the Company’s lien, if any, on
such Shares/Debentures. The Directors may at any time declare any Shares/Debentures wholly or in part to be
exempt from the provisions of this Article.
(b) For the purpose of enforcing such lien the Board may sell the Shares subject thereto in such manner as they
shall think fit, and for that purpose may cause to be issued a duplicate certificate in respect of such Shares and
may authorise one of their number to execute a transfer thereof on behalf of and in the name of such Member.
No sale shall be made until such period as aforesaid shall have elapsed and until notice in writing of the
intention to sell shall have been served on such Member or his Legal Representative, and default shall have
been made by him or them in payment, fulfillment, or discharge of such debts, liabilities or engagements for
fourteen days after such notice.
(c) The net proceeds of any such sale shall be received by the Company and applied in or towards payment of
such part of the amount in respect of which the lien exists as is presently payable and the residue if any
shall(subject to a like lien for sums not presently payable as existed upon the Shares before the sale)be paid to
the Person entitled to the Shares at the date of the sale.
FORFEITURE OF SHARES
Article 21 provides that:
(a) If any Member fails to pay any call or installment or any part thereof or any money due in respect of any
Shares either by way of principal or interest on or before the day appointed for the payment of the same or any
such extension thereof as aforesaid, the Board may, at any time thereafter, during such time as the call or
installment or any part thereof or other moneys remain unpaid or a judgment or decree in respect thereof
remain unsatisfied, give notice to him or his Legal Representatives requiring him to pay the same together
with any interest that may have accrued and all expenses that may have been incurred by the Company by
reason of such non-payment.
(b) The notice shall name a day, (not being less than fourteen days from the date of the notice), and a place or
places on or before which such call or installment or such part or other moneys as aforesaid and interest
thereon, (at such rate as the Board shall determine and payable from the date on which such call or installment
ought to have been paid), and expenses as aforesaid are to be paid. The notice shall also state that in the event
of non-payment at or before the time and at the place appointed, the Shares in respect of which the call was
made or installment is payable, will be liable to be forfeited.
(c) If the requirements of any such notice as aforesaid shall not be complied with, any Share in respect of which
such notice has been given, may at any time thereafter before payment of all calls, installments, other moneys
due in respect thereof, interest and expenses as aforesaid, be forfeited by a Resolution of the Board to that
effect. Such forfeiture shall include all Dividends declared or any other moneys payable in respect of the
forfeited Share and not actually paid before the forfeiture.
(d) When any Share shall have been so forfeited, notice of the forfeiture shall be given to the Member in whose
name it stood immediately prior to the forfeiture or if any of his Legal Representatives or to any of the Persons
entitled to the Shares by transmission, and an entry of the forfeiture with the date thereof, shall forthwith be
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made in the Register of Members, but no forfeiture shall be in any manner invalidated by any omission or
neglect to give such notice or to make any such entry as aforesaid.
(e) Any Share so forfeited shall be deemed to be the property of the Company and may be sold, re-allotted, or
otherwise disposed of either to the original holder thereof or to any other Person upon such terms and in such
manner as the Board shall think fit.
(f) Any Member whose shares have been forfeited shall, not withstanding the forfeiture, be liable to pay and shall
forthwith pay to the Company on demand all calls, amounts, installments, interest and expenses and other
moneys owing upon or in respect of such Shares at the time of the forfeiture together with interest thereon
from the time of the forfeiture until payment at such rate. as the Board may determine and the Board may
enforce, (if it thinks fit), payment thereof as if it were a new call made at the date of forfeiture.
(g) The forfeiture of a Share shall involve extinction at the time of the forfeiture of all interest in all claims and
demands against the Company, in respect of the Share and all other rights incidental to the Share, except only
such of these rights as by these Articles are expressly saved.
(h) A declaration in writing that the declarant is a Director or Secretary of the Company and that a Share in the
Company has been duly forfeited in accordance with these Articles on a date stated in the declaration, shall be
conclusive evidence of the facts therein stated as against all Persons claiming to be entitled to the Shares.
(i) Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers hereinbefore given,
the Board may appoint some Person to execute an instrument of transfer of the Shares sold and cause the
purchaser’s name to be entered in the Register of Members in respect of the Shares sold and the purchaser
shall not be bound to see to the regularity of the proceedings, or to the application of the purchase money, and
after his name has been entered in the Register of Members in respect of such Shares, the validity of the sale
shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages
only and against the Company exclusively.
(j) Upon any sale, re-allotment or other disposal under the provisions of the preceding Articles, the certificate or
certificates originally issued in respect of the related Shares shall, (unless the same shall on demand by the
Company have been previously surrendered to it by the defaulting Member), stand cancelled and become null
and void and of no effect and the Board shall be entitled to issue a new certificate or certificates in respect of
the said Shares to the person or persons entitled thereto.
(k) The Board may at any time before any Share so forfeited shall have been sold, re-allotted or otherwise
disposed of, annul the forfeiture thereof upon such conditions as it thinks fit.
TRANSFER AND TRANSMISSION OF SHARES
Article 22 provides that:
(a) The Company shall keep a “Register of Transfers” and shall have recorded therein fairly and distinctly
particulars of every transfer or transmission of any Share, Debenture or other Security held in a material form.
(b) Every instrument of transfer of Shares shall be in writing in the usual common form or in such form as may be
prescribed under Section 108 of the Act and shall be delivered to the Company within such time as may be
prescribed under the Act.
(c) (1) An application for the registration of a transfer of the Shares in the Company may be made either by
the transferor or the transferee.
(2) Where the application is made by the transferor and relates to partly paid Shares, the transfer shall not
be registered unless the Company gives notice of the application to the transferee and the transferee
makes no objection to the transfer within two weeks from the receipt of the notice.
(d) Every such instrument of transfer shall be executed both by the transferor and the transferee and attested and
the transferor shall be deemed to remain the holder of such Share until the name of the transferee shall have
been entered in the Register of Members in respect thereof.
(e) The Board shall have power on giving not less than seven days previous notice by advertisement in a
newspaper circulating in the city, town or village in which the Office of the Company is situated to close the
transfer books, the Register of Members and/or Register of Debenture-holders at such time or times and for
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such period or periods, not exceeding thirty days at a time and not exceeding in the aggregate forty-five days
(45) in each year, as it may deem expedient.
(f) Subject to the provisions of Sections 111 and 111A of the Act, or any statutory modification of the said
provisions for the time being in force and any other Requirements of Law, the Board may, at its own absolute
and uncontrolled discretion and without assigning any reason, decline to register or acknowledge any transfer
of Shares and in particular may so decline in any case in which (i) the proposed transferee is a Person who is
not permitted by any applicable law, regulation or guideline or any Requirements of Law, to acquire securities
of a company incorporated in India and engaged in the air transport sector or (ii) if the Company has a lien
upon the Shares or any of them or (iii) whilst any moneys in respect of the Shares desired to be transferred or
any of them has remained unpaid or not or unless the transferee is approved by the Board and such refusal
shall not be affected by the fact that the proposed transferee is already a Member. But in such cases it shall,
within one (1) month from the date on which the instrument of transfer was lodged with the Company send to
the transferee and the transferor notice of refusal to register such transfer. The registration of a transfer shall be
conclusive evidence of the approval of the Board of the transferee.
Provided that registration of a transfer shall not be refused on the ground of the transferor being either alone or
jointly with any other Person or Persons indebted to the Company on any account whatsoever except where
the Company has a lien on Shares.
(g) Subject to the provisions of the Act and these Articles, the Directors shall have the absolute and uncontrolled
discretion to refuse to register a Person entitled by transmission to any Shares or his nominee as if he were the
transferee named in any ordinary transfer presented for registration, and shall not be bound to give any reason
for such refusal and in particular may also decline in respect of Shares upon which the Company has a lien.
(h) Transfer of Shares in whatever lot should not be refused, though there would be no objection to the Company
refusing to split a share certificate into several scrips of any small denominations or to consider a proposal for
transfer of Shares comprised in a share certificate to several Members, involving such splitting, if on the face
of it such splitting/transfer appears to be unreasonable or without a genuine need. The Company should not,
therefore, refuse transfer of Shares in violation of the stock exchange listing requirements on the ground that
the number of Shares to be transferred is less than any specified number.
(i) In the case of the death of any one or more of the Members named in the Register of Members as the joint-
holders of any Share, the survivors shall be the only Member or Members recognized by the Company as
having any title to or interest in such Share, but nothing herein contained shall be taken to release the estate of
a deceased joint-holder from any liability on Shares held by him jointly with any other Person.
(j) The Executors or Administrators or holder of the Succession Certificate or the Legal Representatives of a
deceased Member, (not being one of two or more joint-holders), shall be the only Members recognized by the
Company as having any title to the Shares registered in the name of such Member, and the Company shall not
be bound to recognize such Executors or Administrators or holders of Succession Certificate or the Legal
Representatives unless such Executors or Administrators or Legal Representatives shall have first obtained
Probate or Letters of Administration or Succession Certificate, as the case may be, from a duly constituted
court in the Union of India, provided that the Board may in its absolute discretion dispense with production of
Probate or Letters of Administration or Succession Certificate, upon such terms as to indemnity or otherwise
as the Board may in its absolute discretion deem fit and may under these Articles register the name of any
Person who claims to be absolutely entitled to the Shares standing in the name of a deceased Member, as a
Member.
(k) The Board shall not knowingly issue or register a transfer of any share to a minor or insolvent or Person of
unsound mind.
(l) Subject to the provisions of Articles, any Person becoming entitled to Shares in consequence of the death,
lunacy, bankruptcy of any Member or Member, or by any lawful means other than by a transfer in accordance
with these Articles, may with the consent of the Board, (which it shall not be under any obligation to give),
upon producing such evidence that he sustains the character in respect of which he proposes to act under this
Article, or of his title, as the Board thinks sufficient, either be registered himself as the holder of the Shares or
elect to have some Person nominated by him and approved by the Board, registered as such holder; provided
nevertheless, that if such Person shall elect to have his nominee registered, he shall testify the election by
executing in favour of his nominee an instrument of transfer in accordance with the provisions herein
contained and until he does so, he shall not be freed from any liability in respect of the Shares.
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(m) A Person becoming entitled to a Share by reason of the death or insolvency of a Member shall be entitled to
the same Dividends and other advantages to which he would be entitled if he were the registered holder of the
Shares, except that he shall not, before being registered as a Member in respect of the Shares, be entitled to
exercise any right conferred by membership in relation to meetings of the Company; PROVIDED THAT the
Directors shall, at any time, give notice requiring any such Person to elect either to be registered himself or to
transfer the Shares, and is the notice is not complied with within ninety days, the Directors may thereafter
withhold payment of all Dividends, bonuses or other moneys payable in respect of the Shares until the
requirements of the notice have been complied with.
Every instrument of transfer shall be presented to the Company duly stamped for registration accompanied by
such evidence as the Board may require to prove the title of the transferor, his right to transfer the Shares and
every registered instrument of transfer shall remain in the custody of the Company until destroyed by order of
the Board.
(o) In case of transfer and transmission of Shares or other marketable securities where the Company has not
issued any certificates and where such Shares or Securities are being held in any electronic and fungible form
in a Depository, the provisions of the Depositories Act, 1996 shall apply.
(p) Before the registration of a transfer, the certificate or certificates of the Share or Shares to be transferred must
be delivered to the Company along with (save as provided in Section 108 of the Act) a properly stamped and
executed instrument of transfer.
(q) No fee shall be payable to the Company, in respect of the transfer or transmission of Shares, or for registration
of any power of attorney, probate, letters of administration and succession certificate, certificate of death or
marriage or other similar documents.
(r) The Company shall incur no liability or responsibility whatsoever in consequence of its registering or giving
effect to any transfer of Shares made or purporting to be made by any apparent legal owner thereof, (as shown
or appearing in the Register of Members), to the prejudice of a Person or Persons having or claiming any
equitable right, title or interest to or in the said Shares, notwithstanding that the Company may have had any
notice of such equitable right, title or interest or notice prohibiting registration of such transfer, and may have
entered such notice or referred thereto, in any book of the Company and the Company shall not be bound or
required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or
interest or be under any liability whatsoever for refusing or neglecting so to do, though it may have been
entered or referred to in some book of the Company but the Company shall nevertheless be at liberty to regard
and attend to any such notice, and give effect thereto if the Board shall so think fit.
(s) The provision of these Articles shall subject to the provisions of the Act and any requirements of law mutatis
mutandis apply to the transfer or transmission by operation of law to other Securities of the Company.
DEMATERIALISATION OF SECURITIES
Article 23 provides that:
(a) Dematerialisation: Notwithstanding anything contained in these Articles, the Company shall be entitled to
dematerialise its existing Securities, rematerialise its Securities held in the Depositories and/or to offer its fresh
Securities in a dematerialised form pursuant to the Depositories Act, and the rules framed thereunder, if any.
(b) Options for Investors: Subject to Section 68B of the Act, every Person subscribing to Securities offered by the
Company shall have the option to receive security certificates or to hold the Securities with a Depository. Such
a Person who is the Beneficial Owner of the Securities can at any time opt out of a Depository, if permitted by
law, in respect of any Securities in a manner provided by the Depositories Act, and the Company shall, in the
manner and within the time prescribed, issue to the Beneficial Owner the required Certificate of Securities.
If a Person opts to hold his Securities with a Depository, the Company shall intimate such Depository the
details of allotment of the Securities and on receipt of the information, the Depository shall enter in its record
the name of the allottee as the Beneficial Owner of the Securities.
(c) Securities in Depositories to be in fungible form: All Securities held by a Depository shall be dematerialized
and be in fungible form. Nothing contained in Sections 153, 153A, 153B, 187B, 187C and 372A of the Act
shall apply to a Depository in respect of the Securities held by it on behalf of the Beneficial Owners.
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(d) Rights of Depositories & Beneficial Owners:
(i) Notwithstanding anything to the contrary contained in the Act or these Articles, a Depository shall be
deemed to be the Registered Owner for the purposes of effecting transfer of ownership of Securities
on behalf of the Beneficial Owner.
(ii) Save as otherwise provided in (i) above, the Depository as the Registered Owner of the Securities
shall not have any voting rights or any other rights in respect of the Securities held by it.
(iii) Every person holding Shares of the Company and whose name is entered as the Beneficial Owner in
the records of the Depository shall be deemed to be a Member of the Company.
(iv) The Beneficial Owner of Securities shall, in accordance with the provisions of these Articles and the
Act, be entitled to all the rights and subject to all the liabilities in respect of his Securities, which are
held by a Depository.
(e) Service of Documents: Notwithstanding anything contained in the Act or these Articles to the contrary, where
Securities are held in a Depository, the records of the Beneficial Ownership may be served by such Depository
on the Company by means of electronic mode or by delivery of floppies or discs.
(f) Transfer of Securities:
(i) Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of Securities
effected by transferor and transferee both of whom are entered as Beneficial Owners in the records of
a Depository.
(ii) In the case of transfer or transmission of Shares or other marketable Securities where the Company
has not issued any certificates and where such Shares or Securities are being held in any electronic or
fungible form in a Depository, the provisions of the Depositories Act shall apply.
(g) Allotment of Securities dealt with in a Depository: Notwithstanding anything in the Act or these Articles,
where Securities are dealt with by a Depository, the Company shall intimate the details of allotment of
relevant Securities thereof to the Depository immediately on allotment of such Securities.
(h) Certificate No. Etc. of Securities in Depository: Nothing contained in the Act or these Articles regarding the
necessity of having certificate number/distinctive numbers for Securities issued by the Company shall apply to
Securities held with a Depository.
(i) Register and Index of Beneficial Owners: The Register and Index of Beneficial Owners maintained by a
Depository under the Depositories Act, shall be deemed to be the Register and Index (if applicable) of
Members and Security-holders for the purposes of these Articles.
NOMINATION OF SHARES
Article 24 provides that:
(1) Every holder of Shares in, or holder of Debentures of, the Company may, at any time, nominate, in the manner
prescribed under the Act, a Person to whom his Shares in, or Debentures of, the Company shall vest in the
event of his death.
(2) Where the Shares in, or Debentures of, the Company are held by more than one Person jointly, the joint
holders may together nominate, in the manner prescribed under the Act, a Person to whom all the rights in the
Shares or Debentures of the Company shall vest in the event of death of all the joint holders.
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether
testamentary or otherwise, in respect of such Shares in or Debentures of, the Company, where a nomination
made in the manner prescribed under the Act, purports to confer on any Person the right to vest the Shares in,
or Debentures of, the Company, the nominee shall, on the death of the Member or debenture holder of the
Company or, as the case may be, on the death of the joint holders become entitled to all the rights in the Shares
or Debentures of the Company or, as the case may be, all the joint holders, in relation to such Shares or
Debentures of the Company to the exclusion of all other persons, unless the nomination is varied or cancelled
in the prescribed manner under the Act.
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(4) Where the nominee is a minor, the holder of the Shares or Debentures concerned, can make the nomination to
appoint in prescribed manner under the Act, any Person to become entitled to the Shares or Debentures of the
Company in the event of his death, during the minority.
TRANSMISSION IN CASE OF NOMINATION
Article 25 provides that:
(1) Notwithstanding anything contained in other Articles, any Person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, 1956, upon the production of such evidence as may be
required by the Board and subject as hereinafter provided, elect either:-
(a) to be registered himself as holder of the Share or Debenture, as the case may be, or
(b) to make such transfer of the Share or Debenture, as the case may be, as the deceased shareholder or
debenture holder, as the case may be, could have made.
(2) If the person being a nominee, so becoming entitled, elects to be registered as holder of the Share or
Debenture, himself, as the case may be, he shall deliver or send to the Company a notice in writing signed by
him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased
Member or debentureholder, as the case may be.
(3) All the limitations, restrictions and provisions of the Act relating to the right to transfer and the registration or
transfer of Shares or Debentures shall be applicable to any such notice or transfer as aforesaid as if the death of
the Member had not occurred and the notice or transfer where a transfer signed by that Member or
debentureholder, as the case may be.
(4) A Person, being a nominee, becoming entitled to a Share or Debenture by reason of the death of the holder
shall be entitled to the same Dividends and other advantages to which he would be entitled if he were the
registered holder of the Share or Debenture except that he shall not, before being registered a Member in
respect of his Share or Debenture, be entitled in respect of it to exercise any right conferred by membership in
relation to meetings of the Company.
Provided that the Board may, at any time, give notice requiring any such Person to elect either to be registered
himself or to transfer the Share or Debenture, and if the notice is not complied with within ninety days, the
Board may thereafter withhold payment of all Dividends, bonuses or other moneys payable in respect of the
Share or Debenture until the requirements of the notice have been complied with.
NOMINATION FOR FIXED DEPOSITS
Article 26 provides that:
A depositor may, at any time, make a nomination and the provisions of Sections 109A and 109B shall, as far as may be,
apply to the nominations made pursuant to the provisions of Sections 58A(11) of the Act.
NOMINATION IN CERTAIN OTHER CASES
Article 27 provides that:
Subject to the provisions of the Act and these Articles, any person becoming entitled to Shares in consequence of the
death, lunacy, bankruptcy or insolvency of any Member, or by any lawful means other than by a transfer in accordance
with these Articles, may, with the consent of the Board (which it shall not be under any obligation to give), upon
producing such evidence that he sustains the character in respect of which he proposes to act under this Article or of
such title as the Board thinks sufficient, either be registered himself as the holder of the Shares or elect to have some
Person nominated by him and approved by the Board registered as such holder; provided nevertheless that, if such
Person shall elect to have his nominee registered, he shall testify the election by executing in favour of his nominee an
instrument of transfer in accordance with the provisions herein contained and until he does so, he shall not be freed
from any liability in respect of the Shares.
RESTRICTED RIGHT OF TRANSFER
Article 28 provides that:
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No Person shall exercise any rights or privileges of Members until he shall have paid all sums (whether in respect of
call or otherwise) for the time being due in respect of the Shares held by him or due in any manner whatsoever to the
Company.
MANAGEMENT OF COMPANY’S AFFAIRS
Article 33 provides that:
Subject to the provisions of the Act and these Articles, the entire management of the Company’s affairs including all
decisions and resolutions shall be entrusted by the Members of the Company to its Board of Directors. All matters
arising at a meeting of the Board of Directors, other than those otherwise specified in these Articles if any shall be
decided by a majority vote, subject to any casting vote of the Chairman in the event of a tie.
REQUISITION OF EXTRAORDINARY GENERAL MEETING
Article 38 provides that:
(a) The Board may, whenever it thinks fit, call an Extraordinary General Meeting and it shall do so upon a
requisition in writing by any two Directors or by any Member or Members holding in the aggregate not less
than one-tenth of such of the Paid-up Share Capital as at that date carries the right of voting in regard to the
matter in respect of which the requisition has been made, and such meeting shall be held at the Office of the
Company or at such place and at such time as the Board thinks fit.
(b) Any valid requisition so made by Members must state the object or objects of the meeting proposed to be
called, and must be signed by the requisitionists and be deposited at the Office; provided that such requisition
may consist of several documents in like form each signed by one or more requisitionists.
(c) Upon the receipt of any such requisition, the Board shall forthwith call an Extraordinary General Meeting and
if they do not proceed within twenty-one days from the date of the requisition being deposited at the Office to
cause a meeting to be called on a day not later than forty-five days from the date of deposit of the requisition,
the requisitionists or such of their number as represent either a majority in value of the Paid-Up Share Capital
held by all of them or not less than one-tenth of such of the Paid-up Share Capital of the Company as is
referred to in Section 169(4) of the Act, whichever is less, may themselves call the Meeting, but in either case
any Meeting so called shall be held within three months from the date of the delivery of the requisition as
aforesaid.
(d) Any Meeting called under the foregoing sub-Articles by the requisitionists, shall be called in the same manner,
as nearly as possible, as that in which a Meeting is to be called by the Board.
(e) The accidental omission to give any such notice as aforesaid to any of the Members, or the non-receipt thereof,
shall not invalidate any resolution passed at any such Meeting.
(f) No General Meeting, Annual or Extraordinary, shall be competent to enter into, discuss or transact any
business which has not been mentioned in the notice or notices by which it was convened.
NO BUSINESS TO BE TRANSACTED IN GENERAL MEETING IF QUORUM IS NOT PRESENT
Article 39 provides that:
(a) Five Members present in person (who shall include the authorized representatives of the NG Group) shall be
the quorum.
(b) Notwithstanding what is stated in Article 39(a) above, the NG Group may by notice in writing waive the
requirement of the presence of its representative for the purpose of constituting a valid quorum in respect of a
General Meeting.
CHAIRMAN OF THE GENERAL MEETING
Article 41 provides that:
(a) NG shall be the Chairman of every General Meeting so long as he is willing to be a Director and the Chairman
of the Company. In the absence of NG at any General Meeting, one of the NG Group Nominees shall preside
at such Meeting as the Chairman of such General Meeting.
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(b) If for any reason NG is unable to continue as the Chairman of the Company, then the Chairman of the Board
shall be the Chairman of every General Meeting. In the absence of the Chairman of the Board at any General
Meeting, one of the NG Group Nominees shall preside at such Meeting as the Chairman of that General
Meeting. No business shall be discussed at any General Meeting except the election of a Chairman while the
chair is vacant.
CHAIRMAN CAN ADJOURN THE GENERAL MEETING
Article 42 provides that:
The Chairman may adjourn the General Meeting from time to time and from place to place within the city, town or
village in which the Office of the Company is situate but no business shall be transacted at any adjourned meeting other
than the business left unfinished at the meeting from which the adjournment took place.
QUESTIONS AT GENERAL MEETING HOW DECIDED
Article 43 provides that:
(a) At any General Meeting, a resolution put to the vote of the Meeting shall, unless a poll is demanded, be
decided on a show of hands. Before or on the declaration of the result of the voting on any resolution on a
show of hands, a poll may be ordered to be taken by the Chairman of the Meeting of his own motion and shall
be ordered to be taken by him on a demand made in that behalf by any Member or Members present in person
or by proxy and holding shares in the Company which confer a power to vote on the resolution not being less
than one-tenth of the total voting power in respect of the resolution, or in which an aggregate sum of not less
than fifty thousand rupees has been Paid-up. Unless a poll is demanded, a declaration by the Chairman that a
resolution has, on a show of hands, been carried or carried unanimously, or by a particular majority, or lost
and an entry to that effect in the Minute Book of the Company shall be conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded in favour of or against that resolution.
(b) In the case of an equality of votes, the Chairman shall both on a show of hands and at a poll, (if any), have a
casting vote in addition to the vote or votes to which he may be entitled as a Member.
(c) If a poll is demanded as aforesaid, the same shall subject to anything stated in these Articles be taken at such
time, (not later than forty-eight hours from the time when the demand was made), and place within the City,
Town or Village in which the Office of the Company is situate and either by a show of hands or by ballot or
by postal ballot, as the Chairman shall direct and either at once or after an interval or adjournment, or
otherwise and the result of the poll shall be deemed to be the decision of the Meeting at which the poll was
demanded. Any business other than that upon which a poll has been demanded may be proceeded with,
pending the taking of the poll. The demand for a poll may be withdrawn at any time by the Person or Persons
who made the demand.
(d) Where a poll is to be taken, the Chairman of the Meeting shall appoint two scrutineers to scrutinise the votes
given on the poll and to report thereon to him. One of the scrutineers so appointed shall always be a Member,
(not being an officer or employee of the Company), present at the Meeting provided such a Member is
available and willing to be appointed. The Chairman shall have power at any time before the result of the poll
is declared, to remove a scrutineer from office and fill vacancies in the office of scrutineer arising from such
removal or from any other cause.
(e) Any poll duly demanded on the election of a Chairman of a Meeting or any question of adjournment, shall be
taken at the Meeting forthwith.
(f) The demand for a poll except on the question of the election of the Chairman and of an adjournment shall not
prevent the continuance of a Meeting for the transaction of any business other than the question on which the
poll has been demanded.
(g) No report of the proceedings of any General Meeting of the Company shall be circulated or advertised at the
expense of the Company unless it includes the matters required by these Articles or Section 193 of the Act to
be contained in the Minutes of the proceedings of such Meeting.
(h) The Members will do nothing to prevent the taking of any action by the Company or act contrary to or with
the intent to evade or defeat the terms as contained in these Articles.
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VOTES OF MEMBERS
Article 44 provides that:
(a) No Member shall be entitled to vote either personally or by proxy at any General Meeting or Meeting of a
class of Members either upon a show of hands or upon a poll in respect of any Shares registered in his name
on which calls or other sums presently payable by him have not been paid or in regard to which the Company
has exercised any right of lien.
(b) Subject to the provisions of these Articles, without prejudice to any special privilege or restrictions as to
voting for the time being attached to any class of shares for the time being forming a part of the Capital of the
Company, every Member not disqualified by the last preceding Article, shall be entitled to be present, and to
speak and vote at such Meeting, and on a show of hands, every Member present in person shall have one vote
and upon a poll, the voting right of such Member present, either in person or by proxy, shall be in proportion
to his share of the Paid Up Share Capital of the Company held alone or jointly with any other Person or
Persons.
Provided however, if any Member holding Preference Shares be present at any Meeting of the Company, save
as provided in Clause (b) of Sub-Section (2) of Section 87 of the Act, he shall have a right to vote only on
resolutions placed before the Meeting, which directly affect the rights attached to his Preference Shares.
(c) On a poll taken at a Meeting of the Company, a Member entitled to more than one vote, or his proxy, or any
other Person entitled to vote for him (as the case may be), need not, if he votes, use or cast all his votes in the
same way.
(d) A Member of unsound mind or in respect of whom an order has been made by any Court having jurisdiction in
lunacy, may vote, whether on a show of hands or on a poll, through a committee or through his legal
guardian; and any such committee or guardian may, on a poll vote by proxy. If any Member be a minor his
vote in respect of his Share(s) shall be exercised by his guardian(s), who may be selected (in case of dispute)
by the Chairman of the meeting.
(e) If there be joint registered holders of any shares, any one of such Persons may vote at any Meeting or may
appoint another Person, (whether a Member or not) as his proxy in respect of such Shares, as if he were solely
entitled thereto; but the proxy so appointed shall not have any right to speak at the Meeting and if more than
one of such joint-holders be present at any Meeting, then one of the said Persons so present whose name
stands higher in the Register of Members shall alone be entitled to speak and to vote in respect of such Shares,
but the other joint- holders shall be entitled to be present at the Meeting. Several Executors or Administrators
of a deceased Member in whose name Shares stand shall for the purpose of these Articles be deemed joint-
holders thereof.
(f) Subject to the provision of these Articles, votes may be given personally or by an attorney or by proxy. A body
corporate, whether or not a Company within the meaning of the Act, being a Member may vote either by a
proxy or by a representative duly authorised in accordance with Section 187 of the Act and such representative
shall be entitled to exercise the same rights and powers, (including the right to vote by proxy), on behalf of the
body corporate which he represents as that body could have exercised if it were an individual Member.
(g) Any Person entitled to transfer any Shares of the Company may vote at any General Meeting in respect thereof
in the same manner as if he were the registered holder of such Shares, provided that forty-eight hours at least
before the time of holding the Meeting or adjourned Meeting as the case may be at which he proposes to vote,
he shall satisfy the Board of his right to such Shares and give such indemnity (if any) as the Board may require
unless the Board shall have previously admitted his right to vote at such Meeting in respect thereof.
(h) Every proxy, (whether a Member or not), shall be appointed in writing under the hand of the appointer or his
attorney, or if such appointer is a corporation under the Common Seal of such corporation or be signed by an
officer or an attorney duly authorised by it, and any committee or guardian may appoint proxy. The proxy so
appointed shall not have any right to speak at a Meeting.
(i) An instrument of proxy may appoint a proxy either for (i) the purposes of a particular Meeting (as specified in
the instrument) or (ii) for any adjournment thereof or (iii) it may appoint a proxy for the purposes of every
Meeting of the Company, or (iv) of every Meeting to be held before a date specified in the instrument for
every adjournment of any such Meeting.
(j) A Member present by proxy shall be entitled to vote only on a poll.
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(k) An instrument appointing a proxy and a power of attorney or other authority (including by way of a Board
Resolution, (if any),) under which it is signed or a notarially certified copy of that power or authority or
resolution as the case may be, shall be deposited at the Office not later than forty-eight hours before the time
for holding the Meeting at which the Person named in the instrument proposes to vote and in default the
instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the
expiration of 12 months from the date of its execution. An attorney shall not be entitled to vote unless the
power of attorney or other instrument or resolution as the case may be appointing him or a notarially certified
copy thereof has either been registered in the records of the Company at any time not less than forty-eight
hours before the time for holding the Meeting at which the attorney proposes to vote, or is deposited at the
Office of the Company not less than forty-eight hours before the time fixed for such Meeting as aforesaid.
Notwithstanding that a power of attorney or other authority has been registered in the records of the Company,
the Company may, by notice in writing addressed to the Member or the attorney, given at least 48 hours before
the Meeting, require him to produce the original power of attorney or authority or resolution as the case may
be and unless the same is deposited with the Company not less than forty-eight hours before the time fixed for
the Meeting, the attorney shall not be entitled to vote at such Meeting unless the Board in their absolute
discretion excuse such non-production and deposit.
(l) Every instrument of proxy whether for a specified Meeting or otherwise should, as far as circumstances admit,
be in any of the forms set out in Schedule IX of the Act or a form as near thereto as circumstance admit.
(m) If any such instrument of appointment be confined to the object of appointing an attorney or proxy for voting
at Meetings of the Company it shall remain permanently or for such time as the Directors may determine in the
custody of the Company; if embracing other objects a copy thereof, examined with the original, shall be
delivered to the Company to remain in the custody of the Company.
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the
previous death of the principal, or revocation of the proxy or of any power of attorney under which such proxy
was signed, or the transfer of the Share in respect of which the vote is given, provided that no intimation in
writing of the death, revocation or transfer shall have been received at the Office before the Meeting.
(o) No objection shall be made to the validity of any vote, except at the Meeting or poll at which such vote shall
be tendered, and every vote whether given personally or by proxy, not disallowed at such Meeting or poll shall
be deemed valid for all purposes of such Meeting or poll whatsoever.
(p) The Chairman of any Meeting shall be the sole judge of the validity of every vote tendered at such Meeting.
The Chairman present at the taking of a poll shall be in the sole judge of the validity of every vote tendered at
such poll.
(1) The Company shall cause minutes of all proceedings of every General Meeting to be kept by making
within thirty days of the conclusion of every such Meeting concerned, entries thereof in books kept
for that purpose with their pages consecutively numbered.
(2) Each page of every such book shall be initialed or signed and the last page of the record of
proceedings of each Meeting in such book shall be dated and signed by the Chairman of the same
Meeting within the aforesaid period of thirty days or in the event of the death or inability of that
Chairman within that period, by a Director duly authorised by the Board for that purpose.
(3) In no case the minutes of proceedings of a Meeting shall be attached to any such book as aforesaid by
pasting or otherwise.
(4) The Minutes of each Meeting shall contain a fair and correct summary of the proceedings thereat.
(5) All appointments of Directors of the Company made at any Meeting aforesaid shall be included in the
minutes of the Meeting.
(6) Nothing herein contained shall require or be deemed to require the inclusion in any such Minutes of
any matter which in the opinion of the Chairman of the Meeting (i) is or could reasonably be
regarded as, defamatory of any person, or (ii) is irrelevant or immaterial to the proceedings, or (iii) is
detrimental to the interests of the Company. The Chairman of the Meeting shall exercise an absolute
discretion in regard to the inclusion or non-inclusion of any matter in the Minutes on the aforesaid
grounds.
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(7) Any such Minutes shall be evidence of the proceedings recorded therein.
(8) The book containing the Minutes of proceedings of General Meetings shall be kept at the Registered
Office of the Company and shall be open, during business hours, for such periods not being less in
the aggregate than two hours in each day as the Board determines, for the inspection of any Member
without charge.
(9) The Company shall cause minutes to be duly entered in books provided for the purpose of: -
a) the names of the Directors and Alternate Directors present at each General Meeting;
b) all Resolutions and proceedings of General Meeting;
(q) The Members shall vote (whether in person or by proxy) all of the Shares owned or held of record by them at
any Annual or Extraordinary General Meeting of the Company called for the purpose of filling positions to the
Board of Directors, appointed as a Director of the Company under Section 274(1) of the Act in accordance
with these Articles.
(r) The Members will do nothing to prevent the taking of any action by the Company or act contrary to or with
the intent to evade or defeat the terms as contained in these Articles.
(s) All matters arising at a General Meeting of the Company, other than as specified in the Act or these Articles if
any, shall be decided by a majority vote.
(t) The Members shall exercise their voting rights as shareholders of the Company to ensure that the Act and/or
these Articles are implemented and acted upon by the Members, and by the Company and to prevent the taking
of any action by the Company or by any Member , which is contrary to or with a view or intention to evade or
defeat the terms as contained in these Articles.
DIRECTORS
Article 45 provides that:
(a) Until otherwise determined by the Company in a General Meeting and subject to Sections 252 and 259 of the
Act, the number of Directors (excluding Alternate Directors) shall not be less than three and not more than
fifteen. The composition of the Board (including the number of Directors who are Indian Nationals) will be in
accordance with all applicable Requirements of Law.
(b) The NG Group shall be entitled to appoint one third of the members of the Board (NG Group Nominees) who
shall be Non-Retiring Directors.
(c) If a NG Group Nominee retires, resigns, is removed or otherwise vacates office at any time then, subject to
Article 48 the NG Group shall be entitled to nominate one replacement Director upon the retirement, removal or
resignation of their nominee Director.
(d) The NG Group Nominees shall hold office at the pleasure of the NG Group, and be subject to removal by the NG
Group. Their appointment and removal shall be effective by a notice in writing addressed to the Board, under the
hand of one of the authorized representatives of the NG Group and the same shall take effect forthwith upon
being delivered to the Company. As and when there is a vacancy on the Board of the Company for any cause or
reason out of the Directors nominated by the NG Group, such vacancy shall be filled by the NG Group.
CHAIRMAN OF THE BOARD OF DIRECTORS
Article 46 provides that:
(a) NG shall be and shall continue as the non-retiring Chairman of the Board so long as he is willing to be a
Director and Chairman of the Company and shall not be liable to retire by rotation. The Chairman shall
preside at all meetings of the Board and the General Meeting of the Company. In the absence of NG at any
meeting of the Board, one of the NG Group Nominees shall preside at such meeting as the Chairman. The
Chairman shall have a casting vote in the event of a tie.
(b) If for any reason NG is unable to continue as the Chairman, the members of the Board of Directors shall
appoint one of the NG Group Nominees as the Chairman.
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(c) All the Directors shall exercise their voting rights to ensure that these Articles are implemented and acted upon
by them to prevent the taking of any action by the Company or by any Member, which is contrary to or with a
view or intention to evade or defeat the terms as contained in these Articles.
APPOINTMENT OF ALTERNATE DIRECTORS
Article 47 provides that:
Subject to Section 313 of the Act, any Director shall be entitled to nominate an alternate director to act for him during
his absence for a period of not less than 3 months. The Board may appoint such a person as an Alternate Director to act
for a Director (hereinafter called “the Original Director”) (subject to such person being acceptable to the Chairman)
during the Original Director’s absence for a period of not less than three months from the State in which the meetings
of the Board are ordinarily held. An Alternate Director appointed under this Article shall not hold office for a period
longer than that permissible to the Original Director in whose place he has been appointed and shall vacate office if and
when the Original Director returns to the State. If the term of the office of the Original Director is determined before he
so returns to the State, any provisions in the Act or in these Articles for automatic re-appointment shall apply to the
Original Director and not to the Alternate Director.
CASUAL VACANCY AND ADDITIONAL DIRECTORS
Article 48 provides that:
(a) Subject to the provisions of the Act and these Articles, the Board shall have the power at any time and from
time to time to appoint any qualified Person to be a Director either as an addition to the Board or to fill a
casual vacancy but so that the total number of Directors shall not at any time exceed the maximum number
fixed under Article 45. Any Person so appointed as an addition shall hold office only up to the date of the next
Annual General Meeting. Any person appointed to fill a casual vacancy shall hold office only up to the date to
which the Original Director in whose place he is appointed would have held office if it had not been vacated
but shall be eligible for election.
(b) As and when there is a vacancy on the Board of the Company for any cause or reason out of the Directors
nominated by the NG Group (i.e. NG Group Nominees) such a vacancy shall be filled by the NG Group.
DEBENTURE DIRECTORS
Article 49 provides that:
If it is provided by a Trust Deed, securing or otherwise, in connection with any issue of Debentures of the Company,
that any Person/ Lender or Persons/ Lenders shall have power to nominate a Director of the Company, then in the case
of any and every such issue of Debentures, the Person/ Lender or Persons/ Lenders having such power may exercise
such power from time to time and appoint a Director accordingly. Any Director so appointed is herein referred to a
Debenture Director. A Debenture Director may be removed from office at any time by the Person/ Lender or Persons/
Lenders in whom for the time being is vested the power under which he was appointed and another Director may be
appointed in his place. A Debenture Director shall not be bound to hold any qualification shares.
NO QUALIFICATION SHARES FOR DIRECTORS
Article 50 provides that:
A Director shall not be required to hold any qualification Shares of the Company.
REMUNERATION OF DIRECTORS
Article 51 provides that:
(a) Subject to the provisions of the Act, a Managing Director or Managing Directors, and any other Director/s
who is/are in the whole time employment of the Company may be paid remuneration either by a way of
monthly payment or at a specified percentage of the net profits of the Company or partly by one way and
partly by the other, subject to the limits prescribed under the Act.
(b) Subject to the provisions of the Act, a Director (other than a Managing Director or an Executing Director) may
be paid remuneration either:
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(i) by way of monthly, quarterly or annual payment, or
(ii) by way of commission.
(c) The remuneration payable to each Director for every Meeting of the Board or Committee of the Board
attended by them shall be such sum as may be determined by the Board from time to time within the
maximum limits prescribed from time to time by the Central Government pursuant to the first proviso to
Section 310 of the Act.
SPECIAL REMUNERATION FOR EXTRA SERVICES RENDERED BY A DIRECTOR
Article 52 provides that:
If any Director be called upon to perform extra services or special exertions or efforts (which expression shall include
work done by a Director as a member of any Committee formed by the Directors), the Board may arrange with such
Director for such special remuneration for such extra services or special exertions or efforts either by a fixed sum or
otherwise as may be determined by the Board and such remuneration may be either in addition to or in substitution for
his remuneration otherwise provided.
TRAVEL EXPENSES OF DIRECTORS
Article 53 provides that:
The Board may allow and pay to any Director who is not a bonafide resident of the place where the meetings of the
Board/committee meetings are ordinarily held and who shall come to such place for the purpose of attending any
meeting, such sum as the Board may consider fair compensation for travelling, , lodging and/ or other expenses, in
addition to his fee for attending such Board Meetings/ committee meetings as above specified; and if any Director be
called upon to go or reside out of his ordinary place of his residence on the Company’s business, he shall be entitled to
be repaid and reimbursed travelling and other expenses incurred in connection with the business of the Company.
CONTINUING DIRECTORS
Article 54 provides that:
The continuing Directors may act notwithstanding any vacancy in their body; but, if and so long as their number is
reduced below the minimum number fixed by Article 45 hereof, the continuing Directors not being less than two may
act for the purpose of increasing the number of Directors to that number, or of summoning a General Meeting, but for
no other purpose.
VACATION OF OFFICE BY DIRECTOR
Article 55 provides that:
(1) Subject to Sections 283 and 314 of the Act, the office of a Director, including NG or any NG Group Nominee
shall ipso facto be vacated if:
(a) he is found to be of unsound mind by a Court of competent jurisdiction; or
(b) he applies to be adjudicated an insolvent; or
(c) he is adjudged an insolvent; or
(d) he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect
thereof to imprisonment for not less than six months; or
(e) he fails to pay any calls made on him in respect of Shares of the Company held by him whether alone
or jointly with others, within six months from the date fixed for the payment of such call, unless the
Central Government has by notification in the Official Gazette removed the disqualification incurred
by such failure; or
(f) he absents himself from three consecutive Meetings of the Board or from all Meetings of the Board
for a continuous period of three months, whichever is longer, without obtaining leave of absence from
the Board; or
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(g) he, (whether by himself or by any Person for his benefit or on his account), or any firm in which he is
a partner, or any private company of which he is a director, accepts a loan, or any guarantee or
security for a loan, from the Company, in contravention of Section 295 of the Act; or
(h) having been appointed a Director by virtue of his holding any office or other employment in the
Company, he ceases to hold such office or other employment in the Company; or
(i) he acts in contravention of Section 299 of the Act; or
(j) he becomes disqualified by an order of the Court under Section 203 of the Act; or
(k) he is removed in pursuance of Section 284 of the Act; or
(l) if he is a NG Group Nominee , upon receipt of notice by the Board from the NG Group, informing the
Board of the withdrawal of his nomination; or
(m) he is disqualified under section 274 (1)(g) of the Act.
(2) Subject to the provisions of the Act, a Director may resign his office at any time by notice in writing addressed
to the Board of Directors and such resignation shall become effective upon its acceptance by the Board.
REMOVAL OF DIRECTORS
Article 56 provides that:
The NG Group Nominees shall hold office at the pleasure of NG Group and be subject to removal by the Members of
the NG Group.
MANAGING DIRECTOR (S)/ EXECUTIVE DIRECTOR (S)/ MANAGER
Article 63 provides that:
(a) Subject to the provisions of Article 45 and Section 267, 268, 269, 309, 310, 311, 316 and 317 and other
applicable provisions and Schedule XIII of the Act and of these Articles, the NG Group shall have the right by
a notice in writing signed by NG or a NG Group Nominee addressed to the Board, the right to designate one or
more of the NG Group Nominees as the Managing Director(s) or Manager or Executive Director(s) of the
Company and the Board shall within one week of the date of receipt of such letter, appoint such designate or
designates as the Managing Director(s) or Manager or Executive Director(s) of the Company. The NG Group
shall have the right by a similar notice to require the Board to remove any Managing Director(s) or Manager
or Executive Director(s) of the Company and the Board shall within one week of the date of receipt of such
notice take steps to remove such person from such office with the Company. On a vacancy being caused in the
office of the Managing Director(s) or Manager or Executive Director(s), whether by resignation, death,
removal or otherwise, the NG Group shall have the right to designate another NG Group Nominee for such
appointment and the Board shall proceed to appoint such NG Group Nominee in the same manner as
prescribed above. The terms of appointment of Managing Director(s) or Manager or Executive Director(s)
shall be as are specified, (with the power to vary such terms) by the NG Group from time to time and these
shall be the terms on which such persons shall be appointed by the Board. The Managing Director(s) or
Manager or Executive Director(s), as the case may be, so appointed, shall be responsible for and in charge of
the day to day management and affairs of the Company and subject to the provisions of the Act and these
Articles, the Board shall vest in such Managing Director/s or Manager or Executive Director(s), as the case
may be, all the powers vested in the Board generally.
(b) The Managing Director(s) or Manager or Executive Director(s), as the case may be, of the Company in office
on the date of adoption of this Article by the Company shall be deemed to be the Managing Director or
Manager or Executive Director, as the case may be designated by the NG Group for appointment and
appointed by the Board, as provided in sub-Article (a) above and the remaining provisions of sub-Article (a)
above shall apply to such Managing Director or Executive Director or Manager (as the case may be).
PROCEEDINGS OF THE BOARD OF DIRECTORS
Article 68 provides that:
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(a) The Board may meet for the dispatch of the business, adjourn and otherwise regulate its meetings on a date,
time and venue as indicated by the Chairman, provided however, the Board shall meet once in every three
calendar months and at least four times in a year in accordance with Section 285 of the Act or any statutory
modifications thereof.
(b) The Company Secretary shall as and when, directed by the Chairman convene a meeting of the Board by
giving a notice in writing to every Director.
(c) The Board of Directors may meet either at the Office of the Company, or at any other location in India or
outside India as the Chairman may determine.
(d) At least 7 days notice of every meeting of the Board shall be given in writing to every Director for the time
being at his usual address in India and in the case of a Director resident outside India, at his address outside
India and to his alternate, if any in India at his usual address in India. A meeting of the Board may be
convened in accordance with these Articles by a shorter notice in case of any emergency as directed by the
Chairman or the Managing Director or the Executive Director, as the case may be. Such notice or shorter
notice may be sent by post or by fax or email depending upon the circumstances.
(e) If permissible under applicable Requirements of Law, a Director may attend Board Meetings by any video or
audio conferencing facility that permits simultaneous communication between participants.
QUORUM FOR BOARD MEETING
Article 69 provides that:
Subject to Section 287 of the Act, the quorum for a Meeting of the Board shall be presence of at least one- third of its
total strength which must include at least an equal number of Directors who are NG Group Nominees (or his or their
alternate) unless such absent NG Group Nominee Director(s) consent in writing to a quorum requirement being
satisfied despite his or their absence. Provided that where at any time the number of interested Directors exceeds or is
equal to two-thirds of the total strength of the number of remaining Directors, that is to say, the number of Directors
who are not interested, present at the Meeting being not less than two (of whom atleast one should be an NG Group
Nominee), they shall be the quorum during such time.
ADJOURNED BOARD MEETING FOR WANT OF QUORUM
Article 70 provides that:
(a) If any duly convened Board Meeting cannot be held for want of a quorum, in terms of Article 69 above then
such a meeting shall automatically stand adjourned for 7 days after the original Meeting at the same time and
place, or if that day is a public holiday, on the next succeeding day which is not a public holiday to the same
time and place Provided however, the adjourned meeting may be held on such other date and such other place
as may be unanimously agreed by all the Directors.
(b) If in the event of a quorum once again not being available at such an adjourned meeting, the Directors present
shall constitute the quorum and may transact business for which the meeting has been called.
QUESTIONS AT BOARD MEETINGS HOW DECIDED
Article 71 provides that:
(a) Questions arising at any meeting of the Board, other than as specified in these Articles, if any, shall be decided
by a majority vote. In the case of an equality of votes, the Chairman shall have a second or casting vote.
(b) No regulation made by the Company in General Meeting, shall invalidate any prior act of the Board, which
would have been valid if that regulation had not been made.
COMMITTEES AND DELEGATION BY THE BOARD
Article 73 (c) provides that:
(a) Without prejudice to the powers conferred by the other Articles and so as not to in any way to limit or restrict
those powers, the Board may, subject to the provisions of Section 292 of the Act, delegate any of their powers
to the Managing Director(s), the Executive Director(s) or Manager or the Chief Executive Officer of the
192
Company. The Managing Director(s), the Executive Director(s) or the Manager or the Chief Executive
Officer(s) as aforesaid shall, in the exercise of the powers so delegated, conform to any regulations that may
from time to time be imposed on them by the Board and all acts done by them in exercise of the powers so
delegated and in conformity with such regulations shall have the like force and effect as if done by the Board.
(b) Subject to the provisions of the Act, any Requirements of Law and anything stated in these Articles the Board
may delegate any of their powers to Committees of the Board consisting of such member or members of the
Board as it thinks fit, and it may from time to time revoke and discharge any such committee of the Board
either wholly or in part and either as to persons or purposes, but every Committee of the Board so formed shall
in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed
on it by the Board. All acts done by any such Committee of the Board in conformity with such regulations and
in fulfillment of the purposes of their appointment but not otherwise, shall have the like force and effect as if
done by the Board.
(c) Subject to applicable Requirements of Law, in respect of each committee of the Board of Directors, the NG
Group is entitled to nominate atleast one of the NG Group Nominees to each of the committees of the Board
of the Company.
(d) The Meetings and proceedings of any such Committee of the Board consisting of two or more members shall
be governed by the provisions herein contained for regulating the meetings and proceedings of the Directors,
so far as the same are applicable thereto and are not superseded by any regulation made by the Directors under
the last preceding Article.
OFFICERS
Article 77 provides that:
(a) The Company shall have its own professional management and such officers shall be appointed from time to
time as designated by its Board. The officers of the Company shall serve at the discretion of the Board.
(b) The officers of the Company shall be responsible for the implementation of the decisions of the Board, subject
to the authority and directions of the Board and shall conduct the day to day business of the Company.
(c) The officers of the Company shall be the Persons in charge of and responsible to the Company for the conduct
of the business of the Company and shall be concerned and responsible to ensure full and due compliance with
all statutory laws, rules and regulations as are required to be complied with by the Company and/or by the
Board of Directors of the Company.
(d) Qualified experienced managerial, and marketing executives and other officers shall be appointed for the
operation and conduct of the business of the Company.
(e) The Board shall appoint with the approval of the Chairman, the President and/or Chief Executive Officer
and/or Chief Operating Officer of the Company, as well as persons who will be appointed to the posts of
senior executive management.
DIVIDEND POLICY
Article 84 provides that:
(a) The profits of the Company, subject to any special rights relating thereto being created or authorised to be
created by the Memorandum or these Articles and subject to the provisions of these Articles shall be divisible
among the Members in proportion to the amount of Capital Paid-up or credited as Paid-up and to the period
during the year for which the Capital is Paid-up on the Shares held by them respectively. Provided always that,
(subject as aforesaid), any Capital Paid-up on a Share during the period in respect of which a Dividend is
declared, shall unless the Directors otherwise determine, only entitle the holder of such Share to an
apportioned amount of such Dividend as from the date of payment.
(b) Subject to the provisions of Section 205 of the Companies Act, 1956 the Company in General Meeting may
declare Dividends, to be paid to Members according to their respective rights and interests in the profits but no
Dividends shall exceed the amount recommended by the Board, but the Company in General Meeting may
declare a smaller Dividend, and may fix the time for payments not exceeding 30 days from the declaration
thereof.
193
(c) (i) No Dividend shall be declared or paid otherwise than out of profits of the Financial Year arrived at
after providing for depreciation in accordance with the provisions of Section 205 of the Act or out of
the profits of the Company for any previous Financial Year or years arrived at after providing for
depreciation in accordance with those provisions and remaining undistributed or out of both provided
that: -
(I) if the Company has not provided for depreciation for any previous Financial Year or years it
shall, before declaring or paying a Dividend for any Financial Year provide for such
depreciation out of the profits of that Financial Year or out of the profits of any other
previous Financial Year or years,
(II) if the Company has incurred any loss in any previous Financial Year or years the amount of
the loss or an amount which is equal to the amount provided for depreciation for that year or
those years whichever is less, shall be set off against the profits of the Company for the year
for which the Dividend is proposed to be declared or paid or against the profits of the
Company for any previous Financial Year or years arrived at in both cases after providing
for depreciation in accordance with the provisions of sub-section (2) of Section 205 of the
Act or against both.
(ii) The declaration of the Board as to the amount of the net profits shall be conclusive.
(d) The Board may from time to time, pay to the Members such interim Dividend as in their judgment the position
of the Company justifies.
(e) Where Capital is paid in advance of calls upon the footing that the same shall carry interest, such Capital shall
not whilst carrying interest, confer a right to participate in profits or Dividend.
(f) (i) Subject to the rights of Persons, if any, entitled to Shares with special rights as to Dividend, all
Dividends shall be declared and paid according to the amounts paid or credited as paid on the Shares
in respect whereof Dividend is paid but if and so long as nothing is Paid upon any Shares in the
Company, Dividends may be declared and paid according to the amount of the Shares.
(ii) No amount paid or credited as paid on Shares in advance of calls shall be treated for the purpose of
this regulation as paid on Shares.
(iii) All Dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid
on the Shares during any portion or portions of the period in respect of which the Dividend is paid,
but if any Shares are issued on terms providing that it shall rank for Dividend as from a particular
date such Shares shall rank for Dividend accordingly.
(g) Subject to the provisions of the Act and these Articles, the Board may retain the Dividends payable upon
Shares in respect of any Person, until such Person shall have become a Member, in respect of such Shares or
until such Shares shall have been duly transferred to him.
(h) Any one of several Persons who are registered as the joint-holders of any Share may give effectual receipts for
all Dividends or bonus and payments on account of Dividends or bonus or sale proceeds of fractional
certificates or other moneys payable in respect of such Shares.
(i) Subject to the provisions of the Act, no Member shall be entitled to receive payment of any interest or
Dividends in respect of his Share(s), whilst any money may be due or owing from him to the Company in
respect of such Share(s); either alone or jointly with any other Person or Persons; and the Board may deduct
from the interest or Dividend payable to any such Member all sums of money so due from him to the
Company.
(j) A transfer of Shares shall not pass the right to any Dividend declared thereon before the registration of the
transfer.
(k) Unless otherwise directed any Dividend may be paid by cheque or warrant or by a pay slip or receipt (having
the force of a cheque or warrant) and sent by post or courier or by any other legally permissible means to the
registered address of the Member or Person entitled or in case of joint-holders to that one of them first named
in the Register of Members in respect of the joint-holding. Every such cheque or warrant shall be made
payable to the order of the Person to whom it is sent and in case of joint-holders to that one of them first
named in the Register of Members in respect of the joint-holding. The Company shall not be liable or
responsible for any cheque or warrant or pay slip or receipt lost in transmission, or for any Dividend lost to a
Member or Person entitled thereto, by a forged endorsement of any cheque or warrant or a forged signature on
194
any pay slip or receipt of a fraudulent recovery of Dividend. If two or more Persons are registered as joint-
holders of any Share(s) any one of them can give effectual receipts for any moneys payable in respect thereof.
Several Executors or Administrators of a deceased Member in whose sole name any Share stands shall for the
purposes of this Article be deemed to be joint-holders thereof.
(l) No unpaid Dividend shall bear interest as against the Company.
(m) Any General Meeting declaring a Dividend may on the recommendation of the Board, make a call on the
Members of such amount as the Meeting fixes, but so that the call on each Member shall not exceed the
Dividend payable to him, and so that the call will be made payable at the same time as the Dividend; and the
Dividend may, if so arranged as between the Company and the Members, be set-off against such calls.
UNPAID OR UNCLAIMED DIVIDEND
Article 85 provides that:
(i) If the Company has declared a Dividend but which has not been paid or the Dividend warrant in respect
thereof has not been posted or sent within 30 days from the date of declaration to any Member entitled to the
payment of such dividends, the Company shall within 7 days from the date of expiry of the said period of 30
days, open a special account in that regard with any scheduled bank called the “Unpaid Dividend of JET
AIRWAYS (INDIA) LIMITED” and transfer to the said account the total amount of Dividend which remains
unpaid or in relation to which no Dividend warrant has been posted.
(ii) Any money so transferred to the unpaid dividend account of the Company which remains unpaid or unclaimed
for a period of 7 years from the date of such transfer, shall be transferred by the Company to the Fund
established under sub-section (1) of Section 205C of the Act, viz. “Investors Education and Protection Fund”.
(iii) No unpaid or unclaimed Dividend shall be forfeited by the Board.
CAPITALISATION OF PROFITS
Article 86 provides that:
The Company in General Meeting may, upon the recommendation of the Board, resolve:
i) that it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the
Company’s reserve accounts or to the credit of the Company’s profit and loss account or otherwise, as
available for distribution, and
ii) that such sum be accordingly set free from distribution in the manner specified herein below in sub-article (iii)
as amongst the Members who would have been entitled thereto, if distributed by way of Dividends and in the
same proportions.
iii) The sum aforesaid shall not be paid in cash but shall be applied either in or towards:
(a) paying up any amounts for the time being unpaid on any Shares held by such Members respectively;
(b) paying up in full, un-issued Shares of the Company to be allotted, distributed and credited as fully
Paid up, to and amongst such Members in the proportions aforesaid; or
(c) partly in the way specified in sub-article (a) and partly in the way specified in sub-article (b).
AMENDMENT TO MEMORANDUM AND ARTICLES OF ASSOCIATION
Article 91 provides that:
(a) The Members shall vote all the Shares owned or held of record by such Members at any Annual or
Extraordinary General Meeting of the Company in accordance with these Articles.
(b) The Members shall not pass any resolution or take any decision which is contrary to any of the terms of these
Articles.
195
(c) The Articles of the Company shall not be amended unless (i) Members holding not less than 75% of the
Shares (and who are entitled to attend and vote ) cast votes in favour of each such amendment/s to the Articles
and (ii) unless the NG Group votes in favour of such amendment/s, so long as the NG Group are Members of
the Company and vote on such amendment/s.
(d) Notwithstanding anything stated in these Articles, if the NG Group holds less than 26% of the shares of the
Company, then neither NG nor the NG Group will be entitled to the rights as stipulated in Articles 4(c), 39,
45, 56, 63 and 73(c) of these Articles.
(e) Notwithstanding anything stated in these Articles, if the NG Group holds less than 10% of the shares of the
Company, then neither NG nor the NG Group will be entitled to the rights as stipulated in Articles 41(b) and
46(b) of these Articles.
196
FINANCIAL INFORMATION
1. Summary Statements of Assets and Liabilities and Profits and Losses, as restated, under Indian GAAP as of
and for the years ended March 31, 2000, 2001, 2002, 2003 and 2004 and for the six months ended September
30, 2004; and related audit report.
2. Balance Sheet and Profit and Loss, as audited under Indian GAAP, as of and for the six months ended
September 30, 2004, and related audit report.
3. Statement of Differences Between Indian GAAP, IAS/IFRS and U.S. GAAP.
197
Deloitte Haskins & Sells Chaturvedi & Shah
Chartered Accountants Chartered Accountants
12, Dr. Annie Besant Road, A-3 Laxmi Towers, 1
st
Floor
Opposite Shiv Sagar Estate, Bandra Kurla Complex,
Worli Bandra (East)
Mumbai 400 018 Mumbai 400 051
AUDITORS’ REPORT
To,
The Board of Directors,
Jet Airways (India) Private Limited,
41/42 Maker Chambers III,
Nariman Point,
Mumbai 400 021
Dear Sirs,
We have examined the financial information of Jet Airways (India) Private Limited (‘Jet Airways’ or ‘the Company’)
described below in A and B and annexed to this report and initialed by us for identification. The said financial
information has been prepared in accordance with the requirements of paragraph B (1) of Part II of Schedule II to the
Companies Act, 1956 (‘the Act’), the Securities and Exchange Board of India (“SEBI”) - Disclosure and Investor
Protection Guidelines, 2000 (as amended vide Circular No. 11 on August 14, 2003 and Circular no.
SEBI/CFD/DIL/DIP/13/2004/28/5 dated May 28, 2004) (‘the Guidelines’) issued by the Securities and Exchange
Board of India on January 19, 2000 in pursuance of Section 11 of the Securities and Exchange Board of India Act,
1992; and related clarifications. The financial information has been prepared by the Company and approved by the
Board of Directors of the Company.
A. Financial Information As Per Audited Financial Statements:
We have examined the attached summary statement of profits and losses as restated to reflect the retrospective effect
of the accounting policies adopted by the Company as at September 30, 2004, of the Company for the years ended
March 31, 2000, March 31, 2001, March 31, 2002, March 31, 2003, March 31, 2004 and for the half year ended
September 30, 2004 (Annexure I), the attached summary statement of assets and liabilities as at those period end dates
as restated to reflect the retrospective effect of the accounting policies adopted by the Company as at September 30,
2004 (Annexure II), and the related financial statement schedules as restated to reflect the retrospective effect of the
accounting policies adopted by the Company as at September 30, 2004 (Annexure III) together referred to as the
‘Summary Statements’.
Our examination consisted of:
i. Auditing the financial statements of the Company for the half year ended September 30, 2004 and
comparing the information therein to the information in the ‘Summary Statements’,
ii. Comparing the information in the ‘Summary Statements’, for the years ended March 31, 2000, 2001,
2002, 2003 and 2004 with the annual financial statements for those years audited by C.C.Chokshi & Co.
We have relied upon these audited financial statements,
iii. Auditing the adjustments made to aforesaid financial information to arrive at the as restated amounts in the
‘Summary Statements’.
The aforesaid financial statements have been adopted by the Board of Directors and the Members for those respective
years and by the Board of Directors for the half-year ended September 30, 2004.
Based on our examination of these Summary Statements, we state that:
The restated profits and losses have been arrived at after charging all expenses including depreciation and
after making such adjustments and regroupings as in our opinion are appropriate in the respective years /
period
198
The Summary Statements of the Company have been restated with retrospective effect (wherever possible) to
reflect the accounting policies adopted by the Company as at September 30, 2004. These and other
adjustments are explained in Annexure IV.
There are no qualifications in the auditors’ reports that require any adjustment to the Summary Statements.
There are no extra-ordinary items that need to be disclosed separately in the Summary Statements.
B. Other financial Information
We have examined the following financial information relating to the Company proposed to be included in the
Prospectus, approved by the Board of Directors and annexed to this report:
i. Summary of accounting ratios based on the restated profits relating to earnings per share, net asset value and
return on net worth (Annexure V)
ii. Tax Shelter statement (Annexure VI)
iii. Capitalisation statement of the Company (Annexure VII)
In our opinion, the financial information of the Company attached to this report as mentioned in paragraphs (A) and (B)
above, read with respective significant accounting policies and notes as annexed to this report and after making
adjustments and re-groupings as considered appropriate; has been prepared in accordance with Part II of Schedule II of
the Act and the Guidelines issued by SEBI.
This report is intended solely for your information and for inclusion in the Prospectus in connection with the specific
Initial Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our
prior written consent.
For Deloitte Haskins & Sells For Chaturvedi & Shah
Chartered Accountants Chartered Accountants
R. Salivati C.D.Lala
Partner Partner
Membership No: 34004 Membership No: 35671
Place: Mumbai Place: Mumbai
Date : December 20, 2004 Date : December 20, 2004
199
INDEX OF FINANCIAL INFORMATION
Annexure I: A. Summary Statement of Profits and Losses as restated
B. Profit and Loss Account as at April 1, 1999 as restated
Annexure II : Summary Statement of Assets and Liabilities as restated
Annexure III : Financial Statement Schedules
A. Schedule of Loans
B. Schedule of Quoted Investments
C. Schedule of Sundry Debtors
D. Statement of Restated Cash Flows
E. Schedule of Non-operating Revenues
F. Details of Rates of Dividend
G. Schedule of Contingent liabilities
H. Segment Disclosures and Other Notes
I. Schedule of Related Party Transactions.
Annexure IV : Notes on adjustments and Significant Accounting policies for restated financial
statements
Annexure V : Summary of accounting ratios
Annexure VI : Tax Shelter statement
Annexure VII : Capitalisation statement of the Company
200
ANNEXURE I A - SUMMARY STATEMENT OF PROFITS AND LOSSES, AS RESTATED
INR 000s
Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Income
Operating Revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 19,264,181
Non-operating Revenues 226,076 275,606 1,234,156 664,184 1,183,183 402,545
Total Revenues
20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 19,666,726
Expenditure
Employees Remuneration and Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 2,527,210
Other Operating Expenses (including
Maintenance & Airport Charges etc)
6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,232,231
Total Expenditure 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 18,084,618
Profit /(Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 1,582,108
Provision for Taxation
Current Tax 24,746 12,000 420 500 150,330 122,410
Deferred Tax - - - (12,377) - 166,101
Profit /(Loss) after taxation as per audited
accounts (A)
101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in
accounting policies
Capitalisation of Software Purchased
(Refer Note No 1 (a) in Annexure IV)
30,369 2,648 1,081 2,285 - -
Depreciation
(Refer Note No 1 (a) in Annexure IV)
(16,257) (21,341) (14,764) (7,371) (2,181) (577)
Frequent flyer expenses
(Refer Note No 1 (b) in Annexure IV)
7,147 42,001 (19,815) (58,896) - -
Reversal of Provisions as per AS 29 (Net)
(Refer Note No 1 (c) in Annexure IV)
313,976 318,273 27,489 393,512 511,631 -
Deferred Tax
(Refer Note No 1 (d) in Annexure IV)
(249,223) (274,327) 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior Period
Items
(Refer Note No 2 in Annexure IV)
(69,858) (4,762) 61,100 70,147 (60,201) (9,179)
Other adjustments
Refer Note No 3 in Annexure IV)
115,495 174,263 (318,163) (3,642) 13,509 -
Total of adjustments 131,649 236,755 (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments
(Refer Note No 4 in Annexure IV)
41,601 43,275 - - 21,257 2,184
Total of adjustments after tax impact
(B)
90,048 193,480 (176,735) 1,249,038 (139,230) (609,682)
Net Profit/(Loss), as restated
(A+B)
191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
Profit and Loss Account at the beginning
of the period
463,240 575,019 801,226 333,178 (860,599) 631,266
Profit /(Loss) available for appropriation
as restated
655,038 893,312 490,178 (862,285) 631,266 1,315,181
Excess provision for Tax written back - - 14,544 - - -
Provision for Dividend on preference
shares no longer required
- - 66 1,686 - -
Transfer to Contingency Reserve - 7,200 52,108 - - -
Dividend
Proposed on Preference Share Capital - 4,371 36,600 - - -
Interim paid on Equity Share Capital 72,089 72,089 - - -
Proposed on Equity Share Capital - - 82,902 - - -
Income Tax on Dividend 7,930 8,426 - - - -
BALANCE CARRIED FORWARD AS
RESTATED
575,019 801,226 333,178 (860,599) 631,266 1,315,181
The above statement should be read with Notes to the Summary statement of Profits and Losses and Assets and Liabilities, as restated, together with the significant
accounting policies appearing in Annexure IV.
201
ANNEXURE I B - PROFIT & LOSS ACCOUNT AS AT APRIL 1, 1999
INR' 000s
Profit and Loss Account Balance as at April 1, 1999 333,604
as per Audited Financial Statements
Capitalisation of Software Purchased 35,268
(Refer Note No 1 (a) in Annexure IV)
Depreciation (8,504)
(Refer Note No 1 (a) in Annexure IV)
Frequent flyer expenses 29,563
(Refer Note No 1 (b) in Annexure IV)
Reversal of Provisions as per AS-29 583,175
(Refer Note No 1 (c) in Annexure IV)
Deferred Tax (460,254)
(Refer Note No 1 (d) in Annexure IV)
Adjustment on account of Prior Period Items 12,752
(Refer Note No 2 in Annexure IV)
Other adjustments 18,538
(Refer Note No 3 in Annexure IV)
Tax impact on adjustments (80,902)
(Refer Note No 4 in Annexure IV)
129,636
Profit and Loss Account Balance as at April 1, 1999 as restated 463,240
202
ANNEXURE II - SUMMARY STATEMENT OF ASSETS AND LIABILITIES, RESTATED AS AT
INR 000s
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
A Fixed Assets
Gross Block 18,734,789 21,949,941 36,641,155 50,169,299 51,689,718 52,084,594
Less: Accumulated Depreciation 4,179,443 6,823,320 8,706,665 15,325,550 20,534,834 23,316,800
Net Block 14,555,346 15,126,621 27,934,490 34,843,749 31,154,884 28,767,794
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Net Block after adjustment for Revaluation Reserve 14,555,346 15,126,621 20,634,824 29,435,052 27,279,199 25,756,214
Add: Capital Work In Progress 790,537 1,989,481 13,015,464 3,007,865 151,901 124,904
Total (A) 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
B Investments (B) - - - 597,000 2,334,164 5,008,292
C Current Assets, Loans and Advances
a) Inventories 1,363,980 2,329,059 3,021,375 3,409,999 3,474,355 3,420,493
b) Sundry Debtors 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
c) Cash and Bank Balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
d) Loans and Advances 1,697,754 2,029,875 1,464,613 1,711,503 1,803,409 1,947,005
Total (C) 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
D Liabilities and Provisions
a) Current Liabilities & Provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
b) Deferred Tax Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
c) Secured Loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
d) Unsecured Loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Total (D) 21,089,315 23,168,579 39,881,962 41,598,215 35,841,619 36,629,682
E Subordinated Debt (E) - - 2,640,000 2,840,733 3,080,775 3,341,100
F Net Worth (A + B + C - D - E) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Net Worth Represented by
G Share Capital
Equity Capital 720,889 720,889 720,889 720,889 720,889 720,889
Preference Capital - 698,288 698,288 698,288 698,288 698,288
Total (G) 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
H Reserves and Surplus
Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Contingency Reserve - 7,200 59,308 59,308 59,308 59,308
General Reserve 54,670 54,670 54,670 54,670 54,670 54,670
Profit & Loss Account 575,019 801,226 333,178 (860,599) 631,266 1,315,181
Total 629,689 863,096 7,746,822 4,662,076 4,620,929 4,440,739
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Total (Net of Revaluation Reserves) (H) 629,689 863,096 447,156 (746,621) 745,244 1,429,159
I Net Worth (G + H) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Note : The above statement should be read with the notes to the Summary Statement of Profits and Losses and Assests and Liabilities, as
restated, together with Significant Accounting Policies appearing in Annexure IV.
203
Annexure III A : SCHEDULE OF LOANS
INR '000s
Secured Loans
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
State Bank of India - - - 901,648 - -
UTI Bank Ltd. - - - 142,455 - -
Citibank N.A. - - - 12 - -
Corporation Bank - - - 248,971 3,433 -
IndusInd Bank Ltd. - - 732,000 712,275 - -
Financial Institutions 150,000 930,000 - - - -
12% Non Convertible Redeemable Debentures 1,534,000 - - - - -
Overdraft facilities from Banks - 1,201,753 - - - -
From Others (HDFC Ltd) - - - - 600,000 600,000
Total 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
1) Interest on loan was payable in the range of 12% to 14.5%, 6.5% to 14%, 3% to 5%, 6% to 8%, 9% to 10.5% and 9% for the period ended March 31, 2000,
March 31, 2001, March 31, 2002, March 31, 2003, March 31, 2004 and September 30, 2004 respectively.
2) Loans outstanding as at September 30, 2004 except from HDFC Ltd. are secured by hypothecation of Stocks and Debtors and/ or pledge of Fixed Deposits. The
loan from HDFC Ltd. is secured by hypothecation of the Simulator and other accessories thereto.
Unsecured Loans (INR '000s)
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Outstanding Hire Purchase/ Finance Lease 14,217,708 15,649,546 21,189,626 29,584,190 28,415,657 27,539,790
Instalments for aircraft and vehicles
HDFC Ltd. - - - 600,000 - -
ICICI Bank Ltd. - - - 250,000 - -
GE Capital Services India - - - 500,000 - -
Banks 654,375 - - - - -
Others - 51,895 10,074,824 2,043,974 - -
Total 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
204
ANNEXURE III B - SCHEDULE OF QUOTED INVESTMENTS
The Book Value and Market Value of quoted investments of the company is as below:
(INR '000s)
Particulars Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book Value
Market
Value
Number of
Shares/Units
Book Value Market Value
Number of
Shares/Units
Book Value
Market
Value
TRADE INVESTMENTS
Units in Mutual Funds - - - -
-
- - - - 50,032,345 597,000 597,000 216,229,616 2,334,164 2,334,674 439,708,484 5,008,292 5,038,181
TOTAL - - - -
-
- - - - 50,032,345 597,000 597,000 216,229,616 2,334,164 2,334,674 439,708,484 5,008,292 5,038,181
205
ANNEXURE III C - SCHEDULE OF SUNDRY DEBTORS
(INR '000s)
Particulars Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
A) Debts outstanding for a period exceeding six
months: 7,130 90,080 216,076 181,647 66,905 68,579
B) Other Debts 1,570,060 1,327,672 1,769,153 2,067,058 2,304,633 2,645,588
1,577,190 1,417,752 1,985,229 2,248,705 2,371,538 2,714,167
Unsecured - Considered Good 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
- Considered Doubtful 11,750 19,388 19,388 18,122 27,163 38,382
1,577,190 1,417,752 1,985,229 2,248,705 2,371,538 2,714,167
Less: Provision for Doubtful Debts 11,750 19,388 19,388 18,122 27,163 38,382
Total 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
206
ANNEXURE III D STATEMENT OF RESTATED CASH FLOWS
APRIL ,1999 TO
April ,2000 to April ,2001 to April ,2002 to April ,2003 to April ,2004 to
March, 2000 March, 2001 March, 2002 March, 2003 March, 2004 September, 2004
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
A.
Cash Flow from Operating
Activities
Net Profit / ( Loss) before tax 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Adjustments for :
Depreciation & Stock Obsolescence 2,201,562 2,679,558 3,510,433 4,752,390 5,355,180 2,435,859
Loss / (Profit) on sale of Fixed
assets
996 (259) (895,978) (180,244) (385,928) 34,880
(Profit) on sale of Investments - - - (39,660) (23,724) (15,945)
Interest expense 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,232,231
Provision for doubtful debts 2,073 7,638 - 719 9,041 11,219
Operating profit before working
capital changes
3,580,431 4,543,814 3,926,202 5,034,206 10,090,153 5,270,596
Changes in Inventories (581,310) (996,349) (774,912) (409,171) (262,526) (52,874)
Changes in Sundry Debtors 255,344 159,438 (567,477) (265,461) (122,833) (342,629)
Changes in Fixed Deposits with
Banks
(1,026,246) (97,579) (920,822) (963,028) 708,274 527,295
Changes in Loans & Advances (599,831) (279,645) 531,689 (171,745) (101,237) (32,789)
Changes in Current Liabilities and
Provisions
261,348 541,131 398,337 1,152,828 50,304 961,592
Cash generated from operations 1,889,736 3,870,810 2,593,017 4,377,629 10,362,135 6,331,191
Income tax (paid) / refunded (19,342) (52,476) (19,630) (83,291) 9,331 (110,806)
Wealth tax paid (92) (290) (722) (309) (300) -
Net cash from operating activities A 1,870,302 3,818,044 2,572,665 4,294,029 10,371,166 6,220,385
B.
Cash Flow from Investing
Activities
Capital Expenditure - Aircraft &
Others
(5,830,736) (4,368,726) (9,275,310) (12,364,600) (3,123,775) (816,615)
Proceeds from sale of fixed assets 1,133 3,353 2,358,104 1,519 863,750 2,590
Purchase of Investments - - - (8,885,000) (29,104,731) (19,329,889)
Sale of Investments - - - 8,327,660 27,391,291 16,671,706
Net cash from investing activities B (5,829,603) (4,365,373) (6,917,206) (12,920,421) (3,973,465) (3,472,208)
C.
Cash flows from Financing
Activities
Increase in Capital - 698,288 - - - -
Subordinated Debt - - 2,640,000 - - -
Increase (Decrease) in Term Loans 5,092,531 1,277,111 4,367,476 10,738,881 (3,920,461) (879,300)
Interest paid (1,100,857) (1,254,945) (1,870,280) (2,524,377) (2,789,056) (1,154,574)
Dividend paid - (160,088) (4,751) (117,816) - -
Net cash used from financing
activities
C 3,991,674 560,366 5,132,445 8,096,688 (6,709,517) (2,033,874)
Net change in cash (A+B+C) 32,373 13,037 787,904 (529,704) (311,816) 714,303
Cash and cash equivalents at
beginning of year
133,481 165,854 178,891 966,795 437,091 125,275
Cash and Bank equivalents at end
of year
165,854 178,891 966,795 437,091 125,275 839,578
Note : Fixed Deposits with banks with maturity period of more than three months including interest accrued thereon and
Fixed Deposit under lien are not included in Cash and Cash equivalents.
207
ANNEXURE III E : SCHEDULE OF NON OPERATING REVENUES
Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Other Income 226,076 275,606 1,234,156 664,184 1,183,183 402,545
Net Profit / (Loss) before Tax as restated 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Percentage 45 43 -* -* 53 26
Source of Income Year ended Year ended Year ended Year ended Year ended Six months ended Nature
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Interest on Bank & Other Deposits 188,837 211,978 247,343 370,649 251,151 106,385 Recurring
Exchange Difference (Net) 32,045 59,032 21,696 334,756 Recurring
Profit on Sale of Other Fixed Assets (Net) - 259 Recurring
Profit on Sale and Hire Purchase Back of Engines 49,780 180,914 170,753 Refer Note 1
Profit on Sale of Investments 39,660 23,724 15,945 Recurring
Profit on Sale of Aircraft 846,434 266,206
Provision for Doubtful Debts no longer required (Refer Note 2) 1,266 151 Recurring
Dividend on Investments 17,080 27,977 Recurring
Excess Provisions no longer required 5,358 182,199 Recurring
Other Income 5,194 4,337 68,903 71,695 114,155 69,888 Recurring
Total 226,076 275,606 1,234,156 664,184 1,183,183 402,545
* Since there is a Net Loss the percentages have not been shown
Notes:
1) In the year 2001-02, the Company had sold two aircraft engines and acquired them back on hire purchase. The
profit earned in this transaction has been deferred over the terms of the hire purchase, in accordance with the
provision of Accounting Standards (AS 19 on leases).
2) The amount indicates the profit on sale of aircraft sold and acquired back on operating lease.
208
ANNEXURE III F : DETAILS OF RATES OF DIVIDEND
Class of Shares Face Value Year ended Year ended Year ended Year ended Year ended
Six months
ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Equity Shares Rs. 10
- Interim 10% 10% - - - -
- Final - - 11.50% - - -
Total 10% 10% 11.50% - - -
5% Cumulative Convertible
Redeemable Preference
Shares Rs. 10 - 5% 5% - - -
(Refer Note 1)
Notes :
1) The Company issued 69,828,750 Cumulative Convertible Redeemable Preference Shares of Rs. 10/- each fully paid up for the first time in
February, 2001.
209
ANNEXURE III G - SCHEDULE OF CONTINGENT LIABILITIES
INR 000s
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Bank Guarnatees and Letters of Credit - - - 1,724,513 3,109,681 3,201,797
Estimated amount of Contracts remainig to
be executed on captial account and not
provided for
18,056,264 15,250,234 15,029 7,928 433,628 234,863
Claims against the Company not
acknowledged as debts
3,615 296,963 296,688 372,513 777,393 838,066
Arrears of Preference Dividend and
annualised return thereon
- - - 92,429 182,393 242,374
Total 18,059,879 15,547,197 311,717 2,197,383 4,503,095 4,517,100
The above amounts have been compiled from the audited financial statements of the Company for the respective years/ period.
210
Annexure III H: SEGMENT DISCLOSURES AND OTHER NOTES
SEGMENT REPORTING
The Company commenced international operations on March 23, 2004. The proportion of
international operations revenue to the total revenue is insignificant, therefore has not been reported
separately.
As such all other related activities revolve around the main business. Hence there are no such
separate reportable segments, as required by the Accounting Standard - 17 on “Segment Reporting”
issued by the Institute of Chartered Accountants of India.
OTHER NOTES
Aircraft Lease Rentals are stated net of sub-lease rental receipts of Rs. 105,496 ('000s) and Rs.
79,011 ('000s) for the year ended March 31, 2004 and six months period ended September 30, 2004.
211
ANNEXURE III - I : SCHEDULE OF RELATED PARTY TRANSACTIONS
(a) Names of related parties and nature of relationship where control exists
Sr. No. Category of related parties Names
1 Holding Company Tailwinds Ltd.
2 Associates Jetair Private Limited
Jet Enterprises Private Limited
Jet Airways LLC
Jet Airways of India Inc.
Jetair Tours Private Limited
Vimpal Holding Private Limited
International Cargo Carriers Private Limited
National Travel Services (Partnership Firm)
3 Key Management Personnel Mr. S.K. Datta
4 Parties with Substantial Interest Naresh Goyal
5 Others (relative of Naresh Goyal) Anita Goyal
212
(b) Transactions & balances with related parties (INR '000s)
Nature of Transaction
Holding
Company/
Parties with
Substantial
Interest
Associates
Key Management
Personnel
Others (relative of
Naresh Goyal)
Transactions for the year ended March 31, 2002
Dividend 82,902 - - -
Remuneration - - 4,425 3,436
Agency Commission - 898,230 - -
Expenses Reimbursed - (470,681) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 43,262 - -
Balance as at 31 March, 2002
Deposits & Advances for Leased Premises - 33,500 - -
Sundry Creditors - 20,126 - -
Sundry Debtors - 82,127 - -
Share Capital 720,889 - - -
Transactions for the year ended March 31, 2003
Remuneration - - 3,940 2,165
Agency Commission - 842,116 - -
Rent - 39,744 - -
Expenses Reimbursed - (364,976) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 45,945 - -
Balance as at 31 March, 2003
Deposits & Advances for Leased Premises - 160,337 - -
Sundry Creditors - 85,244 - -
Sundry Debtors - 38,330 - -
Share Capital 720,889 - - -
Transactions for the year ended March 31, 2004
Remuneration - - 3,900 2,109
Agency Commission - 1,003,067 - -
Rent - 17,856 - -
Expenses Reimbursed - (464,640) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 55,892 - -
Balance as at 31 March, 2004
Deposits & Advances for Leased Premises - 167,837 - -
Sundry Creditors - 13,014 - -
Sundry Debtors - 13,251 - -
Share Capital 720,889 - - -
Transactions for the Six months ended September 30, 2004
Remuneration - - 2,065 43
Agency Commission - 628,489 - -
Rent - 5,178 - -
Expenses Reimbursed - - - -
(Staff Costs, communication costs, rent) - (313,423) - -
Trademark Fees - 36,588 - -
Balance as at September 30, 2004
Deposits & Advances for Leased Premises - 164,837 - -
Sundry Creditors - 108,558 - -
Sundry Debtors - - - -
Share Capital 720,889 - - -
The information has been provided from the financial year 2001-02, when the Accounting Standard 18 on 'Related Party
Disclosures' issued by the Institute of Chartered Accountants of India became mandatory
213
ANNEXURE IV: NOTES ON ADJUSTMENTS AND SIGNIFICANT ACCOUNTING POLICIES FOR
RESTATED FINANCIAL STATEMENTS.
(I) NOTES ON ADJUSTMENTS
1. Changes in accounting policies
a. Depreciation
Until the year ended March 31, 2003, the expense incurred on software was treated as revenue expenditure.
In order to comply with the Accounting Standard 26 on Intangible assets issued by the “Institute of
Chartered Accountants of India”, the company has capitalized the software which results in future
economic benefits and has amortised it over 36 months on straight line method.
Accordingly, the fixed assets have been restated and depreciation has been recomputed for the years ended
March 31, 2000,March 31,2001, March 31,2002 and March. 31,2003. Further, reserves as at April 1,1999
have been appropriately adjusted to reflect the impact of change pertaining to prior years.
b. Frequent Flyer Expenses
Until the year ended March 31, 2002 the cost of allowing free travel to members of frequent flyer program
was computed on the basis of average cost per free seat.
Effective April 1, 2002 the frequent flyer expenses has been computed considering the incremental cost as
per the IATA Airline Accounting Guideline.
Accordingly, the frequent flyer expenses has been restated for the years ended March 31, 2000, March
31,2001 and March 31,2002. Further, reserves as at April 1,1999 have been appropriately adjusted to
reflect the impact of change pertaining to prior years.
c. Provisions for Aircraft Maintenance and Repairs
Until the year ended March 31, 2004, aircraft maintenance costs were provided at a predetermined rate for
each block hour flown except for Engines / Auxilliary Power Units covered by third party maintenance
agreement.
In order to comply with the accounting standard 29 on “Provisions, Contigent Liablities and Contigent
Assests” issued by the Institute of Chartered Accountants of India, the Company has started charging, from
the accounting period commencing on April 1, 2004, the above mentioned expenses on as incurred basis
except where such overhaul costs are covered by third party maintenance contracts.
Accordingly, the expenses have been restated for the years ended March 31, 2000, March 31, 2001, March
31, 2002, March 31, 2003 and March 31, 2004. Further, Reserves as at March 31, 1999 have been
appropriately adjusted to reflect the impact of the change pertaining to the prior years.
d. Deferred Tax
The Company adopted Accounting Standard 22, Accounting for taxes on Income issued by the “Institute
of Chartered Accountants of India” for the first time in preparing the financial statements for the year
ended March 31, 2003. Accordingly, for the purpose of this statement, the deferred tax asset/liability has
been recognized in the respective years of origination, considering the adjustment on account of change in
accounting policy and other changes with the corresponding effect to the statement of profits, as restated.
2. Prior Period Adjustments
In the financial statements for the year ended March 31, 2004 and the half year ended September 30, 2004,
the Company had recognised / charged off certain amount of Income and Expense as prior period. For the
purpose of this statement, the said income / expense have been appropriately adjusted in the years that it
relates to.
214
3. Other Adjustments
a. Impact of Change in accounting estimates
During the year ended March 31, 2004 the Company has revised the estimated useful life of the Galley
Equipments, which forms a part of the Engineering Inventory. Accordingly provision for obsolescence on
such inventory has been adjusted on the straight line method basis over its balance useful life as estimated
by the management. The management’s estimate of the useful life of such inventory is 10 years. In the
earlier years the depreciation has been calculated on the straight-line method at the rates prescribed in
schedule XIV to the Companies Act, 1956.
Accordingly, provision for obsolescence has been adjusted against profits for the years ended March 31,
2000, March 31, 2001, March 31, 2002 and March 31, 2003, in line with the above-mentioned change in
estimate. Further, reserves as at April 1,1999 have been appropriately adjusted to reflect the impact of
change pertaining to prior years.
b. Re-negotiation of aircraft maintenance contract
Post the events of September 11, 2001, the Company has re-negotiated the aircraft maintenance contract in
the financial year 2001-2002 with retrospective effect.
Accordingly, the impact (net) has been adjusted against profits for the years ended March 31, 2000 and
March 31, 2001. Further, reserves as at April 1,1999 have been appropriately adjusted to reflect the impact
of change pertaining to prior years.
4. Current Tax Impact of Adjustments
Current tax impact of adjustments pertains to tax effect on restatement adjustments provided at the tax
rates applicable in the respective years.
5. Non-Adjustment Items:
a. Actuarial valuation of Gratuity for and upto the year ended March 31, 2001.
For and upto year ended March 31, 2001 the Company was making provision for gratuity on the basis of
assumption that all the employees who are in the service of the company as at the year-end are entitled for
the same.
The Company changed the basis of provision for Gratuity on actuarial basis from the year ended March 31,
2002 as per the Accounting Standard – 15 on Accounting for Retirement Benefits in the Financial
Statement of Employers issued by the “Institute of Chartered Accountants of India”. No adjustment has
been made for and upto the year ended March 31, 2001 in the absence of information.
b. Actuarial valuation of Leave Encashment for and upto the year ended March 31, 2002.
For and upto year ended March 31, 2002 the Company was making provision for Leave Encashment on
the basis of actual accumulated leave, in excess of 30 days, lying at the credit at the year end.
The Company changed the basis of provision for Leave Encashment on actuarial basis from the year ended
March 31, 2003 as per the Accounting Standard – 15 on Accounting for Retirement Benefits in the
Financial Statement of Employers issued by the “Institute of Chartered Accountants of India”. No
adjustment has been made for and upto the year ended March 31, 2002 in the absence of information.
c. Capitalisation of Borrowing Costs
For and upto the year ended March 31, 2000 the Company charged the borrowing costs incurred on
acquisition of fixed assets to the Profit and Loss Account.
Pursuant to the introduction of Accounting Standard 16 on Borrowing Cost issued by the Institute of
Chartered Accountants of India, the Company has changed its accounting policy to captialise the interest
on borrowings directly attributable to acquisition of aircraft. No adjustment has been made for and upto the
years ended March 31, 2000 in the absence information.
215
6. Material Re-groupings
“Hire Purchase – Finance charges” have been re-grouped from “Operating Expenses” and is included as a
part of “Interest Expense” for the half year ended September 30, 2004 and the years ended March 31,
2000, March 31, 2001, March 31, 2002, March 31, 2003 and March 31, 2004.
216
(II) SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS :
The financial statements have been prepared under the historical cost convention, except for certain
aircraft, which have been revalued, in accordance with the generally accepted accounting principles in
India and the provisions of the Companies Act, 1956.
B. USE OF ESTIMATES :
The presentation of financial statements in conformity with generally accepted accounting principles
requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on
the date of the financial statements and the reported amount of revenue and expenses during the reporting
period. Differences between the actual result and estimates are recognised in the period in which the results
are known / materialised.
C. REVENUE RECOGNITION :
Passenger and Cargo income is recognised on flown basis, i.e. when the service is rendered.
The net sales (sales net of refunds) are initially credited to the "Forward Sales Account". Income
recognised as indicated above is reduced from the Forward Sales Account and the balance is shown under
Current Liabilities.
Balances in Forward Sales are recognised as income where a claim for refund has not been made for two
years.
D. COMMISSION :
As in the case of revenue, the commission paid / payable on sales including any over-riding commission is
recognised only on flown basis.
E. EMPLOYEE RETIREMENT BENEFITS :
The Company makes regular contribution to Provident Fund and this contribution is charged to Profit and
Loss Account. Provisions for Gratuity and Leave Encashment Benefit are made on the basis of actuarial
valuation and charged to Profit and Loss Account.
F. FIXED ASSETS :
Fixed assets are stated at cost and includes amount added on revaluation less accumulated depreciation and
impairment loss, if any. All costs relating to acquisition & installation of fixed assets upto the time the
assets get ready for their intended use are capitalised.
Impairment loss (if any) is provided to the extent the carrying amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an asset's selling price or its Value in Use. Value in Use is the
present value of estimated future cash flows expected to arise from the continuing use of an asset and from
its disposal at the end of its useful life. Net Selling Price is the amount obtainable from the sale of an asset
in an arms length transaction between knowledgeable, willing parties, less the cost of disposal.
The cost of improvements to Leased Properties as well as customs duty/modification cost incurred on
aircraft taken on operating lease have been capitalised and disclosed appropriately.
G. ASSETS TAKEN ON LEASE :
(a) Operating Lease: Rentals are expensed with reference to the Lease Term and other considerations.
(b) Finance Lease (Hire Purchase): The lower of the fair value of the assets and the present value of the
minimum lease rentals is capitalised as Fixed Assets with corresponding amount shown as Lease
Liability (Outstanding Hire Purchase/Finance lease Instalments). The principal component of the
lease rentals is adjusted against the leased liability and interest component is charged to the Profit
and Loss Account.
217
H. INTANGIBLE ASSETS :
Computer Software is amortised over 36 months on straight-line method.
I. INVESTMENTS :
Current Investments are carried at lower of cost and quoted/fair value. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is made only if such a decline is other
than temporary in the opinion of the management.
J. BORROWING COSTS :
Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part
of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are
incurred.
K. DEPRECIATION :
Depreciation has been provided on Written Down Value method at the rates and in the manner prescribed
under the schedule XIV to the Companies Act, 1956 on fixed assets, other than expenditure incurred on
improvements of assets acquired on operating lease, which are written off evenly over the balance period
of the lease.
On revalued assets, depreciation is charged over the residual life and the additional charge of depreciation
is withdrawn from the Revaluation reserve.
L. FOREIGN EXCHANGE TRANSACTIONS:
Sales and other transactions in foreign currency are recorded at the Current rate of exchange in force at the
time the transactions are effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that related to fixed assets, is adjusted in the Profit & Loss Account.
Monetary Assets and Liabilities relating to foreign exchange transactions not settled as at the year end,
are translated at the rates prevalent on that date, and losses/profits, if any on such transactions are
recognised in the Profit and Loss Account.
Exchange difference on settlement/ translation of long-term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in
the carrying amount of fixed assets over the life of the contract.
M. DERIVATIVES TRANSACTIONS
Gain or Loss on derivative contracts entered into to hedge exposures to interest rate fluctuations are
recognised as and when the underlying transactions are settled. Accordingly proportionate amounts are
accrued/provided for the period between the last settlement date and the year-end.
N. INVENTORIES :
Inventories include:
a) Tickets & Airway Bills Stock
b) Unutilised Inflight Service Amenities
c) Expendable Aircraft Spares
d) Aircraft Fuel in the Aircraft
e) Rotables, Galley Equipment and Tooling
Inventories are valued at cost or Net Realisable Value (NRV) whichever is lower. Cost includes custom
duty, freight and other charges as applicable and is determined using the Weighted Average formula. In
respect of reusable items such as rotables, galley equipment & tooling under (e) above, NRV takes into
consideration provision for obsolescence and wear & tear based on the estimated useful life of the aircraft
218
derived from Schedule XIV of the Companies Act, 1956 & also includes provisioning for non-moving
/slow moving items.
O. REDELIVERY EXPENSES :
Aircraft Redelivery Expenses have been provided in proportion to the expired lease period.
P. AIRCRAFT MAINTENANCE & REPAIRS COST :
Aircraft Maintenance, Auxiliary Power Unit (APU) and Engine maintenance and repair costs are expensed
as incurred except where such overhaul cost in respect of Engines/ APU covered by third party
maintenance agreement and accounted in accordance therewith.
Q. FREQUENT FLYER EXPENSES :
The cost of allowing free travel to members of the Frequent Flyer Programme is accounted considering the
members’ accumulated mileage.
R. TAXATION
Provision for current tax is made after taking into consideration benefits admissible under the provisions of
the Income Tax Act, 1961.
Deferred tax resulting from “timing differences” between book and taxable profit is accounted for using
the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent that there is a reasonable/virtual
certainty that the asset will be realised in future.
S. CONTINGENT LIABILITY
These are disclosed by way of Notes to the Accounts. Provision is made in the accounts in respect of those
contingencies which are likely to materialise into liabilities after the year end, till the finalisation of
accounts and have material effect on the position stated in the Balance Sheet.
219
ANNEXURE V : SUMMARY OF ACCOUNTING RATIOS
Year Ended Year Ended Year Ended Year Ended Year Ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Cash Earnings per Share (Rs.)
32.50 41.75
45.05
50.03
90.65 41.96
(Refer Note 5)
Basic Earnings per Share (Rs.) 2.66
4.25
(5.34) (17.84) 19.44 8.70
(Refer Note 5)
Diluted Earnings per Share (Rs.) N. A
2.23
(5.34)* (17.84)* 4.06 1.78
(Refer Note 5)
Return on Net Worth %
14.20 13.95
(16.67) (177.75) 68.93 24.01
Net Asset Value per Equity Share
18.73 21.97
16.20 (1.64) 17.81 26.46
Weighted Average Number of Diluted
Equity Shares Outstanding during the
year/period
-
142,738,899 284,646,095 430,948,542
452,447,245 484,897,504
Total Number of Equity Shares
Outstanding during the year/period 72,088,900 72,088,900 72,088,900 72,088,900
72,088,900 72,088,900
* Being anti - dilutive in nature, the basic and diluted EPS for these years remain the same
Notes :-
1) The ratios have been computed as per the following formulae :
Cash Earnings per Share (Rs.) = Net Profit after tax and annualised return on Preference Capital but
before depreciation & Provision for stock Obsolescence
____________________________________________________
Total No of Equity Shares outstanding during the year/ period
Basic Earnings per Share (Rs.) = Net Profit attributable to Equity Shareholders
____________________________________________________
Total No of Equity Shares outstanding during the year/ period
Diluted Earnings per Share (Rs.) = Net Profit attributable to Equity Shareholders
_____________________________________________________
Weighted Average No of Equity Shares outstanding during the year/ period
Return on Net Worth (%) = Net Profit after tax
____________________________________________________
Net worth excluding Revaluation Reserve at the end of the year/ period
Net Asset Value per Equity Share (Rs.) = Net worth excluding Revaluation Reserve, Preference Share Capital incl. annualised
return in arrears thereon at the end of the year/ period
__________________________________________________________________
Total No of Equity Shares outstanding during the year/ period
2) The weighted average number of diluted equity shares is derived after dividing the conversion amount of preference shares and subordinated
debt as at end of each year/ period.
3) Net Profit, as restated and appearing in the statement of Profits and losses has been considered for the purpose of computing the above ratios.
These ratios are computed on the basis of the restated financial statements of the Company.
4) Earnings per share calculations have been done in accordance with Accounting Standard 20 - "Earnings per share" issued by the Institute of
Chartered Accountants of India.
5) Earnings per share for the six months ended September 30, 2004 are not comparable with that of other financial years presented above as they
are not annualised.
6) Net Worth computations in the above workings include 'Cumumlative Convertible Redeemable Preference Shares'.
220
ANNEXURE VI - TAX SHELTER STATEMENTS
INR 000s
As on As on As on As on As on As on
Mar 31, 2000 Mar 31,
2001
Mar 31, 2002 Mar 31, 2003 Mar 31,
2004
Sep 30, 2004
Tax rate (including surcharge) 38.50 39.55 35.70 36.75 35.88 36.59
Net profit/(loss) before tax as restated 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Tax at notional rates (A) 195,337 256,243 - - 805,101 575,324
Book Depreciation 2,102,361 2,621,617 3,503,098 4,740,086 5,153,724 2,291,438
Tax Depreciation 3,593,729 3,615,867 4,198,500 6,846,802 5,877,042 2,201,308
Difference between tax and book depreciation (B) (1,491,368) (994,250) (695,401) (2,106,716) (723,319) 90,130
Other adjustments (C) 22,470 61,071 (939,010) (212,948) (475,815) (27,195)
Net adjustments (B + C) (1,468,898) (933,179) (1,634,411) (2,319,664) (1,199,134) 62,935
Tax Savings thereon (565,526) (369,072) (583,485) (852,476) (430,189) 23,028
Profit/(Loss) as per Income tax return (1,339,936) (800,534) (1,775,289) (4,740,317) 605,210 1,660,688
Less : Set/off of B/f unabsorbed depreciation - - - - (605,210) (1,660,688)
Taxable Income as per Tax Return under MAT 37948 136414 - - 1,764,977 1,553,722
Tax as per Income Tax Return (MAT) incl int 14610 11561 - - 140,443 121,831
Tax on restated profits under MAT (D) 58,601 54,875 - - 171,257 124,184
Tax provision made in books (E) 17,000 11,600 - - 150,000 122,000
Current tax impact of adjustments (D - E) 41,601 43,275 - - 21,257 2,184
221
ANNEXURE VII :- CAPITALISATION STATEMENT AS AT SEPTEMBER 30, 2004
INR '000s
Pre Issue Post Issue *
Short Term Debt 600,000 -
Long Term Debt 27,539,790 -
Subordinated Debt 3,341,100 -
Total Debt 31,480,890 -
Share Holders' Funds
- Share Capital 1,419,177 -
- Reserves (excluding Revaluation Reserve 1,429,159 -
Total Share Holders' Funds 2,848,336 -
Long Term Debt/Equity 10.84 -
* Share Capital and Reserves post - issue can be ascertained only after the conclusion of the book building process
Notes:-
1) Long term debt represents outstanding hire purchase/ finance lease instalments for aircraft and other assets
2) Long term debt includes current portion of the long term debt payable over the next twelve months
3) The Long term debt/ Equity ratio has been calculated as per the following formula :-
Long term Debt + Subordinated Debt
Shareholders' Funds
222
Deloitte Haskins & Sells Chaturvedi & Shah
Chartered Accountants Chartered Accountants
12, Dr. Annie Besant Road, A-3 Laxmi Towers, 1
st
Floor
Opposite Shiv Sagar Estate, Bandra Kurla Complex,
Worli Bandra (East)
Mumbai 400 018 Mumbai 400 051
AUDITORS' REPORT TO THE BOARD OF DIRECTORS
1. We have audited the attached Balance Sheet of Jet Airways (India) Private Limited, as at 30
th
September, 2004
and also the Profit and Loss Account and the Cash Flow Statement for the six months period ended on that date
annexed thereto. These financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We report that:
a) we have obtained all the information and explanations, which to the best of our knowledge and belief
were necessary for the purposes of our audit;
b) in our opinion, proper books of account as required by law have been kept by the Company so far as
appears from our examination of the books;
c) the Balance Sheet, Profit and Loss Account and Cash flow statement dealt with by this Report are in
agreement with the books of account;
d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash flow statement dealt with by this
Report comply with accounting standards referred to in sub-section (3C) of Section 211 of the
Companies Act, 1956;
e) in our opinion, and to the best of our information and according to the explanations given to us, the said
accounts give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 30 th September,
2004;
(ii) in the case of the Profit and Loss Account, of the Profit of the Company for the six months
period ended on that date; and
(iii) in the case of cash flow statement, of the cash flows for the six months period ended on that date.
FOR DELOITTE HASKINS & SELLS. FOR CHATURVEDI & SHAH
CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS
R. SALIVATI C.D. LALA
PARTNER PARTNER
M. No. 34004 M. No. 35671
Mumbai
Dated: December 20, 2004
223
BALANCE SHEET AS AT SEPTEMBER 30,2004
As at As at
Schedule Sep 30,2004 Mar 31,2004
No. Rs'000 Rs'000
I SOURCES OF FUNDS
1Shareholders' Funds :
a)Share Capital A
Equity 720,889 720,889
Preference 698,288 698,288
Capital 1,419,177 1,419,177
b)Reserves and Surplus B 3,184,357 3,934,993
4,603,534 5,354,170
2 Subordinated Debt (Ref. Note 10 of Schedule S) 3,341,100 3,080,775
3 Loan Funds :
a) Secured Loans C 600,000 603,433
b) Unsecured Loans D 27,539,790 28,415,657
28,139,790 29,019,090
Deferred Tax Liability (Ref. Note 17 of Schedule S) 673,552 507,450
Total 36,757,976 37,961,485
Fixed Assets : E
a) Gross Block 52,012,943 51,618,067
b) Less : Depreciation 23,245,805 20,502,101
c) Net Block 28,767,138 31,115,966
d) Capital Work-in-progress 124,904 151,901
28,892,042 31,267,867
Investments F 5,008,292 2,334,164
Current Assets, Loans and Advances :
a) Inventories G 3,420,493 3,474,355
b) Sundry Debtors H 2,675,785 2,344,375
c) Cash And Bank Balances I 3,886,425 3,699,412
d) Loans and Advances J 1,947,005 1,803,409
11,929,708 11,321,551
Less : Current Liabilities and Provisions
a) Current Liabilities K 6,142,101 5,356,847
b) Provisions L 2,929,965 2,785,378
9,072,066 8,142,225
Net Current Assets 2,857,642 3,179,326
4) Profit & Loss Account - 1,180,128
Total 36,757,976 37,961,485
FOR DELOITTE HASKINS &
SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
224
PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS PERIOD ENDED SEPTEMBER 30,2004
Schedule For the Six
months period
ended Sep 30,2004
For the Six months
period ended Sep
30,2003
No. Rs.'000 Rs.'000 Rs.'000
INCOME :
Operating Revenues M 19,264,181 16,344,486
Non - Operating Revenues N 402,545 457,026
Total 19,666,726 16,801,512
EXPENDITURE :
Employees Remuneration and Benefits O 1,738,827 1,399,394
Aircraft Fuel Expenses 4,713,116 3,554,376
Selling & Distribution Expenses P 2,527,210 1,983,440
Other Operating Expenses (including Maintenance,
Airport Charges, etc)
Q 4,575,707 4,700,001
Aircraft Lease Rentals (Refer Note 6 of Schedule S) 1,006,666 1,205,254
Depreciation 2,774,117 3,092,847
Less : Depreciation on amount added on
Revaluation charged to Revaluation Reserve
483,256 547,285
2,290,861 2,545,562
Interest R 1,232,231 1,568,238
Total 18,084,618 16,956,265
PROFIT / (LOSS) BEFORE TAXATION 1,582,108 (154,753)
Provision for Taxation
Current Tax ( including provision for Wealth Tax
Rs. 410 , Previous Period Rs. 270 )
122,410 270
Deferred Tax 166,101 -
PROFIT / (LOSS) AFTER TAXATION 1,293,597 (155,023)
Balance Brought Forward
As on 01.04.2004 (1,180,128) -
As on 01.04.2003 - (2,811,223)
BALANCE CARRIED TO BALANCE SHEET 113,469 (2,966,246)
Earnings per share of Rs 10 each
(Ref. Note 16 of Schedule S)
Basic (in Rupees) 17.15 (2.86)
Diluted (in Rupees) 3.04 (2.86)
Significant Accounting Policies and Notes to Accounts S
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
225
As at As at
Sep 30,2004 Mar 31,2004
Rs'000 Rs'000
SCHEDULE A :
CAPITAL
AUTHORISED
100,000,000 Equity Shares of Rs.10/- each 1,000,000 1,000,000
100,000,000 Preference Shares of Rs 10/- each 1,000,000 1,000,000
2,000,000 2,000,000
ISSUED, SUBSCRIBED AND PAID-UP
72,088,900 Equity Shares of Rs. 10/- each fully paid up
(Entirely held by the Holding Company - Tail Winds Limited and its nominee)
(Of the above, 9,402,900 shares are allotted as fully paid Bonus shares by
Capitalization of Profit) 720,889 720,889
5%, 69,828,750 Cumulative Convertible Redeemable Preference Shares of Rs.
10/- each . Fully paid up (Refer Note No. 5 of Schedule S) 698,288 698,288
Total 1,419,177 1,419,177
SCHEDULE B :
RESERVES and SURPLUS
Capital Reserve
Balance as per Last Balance Sheet * *
Nominal Value of investments in SITA received free of cost *
(See Note 1 of Schedule 'F' - Investments ) (*Re. 2/-) * *
Revaluation Reserve
Balance as per Last Balance Sheet 3,875,685 5,408,697
Less : Adjustment /Reversal during the period 380,850 359,832
Less : Depreciation for the period on amount added on Revaluation transferred
to Profit & Loss Account 483,256 1,173,180
3,011,580 3,875,685
Contingency Reserve
Balance as per Last Balance Sheet 59,308 59,308
Surplus Balance in Profit and Loss Account 113,469 -
Total 3,184,357 3,934,993
SCHEDULE C :
SECURED LOANS
From Banks
Corporation Bank - 3,433
(Loans from Banks are hypothecation of Stocks and Debtors and/or by pledge
of Fixed Deposits)
From Others
HDFC Ltd (Secured by hypothecation of Simulator & other accessories
thereto) 600,000 600,000
Total 600,000 603,433
SCHEDULE D :
UNSECURED LOANS
From Banks
Outstanding Hire Purchase/Finance Lease Instalments 16,187 35,352
From Others
Outstanding Hire Purchase/Finance Lease Instalments
[Instalments due within one year Rs. 2,789,552 (Previous Year - Rs.2,704,985
)] 27,523,603 28,380,305
Total 27,539,790 28,415,657
226
Schedule E: Fixed Assets
G R O S S B L O C K (At Cost /Valuation)
D E P R E C I A T I O N N E T B L O C K
As at Additions Deduction/ As at Upto For the Upto As on As on
N A T U R E O F A S S E T S 01.04.2004 during Adjustment 30.09.2004 31.03.2004 Period Deduction 30.09.2004 30.09.2004 31.03.2004
the period
Furniture and fixtures 142,637 3,444 337 145,744 89,888 5,853 187 95,554 50,190 52,749
Electrical fittings 120,052 6,808 1,541 125,319 57,035 5,253 1,037 61,251 64,068 63,017
Data processing equipment 443,123 47,427 - 490,550 339,965 25,815 - 365,780 124,770 103,158
Office equipment 231,822 7,248 611 238,459 114,870 8,761 344 123,287 115,172 116,952
Ground support equipment 392,387 23,181 10,836 404,732 194,445 13,832 5,631 202,646 202,086 197,942
Vehicles 65,251 1,540 3,618 63,173 38,446 3,572 2,977 39,041 24,132 26,805
Ground support vehicles 317,424 5,739 743 322,420 219,665 15,129 671 234,123 88,297 97,759
Aircraft & spare engine 49,043,802 630,697 431,050 49,243,449 19,089,493 2,630,267 19,569 21,700,191 27,543,258 29,954,309
Capital expenditure on leased aircraft 217,917 57,864 - 275,781 92,760 23,517 - 116,277 159,504 125,157
Capital expenditure on leased property 91,444 8,083 - 99,527 64,755 6,850 - 71,605 27,922 26,689
Simulator 513,755 - 513,755 199,731 25,506 - 225,237 288,518 314,024
Intangible asset
Software 38,453 51,581 - 90,034 1,051 9,762 - 10,813 79,221 37,402
Total 51,618,067 843,612 448,736 52,012,943 20,502,104 2,774,117 30,416 23,245,805 28,767,138 31,115,963
Previous year 50,097,648 3,649,732 2,129,313 51,618,067 15,298,284 6,324,723 1,120,906 20,502,101 31,115,966 34,799,364
Capital work in progress including capital
advance 124,904 151,901
NOTE :
1) All the Aircraft are acquired on Hire-purchase/Finance Lease basis and do not include Aircraft taken on Operating lease. Such Aircraft are charged against financing arrangements
obtained by the Hirers/Lessor.
2) Additions to Aircraft is net of Rs. 495 million (Previous Year Rs. 757 million) on account of exchange difference during the period.
3) Net Block of Vehicles and Ground Support Vehicles include Rs.27 million (Previous Year Rs 78 million) on account of vehicles taken on Hire Purchase.
4) Aircraft were revalued on 31st March, 2002 with reference to the current prices; amount added on revaluation was Rs. 7,300 million; the revalued amount substituted for historical cost
on 31st March, 2002 was Rs. 34,286 million
227
As at As at
Sep 30,2004 Mar 31,2004
Rs'000 Rs'000
SCHEDULE F :
INVESTMENTS
Long Term
18 Shares (Previous Year 15 Shares) held with Societe Internationale de
Telecommunications Aeronautiques (S.I.T.A S.C) * (Re. 2/-) * *
1)
Notes:
These investments have been received free of cost from SITA SC for
participation in their Computer Reservation System and have been accounted at
a nominal value of Rs. 1/- by crediting to Capital Reserve
2) The transfer of this investment is restricted to other Depository Certificate
holders for e.g. Air Transport members, etc.
Current
Investments in Mutual Funds – Traded
Schemes No. of Units
Face Value /
Unit (Rs)
As at Sep
30,2004
Rs'000
As at Mar 31,
2004
Rs'000
Growth Plan
Kotak Mahindra Mutual Fund 83,866,379 10.00 1,013,051 -
Principal Mutual Fund 33,753,282 10.00 350,000 -
Deutsche Mutual Fund 24,742,237 10.00 250,000 -
HDFC Mutual Fund 32,479,754 10.00 398,505 -
JM Mutual Fund 58,202,121 10.00 585,000 -
Prudential ICICI Mutual Fund 55,882,454 10.00 651,563 -
Alliance Capital 219,444 10.00 173 -
Birla Sun Life Mutual Fund 20,000,000 10.00 200,000 -
HSBC Mutual Fund 11,824,641 10.00 120,000 -
Reliance Mutual Fund 61,393,579 10.00 615,000 -
Franklin Templeton Investments 197,956 1,000.00 200,000 -
Tata Mutual Fund 57,146,637 10.00 625,000 -
Dividend Plan
Kotak Mahindra Mutual Fund 46,473,451 10.00 568,282
Principal Mutual Fund 20,000,000 10.00 200,000
Deutsche Mutual Fund 21,284,159 10.00 219,093
HDFC Mutual Fund 16,720,663 10.00 177,848
JM Mutual Fund 35,949,950 10.00 359,499
Prudential ICICI Mutual Fund 8,736,859 10.00 103,544
Alliance Capital 7,011,068 10.00 70,111
Birla Sun Life Mutual Fund 15,333,430 10.00 165,373
ING Vysya Mutual Fund 15,332,713 10.00 165,162
DSP Merrill Lynch Mutual Fund 9,996,004 10.00 100,060
Standard Chartered Mutual Fund 19,391,321 10.00 205,192
5,008,292 2,334,164
Market Value
Growth Plan
Kotak Mutual Fund 1,022,893
Principal Mutual Fund 351,097
Deutsche Mutual Fund 250,413
HDFC Mutual Fund 401,944
JM Mutual Fund 587,664
Prudential Mutual Fund 657,126
Alliance Mutual Fund 2,357
Birla Mutual Fund 201,482
HSBC Mutual Fund 120,031
Reliance Mutual Fund 615,838
Templeton Mutual Fund 200,460
Tata Mutual Fund 626,876
Dividend Plan
Kotak Mutual Fund 568,282
Principal Mutual Fund 200,380
Deutsche Mutual Fund 219,093
HDFC Mutual Fund 177,848
JM Mutual Fund 359,629
Prudential Mutual Fund 103,544
Alliance Mutual Fund 70,111
Birla Mutual Fund 165,373
ING Vysya Mutual Fund 165,162
DSP Mutual Fund 100,060
Standard Chartered Mutual Fund 205,192
5,038,181 2,334,674 5,008,292 2,334,164
Note : The market price is based on the repurchase price declared by the respective funds
228
As at As at
Sep 30,2004 Mar 31,2004
SCHEDULE G :
INVENTORIES (At Lower of Cost or Net Realisable Value)
i) Spare Parts, Consumable stores and tools 3,991,784 4,016,327
Less : Provision for Obsolescence /Slow & Non-Moving items
(Refer Note 1 (N) of Schedule S) 674,517 639,836
3,317,267 3,376,491
ii) Fuel 6,375 4,458
iii) Other Stores Items 96,851 93,406
Total 3,420,493 3,474,355
SCHEDULE H :
SUNDRY DEBTORS
(Unsecured) 68,579 66,905
a) Debts (Outstanding for a period exceeding six months) 2,645,588 2,304,633
b) Other Debts 2,714,167 2,371,538
Less : Provision for Doubtful Debts 38,382 27,163
2,675,785 2,344,375
NOTE : As at Previous
30.09.04 Year
1) Considered good 2,675,785 2,344,375
Considered doubtful 38,382 27,163 2,675,785 2,344,375
2) Debtors include Rs.12,112 (Previous
Year Rs 5,720) due from private company
in which the company's director is a
director/member. 2,714,167 2,371,538
SCHEDULE I :
CASH AND BANK BALANCES
Cash on hand (includes cheques on hand Rs. 1,245 2,899 63,431
Previous Year Rs. 61,558)
Balance with Scheduled banks :
a) In Current Account 80,962 54,650
b) In Fixed Deposit Account
[including margin deposit Rs.995,217 and Rs.Nil given as collateral for
overdraft and other loans (Previous Year Rs. 1,814,009 and Rs.641,915
respectively)] 3,735,170 3,539,733
Add : Interest accrued 46,097 34,404
3,865,128 3,692,218
Balance with other banks :
In Current Account :
a) Citibank N.A, Johannesberg South Africa Maximum balance outstanding
during the year Rs. 6,018 (Previous Year Rs. 9,889) 1,907 5,562
b) National Bank of Kuwait
Maximum balance outstanding during the year Rs. 3,029
(Previous Year 1,877) - -
c) Barclays Bank, London
Maximum balance outstanding during the year Rs.13,518
(Previous Year 13,152) 1,989 1,632
d) Barclays Bank – PLC - USD
Maximum balance outstanding during the year Rs.1,096
(Previous Year Nil) - -
e) HSBC CCF – Maximum balance outstanding during the year Rs.10,131
(Previous Year Nil) 10,131 -
f) Deutsche Bank AG - FRF
Maximum balance outstanding during the year Rs.7,194
(Previous Year Nil) 7,193 -
g) Barclays Bank - PLC - Euro
Maximum balance outstanding during the year Rs.79
(Previous Year Nil) 77 -
21,297 7,194
Total 3,886,425 3,699,412
229
As at As at
Sep 30,2004 Mar 31,2004
SCHEDULE J :
LOANS and ADVANCES
( Unsecured and Considered Good )
Advances Recoverable in Cash or in kind for Value to be Received 719,602 732,130
Deposits with Airport Authorities & others (Including margin deposit
Rs.382,739 (Previous Year Rs. 288,377) 849,693 769,464
Balances with Customs Authorities 342 867
Advance Tax & Tax deducted at Source 369,230 258,423
Other assets 8,138 42,525
Total 1,947,005 1,803,409
Note : Deposits & Advances include Rs.164,837 (Previous Year Rs 167,837)
placed with a private company in which the company's director
is a director/member.
SCHEDULE K :
CURRENT LIABILITIES
Sundry Creditors
Outstanding dues to small scale industries - -
Others 1,872,313 1,698,006
1,872,313 1,698,006
Other Current Liabilities 1,815,290 1,285,270
Interest Accrued but not due on loans 131,524 314,192
Forward Sales (net) (Passenger/Cargo) 2,068,603 1,493,360
Balance with Scheduled Bank in Current Account overdrawn as per books 254,371 566,019
Note : No amounts are due to the Investor Education & Protection Fund
Total 6,142,101 5,356,847
SCHEDULE L :
PROVISIONS
Wealth Tax 1,171 761
Income Tax 351,243 229,243
Gratuity 134,290 109,713
Leave Encashment 32,470 25,732
Others 2,410,791 2,419,929
Total 2,929,965 2,785,378
230
For the Six months
period ended Sep
30,2004
For the Six months
period ended Sep
30,2003
SCHEDULE M :
OPERATING REVENUE
Passenger 18,068,701 15,208,634
Excess Baggage 173,753 118,534
Cargo 886,128 849,374
Other Revenue 135,599 167,944
Total 19,264,181 16,344,486
SCHEDULE N :
NON-OPERATING REVENUE
Interest on Bank & Other Deposits
[Tax Deducted at Source Rs.48,631 (Previous Year Rs 58,368)] 106,385 136,971
Exchange difference (Net) - 156,839
Profit on Sale and Hire Purchase of Engines carried forward - 85,377
Profit on sale of Current Investments (Net) - 15,945 13,389
Dividend on Investments - -
Long Term - 962
Short Term 27,977 -
27,977 962-
Excess Provision no longer required 182,199 5,358
Provision for Doubtful Debts no longer required 151 -
Other Income (including Interest on Income Tax Refund of Rs.5,005,
Previous year Rs. Nil) 69,888 58,130
Total 402,545 457,026
231
For the Six months
period ended Sep
30,2004
For the Six months
period ended Sep
30,2003
SCHEDULE O :
EMPLOYEES REMUNERATION AND BENEFITS (Net)
Salaries, Wages, Bonus & Allowances 1,575,569 1,252,923
Contribution to Provident Fund & ESIC 49,820 40,299
Provision for Gratuity 30,958 21,826
Provision for Leave Encashment 10,266 1,836
Staff Welfare Expenses 67,906 73,055
Staff training 4,308 9,455
Total 1,738,827 1,399,394
SCHEDULE P : 512,900 437,735
CRS Cost (Net) 1,834,992 1,426,485
Commission 179,318 119,220
Others 2,527,210 1,983,440
SCHEDULE Q
OPERATING EXPENSES
Aircraft Variable Rentals 334,924 550,799
Aircraft Insurance & Other Insurance 199,409 179,129
Landing, Navigation & Other Airport Charges 1,091,812 1,036,243
Aircraft Maintenance (including Customs Duty and Freight, where applicable)
Component Repairs, Recertification, Exchange, 911,365 1,258,559
Consignment Fees and Aircraft Overhaul 44,011 48,229
Lease of Aircraft Spares incl. Engine 329,716 269,648
Consumption of Stores & Spares (net) (including items scrapped Rs.
131,974 , Previous Period Rs. 117,102) 106,736 91,998
Provision for Spares Obsolescence 1,391,828 1,668,434
Inflight & Other Pax Amenities 664,507 544,085
Communication Cost 66,272 71,391
Travelling & Subsistence 160,508 138,589
Rent 131,371 138,288
Rates & Taxes 9,956 10,230
Repairs & Maintenance
Leased Premises 2,518 2,946
Others 91,450 68,498
93,968 71,444
Electricity 40,248 37,458
Director's Sitting Fees 70 115
Miscellaneous Expenses (Including Printing & Stationery, Bank Charges etc.) 195,187 244,270
Provision for Bad & Doubtful Debts 11,370 9,041
Loss on scrapping of Fixed Asset 30,630
Loss on sale of Fixed Assets other than Aircraft (Net) 4,250 485
Exchange difference (Net) 149,397
Total 4,575,707 4,700,001
SCHEDULE R
INTEREST 1,005,528 1,320,074
Hire Purchase - Finance Charges 194,716 180,513
Interest on Subordinated Debt 27,074 27,066
Interest on Fixed Loan 712 3,410
Interest on Bank overdraft 4,201 72,118
Other Interest 1,232,231 1,603,181
Less : Capitalised during the period - 34,943
Total 1,232,231 1,568,238
232
Schedule 'S'
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost convention, except for certain aircraft
which have been revalued, in accordance with the generally accepted accounting principles in India and
the provisions of the Companies Act, 1956.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted accounting principles
requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on
the date of the financial statements and the reported amount of revenue and expenses during the reporting
period. Differences between the actual result and estimates are recognised in the period in which the results
are known / materialised.
REVENUE RECOGNITION
Passenger and Cargo income is recognised on flown basis, i.e. when the service is rendered.
The net sales (sales net of refunds) are initially credited to the "Forward Sales Account". Income
recognised as indicated above is reduced from the Forward Sales Account and the balance is shown under
Current Liabilities.
Balances in Forward Sales are recognised as income where a claim for refund has not been made for two
years.
COMMISSION
As in the case of revenue, the commission paid / payable on sales including any over-riding commission
is recognised only on flown basis.
EMPLOYEE RETIREMENT BENEFITS
The company makes regular contribution to Provident Fund and this contribution is charged to Profit and
Loss Account. Provisions for Gratuity and Leave Encashment Benefit are made on the basis of actuarial
valuation and charged to Profit and Loss Account.
FIXED ASSETS
Fixed assets are stated at cost and includes amount added on revaluation less accumulated depreciation and
impairment loss, if any. All costs relating to acquisition & installation of fixed assets upto the time the
assets get ready for their intended use are capitalised.
Impairment loss (if any) is provided to the extent the carrying amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an asset's selling price or its Value in Use. Value in Use is the
present value of estimated future cash flows expected to arise from the continuing use of an asset and from
its disposal at the end of its useful life. Net Selling Price is the amount obtainable from the sale of an asset
in an arms length transaction between knowledgeable, willing parties, less the cost of disposal.
The cost of improvements to Leased Properties as well as customs duty/modification cost incurred on
aircraft taken on operating lease have been capitalised and disclosed appropriately.
233
ASSETS TAKEN ON LEASE
a) Operating Lease: Rentals are expensed with reference to the Lease Term and other
considerations.
b) Finance Lease (Hire Purchase): The lower of the fair value of the assets and the present value of
the minimum lease rentals is capitalised as Fixed Assets with corresponding amount shown as Lease
Liability (Outstanding Hire Purchase/Finance lease Instalments). The principal component of the lease
rentals is adjusted against the leased liability and interest component is charged to the Profit and Loss
Account.
INTANGIBLE ASSETS
Computer Software is amortised over 36 months on straight-line method.
INVESTMENTS
Current Investments are carried at lower of cost and quoted/fair value. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is made only if such a decline is other
than temporary in the opinion of the management.
BORROWING COSTS
Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part
of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are
incurred.
DEPRECIATION
Depreciation has been provided on Written Down Value method at the rates and in the manner prescribed
under the schedule XIV to the Companies Act, 1956 on fixed assets, other than expenditure incurred on
improvements of assets acquired on operating lease, which are written off evenly over the balance period
of the lease.
On revalued assets, depreciation is charged over the residual life and the additional charge of depreciation
is withdrawn from the Revaluation reserve.
FOREIGN EXCHANGE TRANSACTIONS
Sales and other transactions in foreign currency are recorded at the Current rate of exchange in force at the
time the transactions are effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that related to fixed assets, is adjusted in the Profit & Loss Account.
Monetary Assets and Liabilities relating to foreign exchange transactions not settled as at the year end, are
translated at the rates prevalent on that date, and losses/profits, if any on such transactions are recognised
in the Profit and Loss Account.
Exchange difference on settlement/ translation of long-term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in the
carrying amount of fixed assets over the life of the contract.
DERIVATIVES TRANSACTIONS
Gain or Loss on derivative contracts entered into to hedge exposures to interest rate fluctuations are
recognised as and when the underlying transactions are settled. Accordingly proportionate amounts are
accrued/provided for the period between the last settlement date and the year-end.
234
INVENTORIES
Inventories include:
a) Tickets & Airway Bills Stock
b) Unutilised Inflight Service Amenities
c) Expendable Aircraft Spares
d) Aircraft Fuel in the Aircraft
e) Rotables, Galley Equipment and Tooling
Inventories are valued at cost or Net Realisable Value (NRV) whichever is lower. Cost includes custom
duty, freight and other charges as applicable and is determined using the Weighted Average formula. In
respect of reusable items such as rotables, galley equipment & tooling under (e) above, NRV takes into
consideration provision for obsolescence and wear & tear based on the estimated useful life of the aircraft
derived from Schedule XIV of the Companies Act, 1956 & also includes provisioning for non-moving/
slow moving items.
REDELIVERY EXPENSES
Aircraft Redelivery Expenses have been provided in proportion to the expired lease period.
AIRCRAFT MAINTENANCE & REPAIRS COST
Aircraft Maintenance, Auxiliary Power Unit (APU) and Engine maintenance and repair costs are expensed
as incurred except where such overhaul cost in respect of Engines/ APU covered by third party
maintenance agreement and accounted in accordance therewith. (Refer Note – 18)
FREQUENT FLYER EXPENSES
The cost of allowing free travel to members of the Frequent Flyer Programme is accounted considering the
members’ accumulated mileage.
TAXATION
Provision for current tax is made after taking into consideration benefits admissible under the provisions of
the Income Tax Act, 1961.
Deferred tax resulting from “timing differences” between book and taxable profit is accounted for using
the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent that there is a reasonable/virtual
certainty that the asset will be realised in future.
CONTINGENT LIABILITY
These are disclosed by way of Notes to the Accounts. Provision is made in the accounts in respect of those
contingencies which are likely to materialise into liabilities after the year end, till the finalisation of
accounts and have material effect on the position stated in the Balance Sheet.
2. Estimated amount of Contracts remaining to be executed on capital account net of advances, not provided for
Rs.234, 863 (‘000s) (Previous Year - Rs.433, 628 (‘000s)).
3. CONTINGENT LIABILITY :
A. Unprovided Income Tax demands which are disputed in appeals Rs.37, 499 (‘000s) (Previous Year Rs.20,
345 (‘000s)).
B. Unprovided claims against the Company, pending Civil and Consumer suits of Rs. 78,765 (‘000s)
(Previous Year Rs.71, 669 (‘000s)).
C. Unprovided claims for Octroi duty on aircraft by Bombay Municipal Corporation (BMC) not accepted by
the company amounts to Rs.289, 892 (‘000s) (Previous Year Rs. 289,892(‘000s)).
D. Disputed claims against the company towards Landing & Navigation Charges made by Airports Authority
of India amounts to Rs. 196,835 (‘000s). (Previous year Rs.187,312)
235
E. Disputed claims against the company towards Ground Handling charges levied by Air India at Cochin
International Airport amounting to Rs. 235,075 (‘000s) (Previous year Rs.208,175). Presently the matter is
under sub-judice before the MRTP Commission.
F. Letters of Credit outstanding are Rs.1,629,323 (‘000s) (Previous Year Rs. 1,612,995 (‘000s)) and Bank
Guarantees outstanding are Rs. 1,572,474 (‘000s) (Previous Year Rs. 1,496,686 (‘000s)).
4. ARREARS OF PREFERENCE DIVIDEND :
Dividend payable of Rs.87,577 (‘000s) (Previous Year Rs.69,829 (‘000s)) on the Cumulative Convertible
Redeemable Preference Shares (CCRPS) from Financial Year 2002-03 to 30
th
September 2004.
5. The Company allotted 69,828,750 5% Cumulative Convertible Redeemable Preference Shares (CCRPS) of Rs.
10 each to International Finance Corporation (IFC), Washington in 2000-2001. IFC has an option to convert
these CCRPS together with an annualised return of 12% (less dividend declared) into equity shares at the time
of the initial public offering (IPO). In the event IFC does not exercise the option, the CCRPS would be
redeemed within 3 months from the IPO date. IFC also has an option for an early redemption before March 31,
2008 if certain terms laid down in the Subscription Agreement are not complied with. The Company also has
an option for early redemption after February 15, 2003 if the Company feels that it would not come out with an
IPO due to market conditions or any other reasons. In the event of redemption, IFC would receive an annual
return of 18% (less dividend declared). The exchange difference on repatriation/ at the time of conversion of
the CCRPS together with the assured return (less dividend declared) is to the account of the Company.
The company has since intimated IFC about its desire to come out with an IPO; IFC in turn has exercised its
option not to convert but to redeem. Accordingly the company proposes to redeem the CCRPS together with
the annualised return of 18% less the dividend so far declared and paid out amounting to Rs. 455,904 (‘000s)
out of the proceeds of the IPO. The annualised return less the dividend so far declared and paid out will be
adjusted against ‘Share Premium Account’ expected to be raised in the IPO.
6. Aircraft Lease Rentals are stated net of sub-lease rentals of Rs. 79,011 (‘000s) (Previous Year Rs. 26,668
(‘000s)).
7. No credit was taken in the previous accounting year 2003-04 from Forward Sales where a claim for refund has
not been made for two years (Refer accounting policy 1 (C)) pending reconciliation of the Forward Sales
Account with the subsidiary register. During the current six months period, the Forward Sales balance has
substantially been utilised and credit has been taken for expired tickets of Rs. 228,467 (‘000s) on the basis of
estimation of pattern and trend of utilization.
From March 1,2004 the company has shifted to a new accounting package for Passenger and Cargo Revenue.
8. During the period ended 30
th
September,2004 the Company has purchased and sold Current Investments in
liquid plans of various Mutual Funds detailed below:
MUTUAL FUND NO. OF UNITS ( in ‘000s) COST (Rs. ‘000s)
Kotak Mahindra Mutual Fund 170,720 2,151,460
Deutsche Mutual Fund 93,957 956,036
HDFC Mutual Fund 62,903 780,500
JM Mutual Fund 66,206 665,220
Prudential ICICI Mutual Fund 78,673 1,189,298
ING Vysya Mutual Fund 53,339 553,500
SBI Mutual Fund 99,031 1,032,229
HSBC Mutual Fund 71,003 711,822
Principal Mutual Fund 129,329 1,296,172
Alliance Capital Mutual Fund 59,176 618,055
Birla Sun Life Mutual Fund 44,111 497,027
Standard Chartered Mutual Fund 159,245 1,598,818
Reliance Mutual Fund 68,760 855,129
Franklin Templeton Mutual Fund 401 400,548
Tata Mutual Fund 88,971 1,016,475
Chola Mutual Fund 8,747 100,000
236
9. A. Prior Period credits included in the determination of the net profit are towards Aircraft Maintenance Rs. Nil ('000s)
(Previous Year Rs. 18,756 (‘000s)).
B. Prior Period debits included in the determination of the net profit are Interest on Rupee loans of Rs. 4,120 (‘000s)
(Previous Year Rs. Nil), and provision for disputed damage charges levied by Airports Authority of India amounting to
Rs. 24,386 (‘000s) (Previous Year Rs. Nil).
10. The Company raised a Subordinated Rupee Debt of Rs.2, 640,000 (‘000s) equivalent to USD 55.6 Million from
Infrastructure Development Finance Company Ltd. (IDFC) in 2001-2002. As per the terms of the borrowings, interest @
4% p.a. is payable every year and a further interest @ 8.45% p.a. is to be cumulated and compounded every year payable at
the end of 8 years i.e. August 23, 2009 or any prepayment date. The principal amount along with the accumulated interest
is repayable in lump sum at the end of 8 years. Accordingly an amount of Rs. 701,100 ('000s) has been cumulated and
compounded upto August 23, 2004 and included in the debt and the interest accrued from August 23, 2004 to the period
ended 30
th
September 2004 is provided for. The Company has an option to prepay the entire amount outstanding on the
fourth anniversary of the debt drawdown i.e. August 23, 2005, failing which IDFC shall have the right to reset the interest
rate for the balance term of the debt. The Company has maintained a Bank Guarantee of Rs.1,170,000 (‘000s) (Previous
year Rs. 1,120,000 (‘000s)) equal to 35% of the debt.
As per the terms and conditions of the document, until all US Exim supported obligations are repaid or discharged in full,
the subordinated debt, shall, in all respects, be subordinated to all the present and future indebtedness of the Company,
whether secured or unsecured.
In the event of default by the Company in payment of the annual interest or the payment of the cumulative loan or
maintaining adequate security deposit/ bank guarantee, IDFC has the right to seek conversion of the amounts due into
equity shares of the Company. However, the Company has the option to buy back these shares subject to the prevailing
law.
11. PAYMENTS TO AUDITORS FOR THE PERIOD ENDED :
Amount (Rs.'000s)
30-Sep-04 30-Sep-03
a) As Audit Fees
2,865
972
b) As Advisor or in any other capacity in respect of :
Company Law Matters
Taxation
-
2,250
945
1,570
c) In any other manner (certification, etc.) 2,865
1,133
d) For reimbursement of expenses
-
1
Total 7,980 4,621
12. MANAGERIAL REMUNERATION :
Amount (Rs.'000s)
30-Sep-04 30-Sep-03
i. Salary 1,541 1,434
ii. Contribution to Provident Fund and Provision for
Gratuity
178 177
iii. Perquisites 346 357
Total 2,065 1,968
13. SEGMENT REPORTING :
The proportion of international operations revenue to the total revenue is insignificant, therefore has not been reported
separately.
As such all other related activities revolve around the main business. Hence there are no such separate reportable segments,
as required by the Accounting Standard - 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of
India.
237
14. RELATED PARTY TRANSACTIONS :
As per Accounting Standard - 18 on “Related Party Disclosures” issued by the Institute of Chartered Accountants of India,
the disclosure of transactions with the related party as defined in the Accounting Standard are given below:
i. List of Related Parties with whom transactions have taken place and Relationships :
Sr. No. Name of the related party Nature of relationship
1 Tailwinds Ltd. Holding Company
2 Naresh Goyal Controlling Shareholder of Holding Company
3 Anita Goyal Relative of Naresh Goyal
4 Saroj K Datta Executive Director
5 Jetair Pvt. Ltd. Associate Companies
6 Jet Enterprises Pvt. Ltd
7 Jet Airways LLC
8 Jet Airways of India Inc.
9 Jetair Tours Pvt. Ltd.
10 Vimpal Holding Pvt. Ltd.
11 International Cargo Carriers Pvt. Ltd.
12 National Travel Services Associate Partnership firm
ii. Transactions during the period ended 30
th
September, 2004 and balances with related parties :
Amount (Rs. ‘000s)
Associated
Companies
Sr.
No.
Nature of Transactions Holding
Company
Relative of
Naresh Goyal
Executive
Director
Jetair Pvt.
Ltd.
Others
A) Remuneration 43 2,065
(2,109) (1,968)
B) Agency Commission 551,914 76,575
(376,782) (72,995)
C) Rent paid 2,178
(2,178)
3,000
(10,500)
D) Expenses Reimbursed (Staff
Costs / Communication Costs,
Rent)
-313,423
(-218,104)
E) Trademark Fees 36,588
*(29,704)
(Figures in brackets indicates September 30, 2003 figures)
*with Jet Enterprise Pvt. Ltd.
Associated
Companies
Sr.
No.
Nature of Transactions Holding
Company
Relative of
Naresh Goyal
Executive
Director
Jetair Pvt.
Ltd.
Others
A) Deposits & Advance for Leased
Premises
126,837
(126,837)
38,000
(41,000)
B) Sundry Creditors 95,256
(Nil)
13,302
(13,014)
C) Sundry Debtors Nil
(122)
Nil
(13,129)
D) Share Capital
(Equity Contribution)
720,889
(720,889)
(Figures in brackets indicates March 31, 2004 figures)
238
15. The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on
‘Leases’ issued by the Institute of Chartered Accountants of India, the future minimum lease payments on account of each
type of lease are as follows: -
A) Finance Leases/ Hire Purchase
Amount (Rs. ‘000s)
Particulars Future Minimum Lease
Payments
Present Value of
Future Minimum
Finance Charges
As at Lease Payments
30
th
Sep’04
As at
30
th
Sep’04
Aircraft
Less than 1 year
4,649,681
(4,565,856)
2,781,812
(2,676,372)
1,867,869
(1,889,484)
Between 1 and 5 years 17,709,378
(17,488,765)
11,960,993
(11,546,832)
5,748,385
(5,941,933)
More than 5 years 14,777,773
(16,668,869)
12,780,798
(14,150,477)
1,996,975
(2,518,392)
Total
37,136,832
(38,723,490)
27,523,603
(28,373,681)
9,613,229
(10,349,809)
Vehicles
Less than 1 year
9,013
(31,202)
7,740
(28,613)
1,273
(2,589)
Between 1 and 5 years
9,210
(14,712)
8,447
(13,363)
763
(1,350)
More than 5 years (-)
(-)
(-)
(-)
(-)
(-)
Total 18,223
(45,914)
16,187
(41,976)
2,036
(3,939)
Grand Total 37,155,055
(38,769,404)
27,539,790
(28,415,657)
9,615,265
(10,353,748)
(Figures in brackets indicates March 31, 2004 figures)
The salient features of a Hire Purchase/ Finance Lease Agreement are:
• Option to purchase the aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount
or at the end of the Hire Purchase term on payment of a nominal option price.
• In the event of default, the Hirer/ Lessee is responsible for payment of all costs of the Owner including the financing cost,
and other associated costs. Further a right of repossession is available to the Owner/ Lessor.
• The Hirer/ Lessee is responsible for maintaining the aircraft as well as insuring the same.
• In the case of Hire Purchase/Finance Lease the property passes to the Hirer/Lessee, on the payment of a nominal option
price at the end of the term.
B) Operating Leases
Amount (Rs.’ 000s)
Particulars Total Lease Payments
30-Sep-04
Aircraft & Spare Engines
Less than 1 year 2,131,531
(2,265,668)
Between 1 and 5 years 4,093,612
(6,182,363)
More than 5 years (-)
(-)
Grand Total 6,225,143
(8,448,031)
239
Amount (Rs.’ 000s)
Particulars Total Lease Payments
30-Sep-04
Aircraft given on sub – lease
Less than 1 year -163,013
(-159,610)
Between 1 and 5 years -499,853
(-661,022)
More than 5 years (-)
(-)
Grand Total -662,866
(-820,632)
(Figures in brackets indicates September 30, 2003 figures)
The Salient features of an Operating Lease agreement are:
• Monthly rentals paid in form of fixed and variable rental. Variable Lease Rentals are payable on a pre determined
rate payable on the basis of actual flying hours. Additionally, the predetermined rates of Variable Rentals are
subject to the annual escalation as stipulated in the respective leases.
• The Company does not have an option to buyback nor does it generally have an option to renew the leases.
• In case of delayed payments, penal charges are payable as stipulated.
• In case of default, in addition to repossession of the aircraft, damages including liquidated damages as stipulated
are payable.
• The Lessee is responsible for maintaining the aircraft as well as insuring the same. The Lessee is eligible to claim
reimbursement of costs as per the terms of the lease agreement.
• The leases are non-cancellable.
16. EARNINGS PER SHARE (EPS) :
The earnings per equity share, computed as per the requirements of Accounting Standard – 20 “Earnings Per Share”
issued by the Institute of Chartered Accountants Of India, is as under:
Amount (Rs. ‘000s)
30-Sep-04 30-Sep-03
Net Profit/ (Loss) after tax
Less: Annualised return on Cumulative Preference Shares
1,293,597
57,023
(155,023)
50,863
Balance Profit attributable to Equity Shareholders A 1,236,574 (205,886)
Add : Return on Preference Shares (See above)
Add : Interest (net) on Institutional Loan with
convertibility clause
57,023
179,448
50,863
166,636
Adjusted Net Profit for Diluted Earnings per Share B 1,473,045 11,613
Weighted no. of Equity Shares outstanding during C
the period
No of Equity Shares resulting from the conversion of
Institutional Loan
No of Equity Shares resulting from the conversion of
CCRPS
72,088,900
313,625,375
99,183,229
72,088,900
289,188,912
88,468,128
Weighted no. of Diluted Equity Shares outstanding during the period
(Nos.) D
484,897,504 449,745,940
Nominal Value of Equity Shares (Rs.) 10 10
Basic EPS (INR) (E = A/C)
(not annualised)
17.15 (2.86)*
Diluted EPS (INR) (F = B/D)
(not annualised)
3.04 (2.86)*
* Being anti-dilutive the Basic & Diluted EPS are the same.
240
17. The Deferred Tax Liability as at 30
th
September 2004 comprises of the following:
Amount (Rs. ‘000s)
Particulars 30-Sep-04 2003-04
Deferred Tax Liability
Related to Fixed Assets
3,436,098
3,173,054
Deferred Tax Asset
Unabsorbed Depreciation
Other Disallowances under Income Tax Act, 1961
2,684,860
77,686
2,581,722
83,882
Provision for Deferred Tax Liability (Net) 673,552 507,450
Deferred Tax Asset on account of unabsorbed tax depreciation has been recognised, as it can be realised against the reversal
of deferred tax liability on account of depreciation.
18. Hitherto costs associated with heavy aircraft maintenance checks (C/D check) and Engine repairs not covered by third party
maintenance agreement were provided for on the basis of a predetermined amount for each block hour flown. The costs of
such maintenance were charged against these provisions. However, in view of mandatory Accounting Standard –29 on
“Provisions, Contingent Liabilities and Contingent Assets” issued by the Institute of Chartered Accountant of India,
applicable for period commencing from 1-4-2004, the company has for the six months ended 30
th
September 2004,
accounted for said expenses on an incurred basis, applying the standard prospectively. Consequently, charge on account of
said expenses for the six months ended 30
th
September 2004 is lower by Rs. 411,035(‘000s) and profit for the period is
higher by the like amount.
19. The company has provided for the following types of expenditure:-
a) Frequent Flyer Programme: -
The Company has a Frequent Flyer Programme named ‘Jet Privilege’, wherein the passengers who frequently use the
services of the Airline become members of ‘Jet Privilege’ and accumulate miles to their credit. Subject to certain terms and
conditions of ‘Jet Privilege’, the passenger is eligible to redeem such miles lying to their credit in the form of free tickets.
The cost of allowing free travel to members as contractually agreed under the Frequent Flyer Programme is accounted
considering the members’ accumulated mileage on an incremental cost basis. The movement in the provision during the
period is as under: -
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 118,400
Add: - Additional Provisions during the period 63,136
181,536
Less: - Amounts used during the period 26,401
155,135
Less: - Unused Amounts reversed during the period -
Closing Balance as at 30/09/2004 155,135
b) Redelivery of Aircraft: -
The company has in its fleet few aircraft on operating lease. As contractually agreed under the lease agreements, the aircraft
have to be redelivered to the lessors at the end of the lease term in the stipulated technical condition. Such redelivery
conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and the
cost of ferrying the aircraft to the location as stipulated under the lease agreement.
The company therefore provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease
period.
241
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 153,472
Add:- Additional Provisions during the period
(Net of Exchange Fluctuation of Rs. 5,016 (‘000s))
14,223
167,695
Less:- Amounts used during the period -
167,695
Less:- Unused Amounts reversed during the period 27,199
Closing Balance as at 30/09/2004 140,496
The cash outflow out of the above provisions as per the current terms under the lease agreements are as under: -
Year No of Aircraft Amount (Rs.‘ 000s)
2004-05 1 8,812
2005-06 4 31,709
2006-07 3 34,028
2007-08 7 42,773
2008-09 2 23,174
Total 140,496
c) Aircraft Maintenance Costs: -
Certain heavy maintenance checks including overhaul of Auxiliary Power Units need to be performed at specified intervals
as enforced by the Director General of Civil Aviation in accordance with the Maintenance Program Document laid down by
the manufacturers. The movements in the provisions for such costs are as under: -
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 1,725,308
Add: - Addition due to Exchange Fluctuation (Refer Note No.18) 93,560
1,818,868
Less: - Amounts used during the period 49,110
1,769,758
Less: - Unused Amounts reversed during the period 99,516
Closing Balance as at 30/09/2004 1,670,242
d) Engine Repairs Cost: -
The aircraft engines have to undergo shop visits for overhaul and maintenance at specified intervals as per the Maintenance
Program Document. The same is provided for on the basis of hours flown at a pre-determined rate.
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 422,748
Add: - Addition due to Exchange Fluctuation (Refer Note No.18) 22,168
444,916
Less: - Amounts used during the period -
444,916
Less: - Unused Amounts reversed during the period -
Closing Balance as at 30/09/2004 444,916
20. Previous Year’s figures have been re-grouped, wherever necessary to correspond with figures of current year.
242
21. Comparative figures in the case of Balance Sheet items and related notes have been provided as at March 31,2004, while in
the case of Profit & Loss items and related notes they have been provided for corresponding six months of the last Financial
Year.
Signatures to Schedules 'A' to 'S’
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
243
Statement of Cash Flow for the Six months period ended 30
th
September 2004
April 04- Sept 04 Apr 03- Sep 03
Rs. ‘000s Rs. ‘000s
A Cash Flow from Operating Activities
Net Profit / (Loss) before tax 1,582,108 (154,753)
Adjustments for :
Depreciation & Stock Obsolescence 2,397,597 2,637,560
Loss/(Profit) on sale of Fixed assets 34,880 (84,892)
Profit on sale of Investments (15,945) (13,389)
Interest expense 1,232,231 1,568,238
Provision for doubtful debts 11,370 9,041
Operating profit before working capital
changes
5,242,241 3,961,805
Changes in Inventories (52,874) (185,163)
Changes in Sundry Debtors (342,780) 156,632
Changes in Fixed Deposits with Banks (Refer
Foot note)
517,006 880,022
Changes in Loans & Advances (32,789) (9,847)
Changes in Current Liabilities and Provisions 990,099 (197,045)
Cash generated from operations 6,320,903 4,606,404
Income tax paid (110,807) 56,178
Net cash from operating activities A 6,210,096 4,662,582
B Cash Flow from Investing Activities
Capital Expenditure - Aircraft & Others (816,614) (1,662,667)
Proceeds from sale of fixed assets 2,590 1,793
Purchase of Investments (19,329,889) (13,262,500)
Sale of Investments 16,671,706 12,852,889
Net cash from investing activities B (3,472,207) (2,070,485)
C Cash flows from Financing Activities
Decrease in Term Loans (879,300) (1,487,704)
Interest paid (1,154,574) (1,527,363)
Net cash used from financing activities C (2,033,874) (3,015,067)
Net change in cash (A+B+C) 704,015 (422,970)
Cash and cash equivalents at beginning of
period
135,563 634,788
Cash and Bank equivalents at end of period 839,578 211,818
Note: Fixed Deposits with banks with maturity period of more than 3 months including interest
accrued thereon and Fixed Deposits under lien are not included in Cash and Cash equivalents
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
244
STATEMENT OF TAX BENEFITS
The Board of Directors
Jet Airways (India) Limited
Dear Sirs,
We hereby certify that the enclosed annexure states the tax benefits available to Jet Airways (India) Ltd. (the
“Company”) and to the Shareholders of the Company under the provisions of the Income Tax Act, 1961 and other
direct tax laws presently in force.
The contents of this annexure is based on information, explanations and representations obtained from the Company
and on the basis of our understanding of the business activities and operations of the Company.
A shareholder is advised to consider in his/her/its own case, the tax implications of an investment in the equity
shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal precedent
or may have a different interpretation on the benefits, which an investor can avail.
For Chaturvedi & Shah
Chartered Accountants
C.D. Lala
Membership No.: 35671
Place: Mumbai
Date : December 31, 2004
245
ANNEXURE TO THE CERTIFICATE DATED DECEMBER 31, 2004
(A) Benefits to the Company Under Income-Tax Act, 1961:
1. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of any company is
exempted from the tax.
2. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
3. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
4. Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve
months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long
term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed
cost of acquisition.
5. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of investment in
shares will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
6. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of investment in shares
will be exempt from capital gains tax if the capital gains are invested in shares of an Indian Company
forming part of an eligible public issue, within a period of 6 months after the date of such transfer and held
for a period of at least one year. Eligible public issue means issue of equity shares which satisfies the
following conditions, namely -
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
7. Under section 112 of the Act and other relevant provisions of the Act, Long term capital gains, (i.e. if
shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act),
arising on transfer of investment in shares, shall be taxed at a rate of 20% (plus applicable surcharge) after
indexation as provided in the second proviso to section 48. The amount of such tax should however be
limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder.
246
8. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if
shares are held for a period not exceeding 12 months), arising on transfer of investment in shares on a
recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge).
(B) Benefits to the Shareholders of the Company under the Income Tax Act, 1961:
Resident Shareholders
9. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of the company is
exempted from the tax.
10. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
11. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
12. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
13. In terms of section 10(23D) of the Act, all Mutual Funds set up by Public Sector Banks or Public Financial
Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized by
the Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from
income tax on all their income, including income from investment in the shares of the company.
14. Under section 48 of the Act, if the company’s shares are sold after being held for not less than twelve
months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long
term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed
cost of acquisition.
15. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of shares of the
Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by:
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
16. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of shares of the
Company, as and when it is listed, will be exempt from capital gains tax if the capital gains are invested in
shares of an Indian Company forming part of an eligible public issue, within a period of 6 months after the
date of such transfer and held for a period of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely -
247
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
17. Under section 54F of the Act, long term capital gains (in cases not covered under section 10(38) of the
Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the net consideration from such shares are
used for purchase of residential house property within a period of one year before and two years after the
date on which the transfer took place or for construction of residential house property within a period of
three years after the date of transfer.
18. Under section 112 of the Act and other relevant provisions of the Act, Long term capital gains, (i.e. if
shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act),
arising on transfer of shares in the Company, shall be taxed at a rate of 20% (plus applicable surcharge)
after indexation as provided in the second proviso to section 48. The amount of such tax should however
be limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder, if the
transfer is made after listing of shares.
19. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if
shares are held for a period not exceeding 12 months), arising on transfer of shares in the Company on a
recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge).
Non-Resident Indians/Non Residents Shareholders (Other than FIIs and Foreign venture capital investors.
20. In terms of section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received by a non-resident Indian
shareholder (i.e. an individual being a citizen of India or person of Indian origin who is not a ‘resident’) on
the shares of the company is exempted from the tax.
21. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax.
22. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
23. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
24. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of shares of the
company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
248
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
25. Under Section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of shares of the
company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in
shares of an Indian company forming part of an eligible public issue, within a period of 6 months after the
date of such transfer and held for a period of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely-
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
26. Under section 54F of the Act, long term capital gains (in cases not covered under section 10(38) of the
Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the net consideration from such shares are
used for purchase of residential house property within a period of one year before and two year after the
date on which the transfer took place or for construction of residential house property within a period of
three years after the date of transfer.
27. Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains (i.e. if shares
are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising
on transfer of shares in the company, shall be taxed at a rate of 20% (plus applicable surcharge) after
indexation as provided in the second proviso to section 48. The amount of such tax should however, be
limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder, if the
transfer is made after listing of shares.
28. Under section 115-I of the Act, the non-resident Indian shareholder has an option to be governed by the
provisions of Chapter XII-A of the Income Tax Act, 1961 viz. “Special Provisions Relating to Certain
Incomes of Non-Residents” which are as follows:-
a) Under section 115E of the Act, where shares in the company are acquired or subscribed for in
convertible Foreign Exchange by a Non Resident Indian, capital gains arising to the non-resident
on transfer of shares held for a period exceeding 12 months on a recognized stock exchange, shall
(in cases not covered under section 10(38) of the Act) be concessionally taxed at the flat rate of
10% (plus applicable surcharge) (without indexation benefit but with protection against foreign
exchange fluctuation).
b) Under provisions of section 115F of the Act, long term capital gains (in cases not covered under
section 10(38) of the Act) arising to a non-resident Indian from the transfer of shares of the
company subscribed to in convertible Foreign Exchange (in cases not covered under section 115E
of the Act) shall be exempt from Income tax, if the net consideration is reinvested in specified
assets within six months of the date of transfer. If only part of the net consideration is so
reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be
chargeable to tax subsequently, if the specified assets are transferred or converted into money
within three years from the date of their acquisition.
Foreign Institutional Investors (FIIs)
29. In terms of section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of the company is
exempted from the tax.
30. In terms of section 10(38) of the Act, any long term capital gains arising to an investor from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
investor if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
249
31. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the investor, shall
be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and
sale of equity share in a company through the recognized stock exchange is liable to securities transaction
tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale transactions are
liable to tax @ 0.015% of the value payable by the seller.
32. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
33. The income by way of short term capital gains or long term capital gains (in cases not covered under
section 10(38) of the Act) realized by FIIs on sale of shares in the company would be taxed @ 10% as per
section 115AD of the Act. However in case of such long term capital gains, the tax is levied on the capital
gains computed without considering the cost indexation and protection against foreign exchange
fluctuation).
34. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gain (in cases not covered under section 10(38) of the Act) arising on the transfer of share of the
company will be exempt from capital gain tax if the capital gain are invested within a period of 6 month
after the date of such transfer for a period of last 3 year in bond issued by:-
a) National Bank for agriculture and Rural Development established under section 3 of The National
Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of the National Highway
Authority of India Act, 1988.
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989.
35. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) o the Act) on the transfer of shares of the
company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in
shares of an Indian company forming part of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely -
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
Venture Capital Companies/Funds
In terms of section 10(23FB) of the Act, all Venture capital companies/funds registered with Securities and
Exchange of India, subject to the conditions specified, are eligible for exemption from income tax on all their
income, including dividend from and income from sale of shares of the company.
250
(C) Benefits to Members of the Company under the Wealth Tax Act, 1957
Shares of company held by the shareholder will not be treated as an asset within the meaning of section
2(ea) of Wealth Tax Act 1957, hence shares are not liable to Wealth Tax Act, 1957
(D) Benefits to Members of the Company under the Gift Tax Act, 1958.
Gift made after 1st October 1998 is not liable for any gift tax and hence gift of shares of the company
would not be liable for any gift tax.
Notes:
1. All the above benefits are as per the current tax law as amended by the Finance (No.2) Act, 2004.
2. The stated benefits will be available only to the sole/first named holder in case the shares are held by joint
holders.
3. In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further
subject to any benefits available under the Double Taxation Avoidance Agreements, if any, between India
and the country in which the non-resident has fiscal domicile.
4. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax
advisor with respect to specific tax consequences of his/her participation in the scheme.
251
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP, IFRS AND U.S. GAAP
The Company’s financial statements are prepared in conformity with the generally accepted accounting principles
followed in India (“Indian GAAP”), which differ in certain significant respects from International Accounting
Standards/International Financial Reporting Standards (IAS/IFRS) and generally accepted accounting standards in
the United States of America (US GAAP). Such differences involve methods for measuring the amounts shown in
the financial statements of the Issuer, as well as additional disclosures required by IAS/IFRS and US GAAP, which
the Company has not made.
The following summarizes the areas in which differences between Indian GAAP, IAS/IFRS, and US GAAP could
be significant to the financial position and results of operations of the Company. The summary below should not be
construed to be exhaustive as no attempt has been made by management of the Company to quantify the effects of
those differences, nor has a complete reconciliation of Indian GAAP to IAS/IFRS or US GAAP been undertaken by
management. Had any such quantification or reconciliation been undertaken by the management of the Company,
other potential significant accounting and disclosure differences may have come to its attention, which is not
identified below.
Further, no attempt has been made to identify future differences between Indian GAAP and IAS/IFRS or US
GAAP as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate Indian GAAP,
IAS/IFRS, and US GAAP have significant projects ongoing that could affect future comparisons such as this one.
Finally, no attempt has been made to identify future differences between Indian GAAP and IAS/IFRS or US
GAAP that may affect the financial information as result of transactions or events that may occur in the future.
Potential investors should consult their own professional advisors for an understanding of the principal differences
between Indian GAAP, IAS/IFRS, and US GAAP and how these differences might affect the financial statements
of the Company set out in pages 196 to 243 of this Draft Red Herring Prospectus.
Elements of the Company’s accounting principles followed in the preparation of the Indian GAAP financial
statements, which differ significantly from IAS/IFRS and U.S. GAAP are described below:
Indian GAAP IAS/IFRS US GAAP
Changes in Accounting Policy
Any change in an accounting policy, which has
a material effect, should be disclosed. The
impact of, and the adjustments resulting from,
such change, if material, should be shown in the
financial statements of the period in which such
change is made, to reflect the effect of such
change. Where the effect of such change is not
ascertainable, wholly or in part, the fact should
be indicated. If a change is made in the
accounting policies which has no material effect
on the financial statements for the current period
but which is reasonably expected to have a
material effect in later periods, the fact of such
change should be appropriately disclosed in the
period in which the change is adopted.
Policy changes made on the adoption of a new
standard must be accounted for in accordance
with that standard’s transition provisions
Changes in accounting policy should be
accounted for retrospectively, with
comparative information restated and the
amount of the adjustment relating to prior
periods adjusted against the opening balance
of retained earnings of the earliest year
presented. An exemption applies when it is
impracticable to change comparative
information. Policy changes made on the
adoption of a new standard must be accounted
for in accordance with that standard’s
transition provisions. If transition provisions
are not specified, the method described above
must be used.
Requires recognition and disclosure of the
cumulative amount of the change in the
income statement for the period of the
change. The entity discloses pro-forma
comparatives as if the change had been
applied to those periods. However,
retrospective adjustments are required in
certain cases. Unlike IFRS, US GAAP
treats a change in the depreciation method
for previously recorded assets as a change
in accounting principle.
Revenue / Expenditure -- Frequent flyer
Passenger and Cargo income is recognised on
flown basis, i.e. when the service is rendered.
The cost of allowing free travel to members of
the Frequent Flyer Programme is accounted,
considering the members’ accumulated mileage.
Net Liability for free miles under Frequent flyer
programme determined based on the
incremental cost basis.
Similar to Indian GAAP.
Similar to Indian GAAP, save for
accounting for frequent flyer program as
described below.
Frequent flyer program obligations are
accounted by recording a liability for the
estimated incremental cost of flight awards
expected to be redeemed.
The Company would need to defer a portion
of the revenue in respect of mileage credits
that are likely to be redeemed through
participating partners such as other airlines,
hotels and car rental agencies and which
would require settlement in cash with these
parties. The revenue is recognized over the
period in which the credits are expected to
be redeemed.
252
Indian GAAP IAS/IFRS US GAAP
Retirement benefits
The liability for defined benefit plan is
actuarially determined. Several alternative
methodologies are considered acceptable for the
purposes of valuation and the actuary has
discretion over selection of the assumptions.
Compensated absences
Leave encashment or vacation accrual is viewed
as retirement benefit and is reported based on
actuarial valuation.
The liability for defined benefit plan is
reported at the present value of future benefits
using the projected unit cost method, with a
stipulated method to determine assumptions.
Actuarial gains and losses arising on periodic
valuation of liability would need to be
recognized based on certain criteria. As a
minimum, amortization of an unrecognized net
gain or loss shall be included as a component
of employee cost for a year if, as of the
beginning of the year, that unrecognized net
gain or loss exceeds 10 percent of the
projected benefit obligation Actuarial gains or
losses are amortized based on the expected
average remaining working lives of the
employees. Other systematic methods such as
immediate recognition of all gains and losses
is also permitted.
Compensated absences outstanding at the
balance sheet date are reported as liability and
is priced at the salary rate prevalent on the
balance sheet date.
Similar to IFRS except that immediate
recognition of actuarial gains or losses
immediately is not permitted.
Similar to IFRS.
Revaluation of Fixed Assets
Fixed assets are stated at historical cost or
revalued amount less accumulated depreciation
and accumulated impairment losses. If the
carrying amount is increased as a result of
revaluation, the increase is credited directly to
equity under the heading Revaluation Reserve.
However, the increase shall be credited in the
income statement to the extent that it reverses a
revaluation decrease of the same asset
previously recognized in the income statement.
If an asset’s carrying amount is decreased as a
result of revaluation, the decrease is recognized
in the income statement. However, the decrease
is directly debited to equity under the heading
Revaluation Reserve to the extent of any credit
balance existing in the revaluation reserve in
respect of that asset.
An entity that elects to revalue an item of
property, plant and equipment, the entire class
of property, plant and equipment to which the
asset belongs should be revalued. Revaluation
shall be made at sufficient regularity to ensure
that the carrying amount does not differ
materially from that which would be
determined using the fair value at the balance
sheet date.
Recognition of an increase or decrease in
revaluation is similar to Indian GAAP.
No upward revaluation of any class of fixed
assets is permitted.
Purchase Incentives
The assets that are received free of cost in
connection with the purchase of other assets are
carried at nil value.
Similar to Indian GAAP.
.
Credits issued by vendors for e.g. aircraft
manufacturers, which can be used for
purchase of spare parts, or other equipment
can be applied as reduction of purchase
price of the aircraft or amortised over the
life of the related aircraft.
Foreign Exchange Differences
Foreign exchange difference relating to
acquisition of fixed assets is adjusted to the
carrying cost of such assets. Other foreign
exchange differences are recognized in the profit
and loss account.
Premium or discount on forward exchange
contracts is amortized and recognized in the
income statement over the period of such
contract, except in respect of contracts relating
to liabilities for purchase of fixed assets where
the amortization is adjusted to the carrying value
of the fixed assets.
All gains or losses arising out of foreign
exchange differences are required to be
included in the determination of net income,
unless these differences are regarded as an
adjustment to interest costs, which are eligible
for capitalization as borrowing costs on fixed
assets.
Exchange differences relating to monetary
assets and liabilities are recorded through
the income statement and those on all non-
monetary assets are not recorded.
Borrowing Costs
Borrowing costs attributable to the acquisition
or construction of a qualifying asset is
capitalised as part of the cost of the asset. Other
borrowing costs are recognised as an expense in
the period in which they are incurred. Costs
considered include interest, and other upfront
fees paid in connection with the arrangement of
funds.
Borrowing costs are recognized as an expense
in the period in which they are incurred and
should be calculated using an effective
interest-rate method. Borrowing costs include
the amortization of transaction costs included
in the initial arrangement of borrowings An
acceptable alternative is to capitalize those
borrowing costs attributable to the acquisition,
construction or production of an asset.
Interest cost is capitalized as part of the cost
of an asset that is constructed or produced
for an entity’s own use. The capitalization
period begins when activities to ready the
asset for its use commences and ends when
the asset is ready for use.
253
Indian GAAP IAS/IFRS US GAAP
Depreciation on fixed assets
The Company generally provides for
depreciation using the written down value
method as per rates prescribed in schedule XIV
of the Companies Act1956. These are the
minimum rates and companies are permitted to
charge depreciation at higher rates in order to
write-off the cost of the assets over their useful
lives, if shorter.
The depreciable amount of an item of
property, plant and equipment are allocated on
a systematic basis over its useful life.
Depreciation is provided on a systematic
and rational manner over the estimated
useful economic life of the asset.
Inventories
Under Indian GAAP inventories are carried at
the lower of cost or net realizable value
(“NRV”) and include aircraft rotables, galley
equipment and tooling. In respect of reusable
items such as rotables, galley equipment &
tooling NRV takes into consideration provision
for obsolescence and wear & tear based on the
estimated useful life of the aircraft derived from
Schedule XIV to the Companies Act, 1956
Similar to US GAAP. Rotables and assemblies of significant
values & other non-expendable parts are
classified along with flight equipment as
fixed assets & depreciated over the
estimated useful life.
AIRCRAFT OVERHAUL/MAINTENANCE
COSTS
Prior to April 1, 2004 heavy maintenance
expenses on C/D checks on aircrafts were
booked at a pre – determined rate. Consequent
to introduction of Accounting Standard 29
“Provisions, Contingent Liabilities and
Contingent Assets”,
Aircraft Maintenance, Auxiliary Power Unit
(APU) and Engine maintenance and repair costs
are expensed as incurred except where such
overhaul cost in respect of Engines/ APU is
covered by third party maintenance agreement
and accounted in accordance therewith. The
accounting standard has been applied
prospectively.
Overhaul expenditure is recognized as an
expense in the period when incurred.
However, in accordance with IAS 16 on
Property, Plant and Equipment, cost of major
inspection (distinct from physical parts) is
recognized in the carrying amount of property,
plant and equipment as replacement if it meets
the recognition criteria. Similarly cost of
replacing a part of property, plant and
equipment can be capitalized if the recognition
criteria are met. In order to capitalize an item
as property, plant and equipment it should be
probable that the future economic benefits
associated with that item will flow to the entity
and cost of the item can be reliably measured.
The carrying amount of any previous
inspection cost capitalized and the part
replaced should be derecognized as property,
plant and equipment and should be included in
determination of profit or loss in the period of
replacement.
Adopt an accounting method that
recognizes overhaul expenses in the
appropriate period. The following
accounting methods are most often
employed:
• Direct expensing method
• Built-in overhaul method
• Deferral method
• Accrual method
Direct Expensing Method. Recognize the
cost of overhauls as expenses as they are
incurred.
Built-in Overhaul Method. The built-in
overhaul method is based on segregation of
the aircraft costs into those that should be
depreciated over the useful life of the
aircraft and those that require overhaul at
periodic intervals. Thus, the estimated cost
of the overhaul component included in the
purchase price is set up separately from the
cost of the airframe and engines and is
amortized to the date of the initial overhaul.
The cost of the initial overhaul is then
capitalized and amortized to the next
overhaul, at which time the process is
repeated.
Deferral Method. Under the deferral
method, the actual cost of each overhaul is
capitalized and amortized to the next
overhaul.
Accrual Method. The accrual method
provides for estimating the cost of the initial
overhaul and accruing the cost, based on an
hourly rate, to the overhaul. At that time,
the actual cost of overhaul is charged to the
accrual, with any deficiency or excess
charged or credited to expense. The cost of
the next overhaul is then estimated, based
on the new rate, and accrued to that
overhaul, at which time the process is
repeated.
Derivative Contracts
Gain or Loss on derivative contracts entered into
to hedge exposures to interest rate fluctuations
are recognised as and when the underlying
transactions are settled. Accordingly
proportionate amounts are accrued/provided for
the period between the last settlement date and
the year-end
Similar to US GAAP.
The FASB issued SFAS No.137,
“Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective
Date of FASB Statement No.133, which
amends SFAS No.133, “Accounting for
Derivatives Instruments and Hedging
Activites”, with effect from April 1, 2001.
SFAS No.133 establishes accounting and
254
Indian GAAP IAS/IFRS US GAAP
reporting standards for derivative
instruments and hedging activities,
including certain derivative instruments
embedded in other contracts, and requires
that an entity recognizes all derivatives as
assets or liabilities in the balance sheet and
measure them at fair values, with changes in
fair values being recognized in earnings,
unless it qualifies the criterion of an
effective hedge, as defined in SFAS
No.133, in which case the changes in fair
value is recognized as other comprehensive
income in under shareholders’ equity.
The gain or loss on derivative financial
instruments that is designated and effective
as hedges are generally recognized in
earnings in the same period as the
corresponding gain or loss on the
underlying transaction being hedged.
In a fair value hedge, a derivative
instrument is marked to its fair value
currently through earnings with an
offsetting partial mark-to-fair-value of the
hedged item (for the risk being hedged)
currently through earnings.
In a cash flow hedge, a derivative
instrument is first marked to its fair value
with the effective portion of the gain or loss
reported initially in comprehensive income
(equity) and the ineffective portion reported
currently in earnings. The gain or loss on
the derivative instrument is reclassified
from equity into earnings in the same period
as the loss or gain on the hedged cash flow.
Investments
Investments are classified as current or long
term.
Current Investments are carried at lower of cost
and quoted/fair value.
Long-term investments are stated at cost.
Provision for diminishing in the value of long-
term investments is made only if such decline is
other than temporary in the opinion of the
management.
Investments are classified as trading, held-to-
maturity or available-for-sale. Investments
acquired principally for the purposes of
generating profits from short-term price
fluctuations or dealers’ margins are classified
as trading. Held-to-maturity investments are
investments with fixed or determinable
payments and fixed maturity together with the
entity’s intent and ability to hold till maturity.
Available-for-sale investments are those that
do not qualify as either trading or held-to-
maturity investments. Changes in fair values
of trading investments are recognize as profit
or loss in the income statement. Held-to-
maturity investments are carried at amortized
cost. Changes in fair values of available-for-
sale investments can either be recognized in
the income statement or in the statement of
shareholder’ equity.
Similar to IFRS except that changes in fair
value of available-for-sale investments are
recognized as other comprehensive income
under shareholders’ equity and other than
temporary impairment of available-for-sale
securities and held to maturity securities,
cannot be reversed.
Other comprehensive income
All items of income are included in net income,
unless specifically permitted to be adjusted to
equity.
Certain foreign exchange differences, changes
in fair values of available-for-sale investments
and related amounts of taxes are recognized in
the statements of changes in shareholders’
equity.
Certain items of revenues, expenses, gains,
and losses that under generally accepted
accounting principles are included in
comprehensive income but excluded from
net income are classified as other
comprehensive income. Items included in
other comprehensive income shall be
classified based on their nature. For
example, under existing US accounting
standards, other comprehensive income
shall be classified separately into;
• foreign currency items,
• minimum pension liability
adjustments, and unrealized gains and
• losses on certain investments in debt
and equity securities
255
Indian GAAP IAS/IFRS US GAAP
Deferred Income Taxes
Deferred tax resulting from “timing differences”
between accounting and taxable income is
accounted for using the tax rates and laws that
have been enacted or substantively enacted as
on the balance sheet date. Deferred tax assets
relating to carry forward losses and unabsorbed
depreciation should be recognized only to the
extent that there is virtual certainty supported by
convincing evidence that sufficient future
taxable income will be available against which
such deferred tax assets can be realized. All
other deferred tax assets should be recognized to
the extent that there is reasonable certainty that
future taxable income will be available for such
deferred tax assets will be realized.
Deferred income taxes are recognised for the
future tax effects of temporary differences
between accounting and tax basis of assets at
the enacted or substantively enacted tax rates.
Deferred tax assets and liabilities must be
recognized regardless of when the timing
difference is likely to reverse. Deferred tax
assets must be recognized when it is probable
that sufficient taxable profits /reversible
differences will be available against which the
deferred tax assets can be utilized.
Deferred tax liabilities and assets are
recorded for the tax effect of all temporary
differences between the accounting and tax
base of assets and liabilities, and operating
loss carry-forwards, at enacted rates.
Changes in tax rates are reported in the
income statements in the period of
enactment.
A valuation allowance is made against
deferred taxes if, based on the weight of
available evidence, it is more likely than not
the some portion or all of the deferred tax
asset will not be realized.
Dividend on preference shares
Dividend is recorded as an appropriation from
earnings and reflected as a liability when
declared.
Dividends relating to a financial instrument
classified, as liability should be reported in the
income statement as an expense. Such
dividends may be shown in the income
statement either as interest or as a separate
item.
Similar to IFRS except that dividends
should be presented separately in the
income statement from interest payments to
other creditors.
Premium on redemption of preference shares
Premium on redemption of preference shares
should be either provided for out of the profits
of the Company or adjusted against the
securities premium account
These shares would be classified as a liability,
and the return assured in the eventuality of
redemption would be accrued as interest
expense.
Similar to IFRS.
Sale and leaseback transactions
Gain on a sale and leaseback transaction where
the leaseback is an operating lease is recognized
immediately.
Similar to Indian GAAP. If the sale-leaseback transaction results in
an operating lease, the timing of the
recognition of a gain on the sale depends on
whether the seller has leased back a minor
portion of the asset or more than a minor
portion. If the present value of a reasonable
amount of rentals for the leaseback period
represents 10% or less of the fair value of
the asset sold, the seller-lessee has leased
back a minor portion. In such situations, the
seller should recognize any gain on the sale
of the asset at the time of the sale. If the
seller-lessee retains more than a minor
portion, but less than substantially all of the
use of the property, any gain in excess of
the present value of a reasonable amount of
rent should be recognized currently. The
remaining gain on the sale should be
deferred and recognized as a reduction of
rent expense over the term of the lease in
proportion to the related gross rentals. A
loss on the sale should be recognized
immediately.
Finance Leases
Requires recognition of an asset held under a
finance lease with a corresponding obligation to
pay future rentals, at an amount equal to the
lower of the fair value of the asset and the
present value of the minimum lease payments
(MLPs) at the inception of the lease. The asset is
depreciated over its useful life or the lease term
if shorter. However, the latter is only permitted
if there is no reasonable certainty of the lessee
obtaining ownership of the asset. The interest
rate implicit in the lease must normally be used
to calculate the present value of the MLPs. If the
implicit rate is unknown, the lessee’s
incremental borrowing rate may be used.
Similar to Indian GAAP. Similar to Indian GAAP, except that the
lessee’s incremental borrowing rate must be
used to calculate the present value of the
MLPs, excluding the portion of payments
representing executory costs unless it is
practicable to determine the rate implicit in
the lease and the implicit rate is lower than
the incremental borrowing rate. If the
incremental borrowing rate is used, the
amount recorded as the asset and obligation
is limited to the fair value of the leased
asset. Asset amortisation is consistent with
Indian GAAP.
•
Onerous contracts
An onerous contract is a contract in which the
unavoidable costs of meeting the obligations
under the contract exceed the economic benefits
expected to be received under it. Under Indian
GAAP, the Company does not recognize any
If the Company has a contract that is onerous,
the present obligation under the contract
should be recognised and measured as a
provision.
A liability for costs to terminate a contract
before the end of its term should be
recognised and measured at fair value when
the entity terminates the contract in
accordance with the contract terms. A
256
Indian GAAP IAS/IFRS US GAAP
provision on account of onerous contracts. liability for costs that will continue to be
incurred under a contract for its remaining
term without economic benefit to the entity
should be recognized and measured at its
fair value when the entity ceases to use the
right conveyed by the contract.
Provisions
Discounting of liabilities is not permitted and all
provisions are carried at their full values.
Where the effect of the time value of money is
material, the amount of a provision may be the
present value of the expenditures expected to
be required to settle the obligation. The
discount rate should be pre-tax rate that
reflects current market assessments of the time
value of money and the risks specific to the
liability. The discount rate should not reflect
risks for which future cash-flow estimates
have been adjusted and, any change in present
value of Provision is recognized as Interest
Cost
Similar to IFRS. However, if a range of
estimates is present and no amount in the
range is more likely than any other amount
in the range, the ‘minimum’ (rather than the
mid-point) amount must be used to measure
the liability. A provision must only be
discounted when the timing of the cash
flows is fixed.
Impairment of assets
The standard requires the company to assess
whether there is any indication that an asset is
impaired at each balance sheet. Impairment loss
(if any) is provided to the extent the carrying
amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an
asset's selling price or its Value in Use. Value in
Use is the present value of estimated future cash
flows expected to arise from the continuing use
of an asset and from its disposal at the end of its
useful life.
An impairment loss for an asset in prior
accounting periods should be reversed if there
has been a change in estimates of cash inflows,
cash outflows or discount rates used to
determine the asset’s recoverable amount since
the last impairment loss was recognized. In this
case, the carrying amount of the asset should be
increased to its recoverable amount. The
reversal of impairment loss should be
recognized in the income statement.
Similar to Indian GAAP Long-lived assets should be tested for
impairment whenever events or changes in
circumstances indicate that the carrying
value of such assets may not be recoverable.
. For assets to be held and used, impairment
is first measured by reference to
undiscounted cash flows. If impairment
exists, the entity must measure impairment
by comparing the asset’s carrying value to
its fair value. Assets classified as held for
disposal must be measured at the lower of
the carrying amount or fair value less
selling costs.
The impairment loss is measured as the
excess of the carrying amount over the
asset’s fair value, being either market value
(if an active market for the asset exists), the
best information available in the
circumstances including the price for
similar assets, or the sum of discounted
future cash flows or other valuation
techniques, using market assumptions. For
assets to be disposed of, the loss recognised
is the excess of the asset’s carrying amount
over its fair value less cost to sell. Costs to
sell include incremental direct costs to
transact the sale that would not have been
incurred except for the decision to sell.
Such assets are not depreciated or amortised
during the selling period.
Impairment losses recognized cannot be
reversed if there is a subsequent increase in
the fair value of the asset.
257
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following contracts (not being contracts entered into in the ordinary course of business carried on by our
Company or entered into more than two years before the date of this Draft Red Herring Prospectus) which are or
may be deemed material have been entered or to be entered into by our Company. These contracts, copies of which
have been attached to the copy of this Draft Red Herring Prospectus, delivered to the Registrar of Companies,
Maharashtra at Mumbai for registration and also the documents for inspection referred to hereunder, may be
inspected at the corporate office of our Company situated at S.M. Centre, Andheri-Kurla Road, Andheri (E),
Mumbai – 400 059 from 10.00 am to 4.00 pm on working days from the date of this Draft Red Herring Prospectus
until the Bid/Offer Closing Date.
Material Contracts
1. Letter of appointment dated January 6, 2005 appointing BRLMs.
2. Letter of appointment dated December 30, 2004 appointing Registrars to the Offer.
3. Memorandum of Understanding among the Company, the Selling Shareholder and the BRLMs dated
January 6, 2005.
4. Memorandum of Understanding/ Agreements executed by our Company with Bankers to the Offer,
Registrar to the Offer, etc.
5. Escrow Agreement dated [•] entered into by the Company, the Registrar, BRLMs, the Syndicate
Member(s) and the Escrow Collection Bank(s) for collection of the Bid Amounts.
6. Syndicate Agreement dated [•] among the BRLMs, Syndicate Member(s), the Selling Shareholder and the
Company.
7. Underwriting Agreement dated [•] between the Company, the Selling Shareholder, the BRLMs and the
other Underwriters.
Material Documents
1. Our Memorandum and Articles of Association as amended from time to time.
2. Our certification of incorporation effective December 28, 2004.
3. Shareholders’ resolutions in relation to this Offer and other related matters such as appointment of
auditors, formation and reconstitution of Audit, Remuneration and other committees.
4. Board resolutions in relation to this Offer and other related matters.
5. Report of the Statutory Auditors dated December 20, 2004 prepared as per Indian GAAP and adjusted as
per SEBI Guidelines for the years ended March 31, 2000, 2001, 2002, 2003 and 2004 and for the six
months ended September 30, 2004 and as mentioned in the Draft Red Herring Prospectus.
6. Report of the Statutory Auditors dated December 20, 2004 prepared as per Indian GAAP for the six
months ended September 30, 2004 as mentioned in the Draft Red Herring Prospectus and Report of the
Statutory Auditors prepared as per Indian GAAP for the six months ended September 30, 2003.
7. Copies of annual reports of the Company for the years ended March 31, 2000, 2001, 2002, 2003 and 2004.
8. Copy of the tax benefit report dated December 31, 2004 prepared by Chaturvedi & Shah.
9. Consents of the Statutory Auditors for inclusion of their reports in the form and context in which they
appear in the Draft Red Herring Prospectus.
10. General Powers of Attorney executed by the Directors of our Company in favor of certain person(s) for
signing and making necessary changes to the Draft Red Herring Prospectus and other related documents.
11. General Power of Attorney executed by the Directors of the Selling Shareholder in favor of the Company
for signing and making necessary changes to the Draft Red Herring Prospectus and other related
documents.
258
12. Consents of Auditors, Bankers to the Company, BRLMs, Syndicate Member(s), Registrar to the Offer,
Escrow Collection Bank(s), Banker to the Offer, domestic legal counsel to the Underwriters, U.S. legal
counsel to the Underwriters, domestic legal counsel to the Company, U.S. legal counsel to the Company,
Directors of the Company, Company Secretary and Compliance Officer, as referred to, in their respective
capacities.
13. In-principle listing approval dated [•] and [•] from NSE and BSE respectively.
14. Initial listing applications dated [•] and [•] filed with NSE and BSE respectively.
15. In-principle listing approvals from NSE dated [•] and BSE dated [•].
16. Approval letter No. 9(24)/2004-FIPB dated November 5, 2004 received from FIPB in connection with the
Offer.
17. Letter from IFC to the Company dated December 6, 2004.
18. Letter from IDFC to the Company dated December 17, 2004.
19. Tripartite Agreement between NSDL, the Company and the Registrar to the Offer dated [•].
20. Tripartite Agreement between CDSL, the Company and the Registrar to the Offer dated [•].
21. Due diligence certificate dated January 6, 2005 to SEBI from the BRLMs.
22. SEBI observation letter No. [•] dated [•].
Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at
any time if so required in the interest of the Company or if required by the other parties, without reference to the
shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.
259
DECLARATION
All the relevant provisions of the Companies Act, 1956, as amended, and the guidelines issued by the Government
of India or the guidelines issued by the Securities and Exchange Board of India, established under Section 3 of the
Securities and Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement
made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, as amended,
the Securities and Exchange Board of India Act, 1992 or rules made thereunder or guidelines issued, as the case
may be. We further certify that all the statements in this Draft Red Herring Prospectus are true and fair.
SIGNED BY ALL THE DIRECTORS OF JET AIRWAYS (INDIA) LIMITED THROUGH THEIR
RESPECTIVE CONSTITUTED ATTORNEY
Mr. Naresh Goyal, Chairman
Mr. Ali Ismail Ghandour
Mr. J.R.Gagrat
Mr. Victoriano P. Dungca
Mr. Javed Akhtar
Mr. I.M. Kadri
Mr. Charles A. Adams
Mr. P.R.S. Oberoi
Mr. Aman Mehta
Dr. Vijay Laxman Kelkar
Mr. Satyan G. Pitroda
Mr. Saroj K. Datta
SIGNED BY CHIEF EXECUTIVE OFFICER OF JET AIRWAYS (INDIA) LIMITED
Mr. Wolfgang Prock-Schauer
SIGNED BY TAIL WINDS LIMITED THROUGH ITS CONSTITUTED ATTORNEY
Mr. Saroj K. Datta
(as representative of the constituted attorney, Jet Airways (India) Limited)
SIGNED BY CHIEF FINANCIAL OFFICER OF JET AIRWAYS (INDIA) LIMITED
Mr. Carl Saldanha
Date: January 4, 2005
Place: Mumbai, India
doc_829537339.pdf
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial statements prepared
and restated in accordance with Indian GAAP, the Companies Act and SEBI Guidelines included elsewhere in this Draft Red
Herring Prospectus. We have no subsidiaries. Accordingly, financial information relating to us is presented on a nonconsolidated
basis.
Our
fiscal
year
commences
on
April
1 and
ends
on
March
31.
In this
Draft
Red
Herring
Prospectus,
any
discrepancies
in
any
table
between
the
total
and the
sums of the
amounts
listed
are
due to
rounding.
Dated [?] (to be updated upon RoC filing)
DRAFT RED HERRING PROSPECTUS
Please read Section 60B of the Companies Act, 1956
100% Book Built Offer
JET AIRWAYS (INDIA) LIMITED
(The Company was incorporated on April 1, 1992, as a private limited company under the Companies Act, 1956. The Company became a deemed public limited
company on July 1, 1996 and was converted into a private limited company on January 19, 2001. The Company became a public limited company on December
28, 2004.)
Registered Office: SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India
Tel: 91 22 2850 5080; Fax: 91 22 2856 0622; Email: [email protected]
Website: www.jetairways.com
Public offer of 17,266,801 Equity Shares of Rs.10 each for cash at a price of Rs.[?] per Equity Share, aggregating Rs.[?] million, comprising a Fresh
Issue of 14,245,111 Equity Shares by Jet Airways (India) Limited (“Jet Airways” or the “Company” or the “Issuer”) and an Offer for Sale of 3,021,690
Equity Shares by Tail Winds Limited (“Tail Winds” or the “Selling Shareholder”). The Fresh Issue and the Offer for Sale are jointly referred to herein
as the “Offer”. 1,200,000 Equity Shares will be reserved in the Offer for subscription by Employees at the Offer Price (the “Employee Reservation
Portion”, and the Offer of Equity Shares other than the Employee Reservation Portion, the “Net Offer”). The face value of the Equity Shares is Rs.10
and the Offer Price is [?] times of the face value. The Offer will constitute 20% of the fully diluted post Offer paid-up equity capital of the Company.
PRICE BAND: RS.[?] TO RS.[?] PER EQUITY SHARE OF FACE VALUE RS.10 EACH
The Offer Price is [?] times the face value at the lower end of the Price Band and [?] times the face value at the higher end of the Price Band.
In case of revision in the Price Band, the Bidding/Offer Period shall be extended for three additional days after such revision, subject to the Bidding/Offer Period
not exceeding 13 days. Any revision in the Price Band, and the revised Bidding/Offer Period, if applicable, shall be widely disseminated by notification to the
National Stock Exchange of India Limited (“NSE”) and The Stock Exchange, Mumbai (“BSE”), by issuing a press release and by indicating the change on the
websites of the Book Running Lead Managers and the terminals of the Syndicate.
The Offer is being made through the 100% Book Building Process wherein at least 60% of the Net Offer shall be offered on a discretionary basis to Qualified
Institutional Buyers (“QIBs”). If at least 60% of the Net Offer cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further,
up to 15% of the Net Offer shall be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 25% of the Net Offer shall be available
for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Offer Price. Further, 1,200,000 Equity
Shares shall be available for allocation on a proportionate basis to the Employees, subject to valid Bids being received at or above the Offer Price.
RISKS IN RELATION TO FIRST OFFER
This being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the
Equity Shares is Rs.10 per Equity Share and the Offer Price is [?] times of the face value. The Offer Price (as determined by the Company, in consultation
with the Book Running Lead Managers, on the basis of assessment of market demand for the Equity Shares offered by way of book building) should not be
taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or
sustained trading in the Equity Shares of the Company or regarding the price at which the Equity Shares will be traded after listing.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Offer unless they can afford to
take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Offer. For taking an
investment decision, investors must rely on their own examination of the Company and the Offer including the risks involved. The Equity Shares offered in
the Offer have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or
adequacy of the contents of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in Risk
Factors beginning on page xi of this Draft Red Herring Prospectus.
COMPANY’S ABSOLUTE RESPONSIBILITY
Jet Airways, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information
with regard to Jet Airways and the Offer, which is material in the context of the Offer, that the information contained in this Draft Red Herring Prospectus is
true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and
that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any
such opinions or intentions misleading in any material respect.
LISTING
The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the NSE and BSE. We have received in-principle approvals
from these Stock Exchanges for the listing of our Equity Shares pursuant to letters dated [?] and [?], respectively. For purposes of the Offer, the Designated
Stock Exchange is NSE.
BOOK RUNNING LEAD MANAGERS (“BRLMs”)
Deutsche Equities India
Private Limited
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4800
Fax: 91 22 2200 6765
Email: [email protected]
HSBC Securities and
Capital Markets (India)
Private Limited
52/60, Mahatma Gandhi
RoadFort,
Mumbai 400 001
Tel: 91 22 2267 4921
Fax: 91 22 2263 1984
Email: [email protected]
UBS Securities India
Private Limited
2
nd
Floor, Hoechst House
Nariman Point
Mumbai 400 021
Tel: 91 22 2286 2000
Fax: 91 22 2281 4676
Email: [email protected]
Citigroup Global Markets
India Private Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9982
Fax: 91 22 5631 9803
Email: [email protected]
DSP Merrill Lynch
Limited
Mafatlal Centre, 10
th
Floor, Nariman Point
Mumbai 400 021
Tel : 91 22 2265 1702
Fax: 91 22 2262 1187
Email: [email protected]
Kotak Mahindra Capital
Company Limited
3rd Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5634 1100
Fax: 91 22 2282 6632
Email:
[email protected]
REGISTRAR TO THE OFFER OFFER PROGRAM
BID/OFFER OPENS ON [•], 2005
Karvy Computershare Private Limited
Unit: Jet
Karvy House, 46, Avenue 4, Street No.1
Banjara Hills, Hyderabad 500 034
Tel.: 91 402 331 2451
Fax: 91 402 331 1968
Email: [email protected]
BID/OFFER CLOSES ON [•], 2005
TABLE OF CONTENTS
PAGE
DEFINITIONS AND ABBREVIATIONS.................................................................................................................. I
GLOSSARY OF CERTAIN INDUSTRY, TECHNICAL AND FINANCIAL TERMS.................................... VI
CERTAIN CONVENTIONS; FINANCIAL AND MARKET DATA...............................................................VIII
FORWARD-LOOKING STATEMENTS ............................................................................................................... IX
CURRENCY OF PRESENTATION..........................................................................................................................X
RISK FACTORS......................................................................................................................................................... XI
SUMMARY................................................................................................................................................................... 1
THE OFFER.................................................................................................................................................................. 5
SUMMARY FINANCIAL INFORMATION............................................................................................................ 6
GENERAL INFORMATION...................................................................................................................................... 9
CAPITAL STRUCTURE........................................................................................................................................... 22
OBJECTS OF THE OFFER..................................................................................................................................... 28
INDUSTRY.................................................................................................................................................................. 31
BUSINESS ................................................................................................................................................................... 36
HISTORY AND CERTAIN CORPORATE MATTERS....................................................................................... 54
SELECTED FINANCIAL INFORMATION.......................................................................................................... 56
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................................................................................................................ 59
MANAGEMENT........................................................................................................................................................ 87
OUR PROMOTERS AND GROUP COMPANIES ............................................................................................... 96
RELATED PARTY TRANSACTIONS................................................................................................................. 109
REGULATIONS AND POLICIES......................................................................................................................... 110
GOVERNMENT APPROVALS............................................................................................................................. 114
OUTSTANDING LITIGATION............................................................................................................................. 116
MATERIAL DEVELOPMENTS ........................................................................................................................... 136
DIVIDEND POLICY................................................................................................................................................ 137
OTHER REGULATORY DISCLOSURES .......................................................................................................... 138
TERMS OF THE OFFER ....................................................................................................................................... 140
OFFER PROCEDURE ............................................................................................................................................ 144
BASIS FOR OFFER PRICE................................................................................................................................... 162
STATUTORY AND OTHER INFORMATION....................................................................................................... 165
MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF JET AIRWAYS (INDIA) LIMITED........ 171
FINANCIAL INFORMATION............................................................................................................................... 196
STATEMENT OF TAX BENEFITS...................................................................................................................... 244
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP, IFRS AND U.S. GAAP ....... 251
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION........................................................... 257
DECLARATION ...................................................................................................................................................... 259
i
DEFINITIONS AND ABBREVIATIONS
Term Description
Abacus Abacus Distribution System Pte. Ltd., a GDS.
AGM Annual general meeting.
Airbus AIRBUS S.A.S.
Air Deccan A unit of Deccan Aviation Private Limited.
Air India Air India Limited.
Air Sahara Sahara Airlines Limited.
Allocation Amount The amount payable by a Bidder on or prior to the Pay-in Date after
deducting any Bid Amounts that may already have been paid by such Bidder.
Allotment Issue or transfer, as the context requires, of the Equity Shares pursuant to the
Offer to the successful Bidders.
Allottee The successful Bidder to whom the Equity Shares are/have been issued or
transferred.
Amadeus Amadeus Global Travel Distribution, a GDS and technology provider,
serving travel and tourism industries.
Articles/ Articles of Association The Articles of Association of the Company.
AS Accounting Standards as issued by the Institute of Chartered Accountants of
India.
ASEAN Assocation of Southeast Asian Nations.
ATR Avions de Transport Régional.
Auditors Deloitte Haskins & Sells, Chartered Accountants, and Chaturvedi & Shah,
Chartered Accountants (member of Nexia International), the joint statutory
auditors of the Company under Indian GAAP.
Banker(s) to the Offer Citibank, N.A., Deutsche Bank AG, The Hong Kong and Shanghai Banking
Corporation Limited, Kotak Mahindra Bank Limited, [?] and [?].
Bid An offer made during the Bidding Period by a prospective investor to
subscribe to the Equity Shares of the Company at a price within the Price
Band, including all revisions and modifications thereto.
Bid Amount The highest value of the optional Bids indicated in the Bid cum Application
Form and payable by the Bidder on submission of the Bid in the Offer.
Bid/Offer Closing Date The date after which the Syndicate will not accept any Bids for the Offer,
which shall be notified in a widely circulated English national newspaper, a
Hindi national newspaper and a Marathi newspaper.
Bid cum Application Form The form in terms of which the Bidder shall make an offer to subscribe
to/purchase Equity Shares and which will be considered as the application for
allotment/transfer of the Equity Shares in terms of this Draft Red Herring
Prospectus.
Bid/Offer Opening Date The date on which the Syndicate shall start accepting Bids for the Offer,
which shall be the date notified in a widely circulated English national
newspaper, a Hindi national newspaper and a Marathi newspaper.
Bidder Any prospective investor who makes a Bid pursuant to the terms of this Draft
Red Herring Prospectus.
Bidding/Offer Period The period between the Bid/ Offer Opening Date and the Bid/ Offer Closing
Date inclusive of both days and during which prospective Bidders can submit
their Bids.
Board of Directors/ Board The Board of Directors of the Company or a committee thereof.
Boeing The Boeing Company.
Book Building Process/Method Book building route as provided in Chapter XI of the SEBI Guidelines, in
terms of which this Offer is being made.
BPCL Bharat Petroleum Corporation Limited.
BRLMs Book Running Lead Managers to the Offer, comprising Deutsche Equities
India Private Limited, HSBC Securities and Capital Markets (India) Private
Limited, UBS Securities India Private Limited, Citigroup Global Markets
India Private Limited, DSP Merrill Lynch Limited and Kotak Mahindra
Capital Company Limited.
BSE The Stock Exchange, Mumbai.
CAGR Compounded annual growth rate.
ii
CAN/Confirmation of Allocation
Note
The note or advice or intimation of allocation of Equity Shares sent to the
Bidders who have been allocated Equity Shares after discovery of the Offer
Price in accordance with the Book Building Process.
CBDT Central Board of Direct Taxes.
CDSL Central Depository Services (India) Limited.
CEGAT Central Excise and Gold Appellate Tribunal, a tax appellate authority in
India, now known as the Customs, Excise and Service Tax Appellate
Tribunal or CESTAT.
CIAL Cochin International Airport Limited.
Citigroup Citigroup Global Markets India Private Limited.
CMIE Centre for Monitoring Indian Economy.
Common Law Agreement The Common Law Trade Marks User Agreement dated dated October 15,
2000 between the Company and Jet Enterprises, as amended.
Company or Jet Airways Jet Airways (India) Limited, a public limited company incorporated under the
Companies Act.
Companies Act The Companies Act, 1956, as amended from time to time.
Cut-off Price Any price within the Price Band finalized by the Company in consultation
with the BRLMs. A Bid submitted at the Cut-off Price by a Retail Individual
Bidder is a valid Bid at all price levels within the Price Band.
Depositories Act The Depositories Act, 1996, as amended from time to time.
Depository A depository registered with SEBI under the SEBI (Depositories and
Participants) Regulations, 1996, as amended from time to time.
Depository Participant A depository participant as defined under the Depositories Act.
Designated Date The date on which funds are transferred from the Escrow Account to the
Public Offer Account after the Prospectus is filed with the RoC, following
which the Board of Directors shall allot and/or transfer Equity Shares to
successful Bidders.
Designated Stock Exchange NSE.
Deutsche Equities Deutsche Equities India Private Limited.
Directors The directors of the Company from time to time.
Draft Red Herring Prospectus This Draft Red Herring Prospectus issued in accordance with Section 60B of
the Companies Act, which does not contain complete particulars on the price
at which the Equity Shares are offered and the size (in terms of value) of the
Offer. It will be filed with the RoC at least three days before the Bid/Offer
Opening Date. After the Pricing Date, it will become a Prospectus upon filing
with the RoC.
DSPML DSP Merrill Lynch Limited.
EGM Extraordinary general meeting.
Employee Reservation Portion The portion of the Offer being 1,200,000 Equity Shares available for
allocation to Employees who are Indian Nationals, are based in India and are
physically present in India on the date of submission of the Bid cum
Application Form.
Employee A permanent employee or a director of the Company or Tail Winds who are
Indian Nationals, are based in India and are physically present in India on the
date of submission of the Bid cum Application Form.
Equity Shares Equity shares of the Company of face value of Rs.10 each, unless otherwise
specified in the context thereof.
Escrow Account Account opened with Escrow Collection Bank(s) and in whose favour the
Bidder will issue cheques or drafts in respect of the Bid Amount when
submitting a Bid.
Escrow Agreement Agreement entered into by the Company, the Registrar, the BRLMs, the
Syndicate Members, the Company, the Selling Shareholder (acting through
the Company, its duly constituted attorney) and the Escrow Collection
Banks, for collection of the Bid Amounts and, where applicable, refunds of
the amounts collected to the Bidders.
Escrow Collection Bank(s) The banks which are clearing members and registered with SEBI as Bankers
to the Issue at which the Escrow Account for the Offer will be opened.
ESOP Employee stock option plan.
ESPS Employee stock purchase scheme.
FCNR Account Foreign Currency Non Resident Account.
FDI Foreign direct investment in India.
FEMA Foreign Exchange Management Act, 1999, as amended from time to time,
and the regulations framed thereunder.
FERA Foreign Exchange Regulation Act, 1973, now repealed.
FII/Foreign Institutional Investor Foreign Institutional Investor (as defined under SEBI (Foreign Institutional
iii
Investors) Regulations, 1995), registered with SEBI under applicable laws in
India.
Financial Year/fiscal/Fiscal/FY The 12 months ended March 31 of a particular year.
FIPB Foreign Investment Promotion Board, Ministry of Finance and Company
Affairs, Government of India.
First Bidder The Bidder whose name appears first in the Bid cum Application Form or
Revision Form.
Fresh Issue Issue of 14,245,111 Equity Shares at the Offer Price by the Company under
this Draft Red Herring Prospectus.
FVCI Foreign Venture Capital Investor, as defined and registered with SEBI under
the SEBI (Foreign Venture Capital Investor) Regulations, 2000, as amended.
Galileo Galileo International, Inc., a GDS.
GDP Gross Domestic Product.
GIR Number General Index Registry Number.
HAL Hindustan Aeronautics Limited.
HPCL Hindustan Petroleum Corporation Limited.
HSBC HSBC Securities and Capital Markets (India) Private Limited.
HUF Hindu Undivided Family.
IDBI Industrial Development Bank of India Limited.
IDFC Infrastructure Development Finance Company Limited.
IFC International Finance Corporation.
IFRS International Financial Reporting Standards.
Indian Airlines Indian Airlines Limited.
Indian National As used in the context of the Employee Reservation Portion, a citizen of
India as defined under the Indian Citizenship Act, 1955, as amended, who is
not an NRI.
Indian GAAP Generally accepted accounting principles in India.
Industrial Policy The industrial policy and guidelines issued thereunder by the Ministry of
Industry, Government of India from time to time.
I.T. Act Income Tax Act, 1961, as amended.
IOC Indian Oil Corporation.
Jetair Jetair Private Limited.
Jet Enterprises Jet Enterprises Private Limited.
KMCC Kotak Mahindra Capital Company Limited.
Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid,
which is between 0% to 100% of the Bid Amount.
MAT Minimum Alternate Tax.
Memorandum/Memorandum of
Association
The Memorandum of Association of the Company.
MoF Ministry of Finance and Company Affairs, Government of India.
NAV Net Asset Value.
Net Offer The Offer of Equity Shares other than Equity Shares included in the
Employee Reservation Portion.
NG Group Mr. Naresh Goyal, Tail Winds Limited and their respective affiliates, as
defined in our Articles.
N.I. Act Negotiable Instruments Act, 1881, as amended.
Non Institutional Bidders All Bidders that are not eligible Qualified Institutional Buyers or Retail
Individual Bidders and who have bid for Equity Shares for an amount more
than Rs.50,000.
Non Institutional Portion The portion of the Net Offer being up to 2,410,020 Equity Shares available
for allocation to Non Institutional Bidders.
Non Residents All Bidders who are not NRIs or FIIs and are not persons resident in India.
NRE Account Non Resident External Account.
NRI/ Non Resident Indian A person resident outside India, as defined in FEMA and who is a citizen of
India or a Person of Indian Origin, each term as defined under the Foreign
Exchange Management (Transfer or Offer of Security by a Person Resident
Outside India) Regulations, 2000.
NRO Account Non-Resident Ordinary Account.
NSDL National Securities Depository Limited.
NSE National Stock Exchange of India Limited.
OCB/Overseas Corporate Body A company, partnership, society or other corporate body owned directly or
indirectly to the extent of at least 60% by NRIs, including overseas trust(s) in
which not less than 60% of beneficial interest is irrevocably held by NRIs
directly or indirectly as defined under Foreign Exchange Management
(Deposit) Regulations, 2000, as amended. OCBs are not allowed to invest in
iv
this Offer.
OCB Regulations Foreign Exchange Management (Withdrawal of General Permission to
Overseas Corporate Bodies (OCBs)) Regulations, 2003.
Offer for Sale The offer for sale by the Selling Shareholder of 3,021,690 Equity Shares of
Rs.10 each at the Offer Price.
Offer Collectively, the Fresh Issue and the Offer for Sale.
Offer Price The final price at which Equity Shares will be issued and allotted in this
Offer. The Offer Price will be decided by the Company in consultation with
the BRLMs on the Pricing Date.
PAN Permanent Account Number.
Pay-in Date Bid Closing Date or the last date specified in the CAN sent to Bidders, as
applicable.
Pay-in-Period This term means (i) with respect to Bidders whose payment has not been
waived by the Syndicate and are therefore required to pay the maximum Bid
Amount into the Escrow Account, the period commencing on the Bid/Offer
Opening Date and extending until the Bid/Offer Closing Date, and (ii) with
respect to Bidders whose payment has been initially waived by the Syndicate
and are therefore not required to pay the Bid Amount into the Escrow
Account on or prior to the Bid/Offer Closing Date, the period commencing
on the Bid/Offer Opening Date and extending until the Pay-in Date.
Price Band Price band of a minimum price (floor of the price band) of Rs.[•] and the
maximum price (cap of the price band) of Rs.[•] (both inclusive), including
revisions thereof.
Pricing Date The date on which Company in consultation with the BRLMs finalizes the
Offer Price.
Promoters Tail Winds Limited and Mr. Naresh Goyal.
Prospectus The Prospectus to be filed with the RoC containing, inter alia, the Offer Price
that is determined at the end of the Book Building Process, the size of the
Offer and certain other information.
Public Offer Account Account opened with the Bankers to the Offer to receive monies from the
Escrow Account for the Offer on the Designated Date.
Qualified Institutional Buyers or
QIBs
Public financial institutions as defined in Section 4A of the Companies Act,
FIIs registered with SEBI, scheduled commercial banks, mutual funds
registered with SEBI, venture capital funds registered with SEBI, foreign
venture capital investors registered with SEBI, state industrial development
corporations, insurance companies registered with Insurance Regulatory and
Development Authority, provident funds with minimum corpus of Rs.250
million and pension funds with minimum corpus of Rs.250 million. QIBs as
defined herein for this Offer specifically exclude multilateral and
bilateral development financial institutions.
QIB Portion The portion of the Offer being at least 9,640,081 Equity Shares of Rs.10 each
available for allocation to QIBs.
RBI The Reserve Bank of India.
Red Herring Prospectus The Red Herring Prospectus dated [•] issued in accordance with Section 60B
of the Companies Act, which does not have complete particulars on the price
at which the Equity Shares are offered and size of the Offer. The Red Herring
Prospectus will be filed with the RoC at least three days before the opening
of the Offer and will become a Prospectus after filing with RoC after the
pricing and allocation.
Registered Office of our Company SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India.
Registered User Agreement The Trade Marks Registered User Agreement dated October 15, 2000
between us and Jet Enterprises, as amended.
Registrar to the Offer Registrar to the Offer, in this case being Karvy Computershare Private
Limited.
Retail Individual Bidder(s) Individual Bidders (including HUFs and NRIs) who Bid for Equity Shares
for an amount not more than Rs.50,000, in any of the bidding options in the
Offer.
Retail Portion The portion of the Offer being up to 4,016,700 Equity Shares of Rs.10 each
available for allocation to Retail Bidder(s).
Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the
Bid Price in any of their Bid cum Application Forms or any previous
Revision Form(s).
RoC Registrar of Companies at Mumbai, Maharashtra.
SAARC South Asian Association for Regional Cooperation.
SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time.
v
SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time.
SEBI The Securities and Exchange Board of India, constituted under the SEBI Act.
SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to
time.
SEBI Guidelines SEBI (Disclosure and Investor Protection) Guidelines 2000, issued by SEBI
effective from January 27, 2000, as amended from time to time, including
instructions and clarifications issued by SEBI from time to time.
Selling Shareholder Tail Winds Limited.
Stock Exchanges NSE and BSE.
Syndicate The BRLMs and the Syndicate Members.
Syndicate Agreement Agreement to be entered into among the BRLMs, Syndicate Member(s), the
Selling Shareholder (acting through the Company, its duly constituted
attorney) and the Company in relation to the collection of Bids in the Offer.
Syndicate Member(s) Kotak Securities Limited
Tail Winds Tail Winds Limited, a company incorporated in the Isle of Man.
TRS/ Transaction Registration Slip The slip or document issued by the Syndicate to the Bidder as proof of
registration of the Bid.
UBS UBS Securities India Private Limited.
Underwriters The BRLMs and the Syndicate Member(s).
Underwriting Agreement The agreement to be entered into among the BRLMs, the Syndicate
Member(s), the Company and the Selling Shareholder (acting through the
Company, its duly constituted attorney), on or after the Pricing Date.
U.S. Exim Export Import Bank of the United States.
U.S. GAAP Generally accepted accounting principles in the United States.
VCF Venture Capital Fund as defined and registered with SEBI under the SEBI
(Venture Capital Fund) Regulations, 1996, as amended.
vi
GLOSSARY OF CERTAIN INDUSTRY, TECHNICAL AND FINANCIAL TERMS
Term Description
AAI Airports Authority of India.
AIC Represents any or all aeronautical information circular(s) issued by the
DGCA from time to time.
AIC No.4 Aeronautical Information Circular No.4/2004 dated March 1, 2004, issued
by the DGCA, as amended, modified, replaced or supplemented from time
to time.
AME Aircraft maintenance engineer.
Aircraft utilization Represents the average number of block hours operated per day per aircraft
for the total aircraft fleet.
Air Taxi Operator A domestic airline, permitted by DGCA to operate non-scheduled flights
APEX Advance Purchase Excursion Fare, a scheme offering lower fares than our
normal published fares.
APU Auxilliary power unit that is used to provide power to the aircraft on the
ground.
ASA Air services agreement between countries.
ATC Air Traffic Control.
ATF Aviation Turbine Fuel.
Available Seat Kilometers, or ASKM Represents the aircraft seating capacity multiplied by the number of
kilometres the seats are flown.
Average stage length Represents the average number of kilometres flown per flight.
BCAS Bureau of Civil Aviation Security of India.
Block hours Refers to the elapsed time between an aircraft leaving an airport gate and
arriving at an airport gate.
Boeing 737 A series of aircraft manufactured by Boeing and comprising the Boeing 737
Classic and Boeing 737 NG variants.
Boeing 737 Classic The series of aircraft comprising the Boeing 737-300, Boeing 737-400 and
Boeing 737-500 aircraft
Boeing 737 NG The series of aircraft comprising the Boeing 737-600, Boeing 737-700,
Boeing 737-800 and the Boeing 737-900 aircraft
Breakeven load factor Represents the Passenger Load Factor that will result in Net Passenger
Revenues being equal to Total Expenses less cargo and Non-operating
Revenues.
BSP Billing Settlement Plan provided by IATA as a part of its passenger agency
programme.
CAR The civil aviation requirements issued by the DGCA from time to time.
C Check A block “C” check in accordance with the MPD and includes all
inspections up to and including those required every 4,800 Flight Hours,
4,000 cycles (defined as one take-off and landing) and 18 months.
Cargo tonnage The total cargo carried on an aircraft expressed in metric tons.
Cash EPS Net profit after tax and annualized return on preference capital before
depreciation, provision for obsolesence divided by total number of Equity
Shares.
CFM International CFM International SA.
CFM56 Engines A type of engine manufactured by CFM International which are fitted on
our Boeing 737 aircraft.
Club Premiere/CP The business class section on our Boeing 737 aircraft.
CRS Computerised Reservation System.
CRS costs Cost paid to CRS service provider.
Chicago Convention Convention on Civil Aviation signed in Chicago on December 7, 1944, as
amended from time to time.
D Check The maintenance shop visit which shall include but not be limited to
accomplishment of a block C6/8 year check in accordance with the
applicable appendix of the MPD, all lesser checks, passenger cabin
refurbishment (including lavatories and galleys) and strip and repainting of
the complete fuselage, empennage, wings and pylons.
DGCA Directorate General of Civil Aviation of India.
EBIT Profit before interest and taxation excluding Non-operating Revenues and
excluding any adjustments to profit as required under SEBI Guidelines.
EBITDA Profit before interest, taxation, depreciation and amortization excluding
Non-operating Revenues and excluding any adjustments to profit as
vii
required under SEBI Guidelines.
EBITDAR Profit before interest, taxation, depreciation, amortization and aircraft
rentals (fixed), excluding Non-operating Revenues and excluding any
adjustments to profit as required under SEBI Guidelines.
EPS Earnings per Equity Share.
EBITDAR margin Calculated by dividing EBITDAR for the relevant period by Operating
Revenues for such period.
Flight hours Refers to the time elapsed from the moment the wheels of an aircraft leave
the ground on a take-off until the wheels of an aircraft next touch the
ground.
FAA Federal Aviation Administration of the United States.
FTT Foreign travel tax.
GDS A global distribution system.
General and Administrative
Expenses
Consists of expenses related to inflight and other passenger amenities,
communication costs, travelling and subsistence, rent, rates and taxes,
repairs and maintenance, electricity, provision for bad and doubtful debts,
directors’ sitting fees, loss on scrapping of fixed assets, loss on sale of fixed
assets, loss on exchange rate difference and other miscellaneous expenses.
GSA General sales agent.
IATA International Air Transport Association.
IATT Inland Air Travel Tax.
ICAO International Civil Aviation Organization.
LIBOR The London Interbank Offer Rate, as applicable to the U.S. Dollar.
MoCA Ministry of Civil Aviation, Government of India.
MPD The DGCA approved maintenance planning document.
MTOW Maximum take-off weight as certified by DGCA.
Net Passenger Revenues Represents the Passenger Revenues net of commisions paid to travel agents
and GSAs.
Non-operating Revenue Represents revenue from interest income, profit from sale of assets such as
aircraft and engines and foreign exchange gains.
Operating Revenues Represents Passenger Revenues, revenues from excess baggage and cargo
and Other Income.
Other Income Represents revenue from ticket cancellation and handling charges paid by
the Government of India for PSF (being collected from passengers) and for
IATT (collected from passengers until January 9, 2004).
Other Operating Expenses Represents the aggregate of variable rent, aircraft maintenance, landing and
navigation charges and other airport charges, insurance costs and General
and Adminstrative Expenses.
PSF Passenger service fee, a tax levied by the Government of India on
passengers.
Passenger Load Factor Revenue Passenger Kilometres expressed as a percentage of Available Seat
Kilometres.
Passenger Revenues Represents the revenue recognized when transportation is provided to a
passenger or when no claim for refund has been made by a passenger on an
unused ticket for a period of two years.
Revenue Passenger Kilometers, or
RPKM
Represents the number of kilometres flown by revenue passengers.
Revenue passengers Represents the total number of fare paying passengers flown on all flight
segments (excluding passengers redeeming their frequent flyer miles).
RONW Return on Net Worth.
SABRE Sabre Inc.
Sabre GDS Sabre Travel Information Network, a GDS.
Scheduled Airline An airline permitted by DGCA to operate scheduled flights
SITA Societe International de Telecommunications Aeronautiques.
Total Expenses Represents the aggregate of employee remuneration and benefit, aircraft
fuel expenses, selling and distribution expenses, aircraft lease rentals,
depreciation, interest and Other Operating Expenses.
Total Revenues Represents the aggregate of Operating Revenues and Non-operating
Revenues.
Turnaround time The time between two continuous flights with the same aircraft.
Y Class / Y The economy class section on our aircraft.
Yield Net Passenger Revenue earned per kilometer flown.
viii
CERTAIN CONVENTIONS; FINANCIAL AND MARKET DATA
All references to “we”, “our”, “us”, “the Company” or “our Company” or words of similar import in this Draft Red Herring
Prospectus are to Jet Airways.
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial statements prepared
and restated in accordance with Indian GAAP, the Companies Act and SEBI Guidelines included elsewhere in this Draft Red
Herring Prospectus. We have no subsidiaries. Accordingly, financial information relating to us is presented on a non-
consolidated basis. Our fiscal year commences on April 1 and ends on March 31. In this Draft Red Herring Prospectus, any
discrepancies in any table between the total and the sums of the amounts listed are due to rounding.
There are significant differences between Indian GAAP, IFRS and U.S. GAAP; accordingly, the degree to which the Indian
GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely
dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian
accounting practices on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited.
We and the Selling Shareholder have not attempted to quantify the impact of these differences on the financial data included
herein, and we and the Selling Shareholder urge you to consult your own advisors regarding such differences and their impact on
our financial data.
All reference to “fiscal”, “Fiscal” “FY” or “Financial Year” in this Draft Red Herring Prospectus refers to the 12 months ending
on March 31.
All references to “India” in this Draft Red Herring Prospectus are to the Republic of India together with its territories and
possessions, and all references to the “US” or the “U.S.” or the “USA”, or the “United States” are to the United States of
America together with its territories and possessions. All references to the “Government” are to the Government of India, unless
otherwise indicated.
All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of India. All references to “US$”, “U.S. Dollar”
or “US Dollars” are to United States Dollars, the official currency of the United States of America.
For additional definitions, please see the section entitled “Definitions and Abbreviations” and “Glossary of Technical Terms”
beginning on pages i and vi, respectively, of this Draft Red Herring Prospectus.
Industry and market data used throughout this Draft Red Herring Prospectus has been obtained from industry publications,
Government of India sources and internal company reports. Industry publications generally state that the information contained
in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not
guaranteed and their reliability cannot be assured. Although we believe industry, market and government data used in this Draft
Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal company reports, while believed by
us to be reliable, have not been verified by any independent sources.
ix
FORWARD-LOOKING STATEMENTS
This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward looking statements can
generally be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “may”,
“objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import.
Similarly, statements that describe our objectives, strategy, plans or goals are also forward-looking statements.
All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to
differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual
results to differ materially from our expectations include, among others:
• general economic and business conditions;
• our ability to successfully implement our strategy and our growth and expansion plans;
• factors affecting travel, including business travel;
• increasing competition in the airline industry;
• increases in fuel, maintenance and repair costs and insurance premia;
• increases in employee costs, including wage levels of pilots, flight crew and engineers;
• manufacturers’ defects or mechanical problems with our aircraft or incidents caused by human error;
• changes in the value of the Indian rupee and other currencies, in particular, the U.S. Dollar;
• cyclical or seasonal fluctuations in our operating results;
• fares that we are able to obtain from different sectors;
• changes in laws and regulations that apply to the aviation industry;
• changes in fiscal, economic or political conditions in India;
• social or civil unrest or hostilities with neighboring countries or acts of international terrorism;
• epidemics or infectious outbreaks affecting travel; and
• changes in the foreign exchange control regulations, interest rates and tax laws in India.
For further discussion of factors that could cause our actual results to differ, please see the sections entitled “Risk Factors”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere
in this Draft Red Herring Prospectus. In the light of inherent risks and uncertainties, the forward-looking statements, events and
circumstances discussed in this Draft Red Herring Prospectus might not occur and are not guarantees of future performance.
Neither our Company, the Selling Shareholder, their respective directors and officers, any Underwriter nor any of their respective
affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or
to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with
SEBI requirements, for purposes of the Offer, our Company and the BRLMs will ensure that investors in India are informed of
material developments relating to our business until such time as the grant of listing and trading permission by the Stock
Exchanges.
x
CURRENCY OF PRESENTATION
This Draft Red Herring Prospectus contains translations of certain U.S. Dollar amounts into Rupees (and certain Rupee amounts
into U.S. Dollars) that have been presented solely to comply with the requirements of Clause 6.8.4 of the SEBI (Disclosure and
Investor Protection) Guidelines, as amended (“SEBI Gudelines”). Investors are cautioned to not rely on such translated amounts.
These convenience translations should not be construed as a representation that those Rupee or U.S. Dollar amounts could have
been, or could be, converted into U.S. Dollars or Rupees, as the case may be, at any particular rate, the rates stated below, or at
all. Except as otherwise stated in this Draft Red Herring Prospectus, all translations from Rupees to U.S. Dollars (and all
translations from U.S. Dollars to Rupees) contained in this Draft Red Herring Prospectus have been based on the Interbank
market mid rates as taken from Bloomberg as on September 29, 2004, which was Rs.46.01 = U.S.$1.00.
The following table sets forth, for each period indicated, information concerning the number of Rupees for which one U.S. Dollar
could be exchanged at the Interbank market mid rates on the last business day of the particular period. The column titled average
in the table below is the average of the Interbank market mid rates for each day in the period.
Period Period End Average High Low
Rs. Rs. Rs. Rs.
Fiscal 2000 43.62 43.34 43.66 42.42
Fiscal 2001 46.62 45.69 46.88 43.63
Fiscal 2002 48.82 47.68 48.83 46.56
Fiscal 2003 47.47 48.40 49.05 47.47
Fiscal 2004 43.60 45.94 47.47 43.60
Six months ended
September 30, 2004 45.95 45.53 46.47 43.54
____________
Source: Bloomberg
The Interbank market mid rate as on [?] was Rs. [?] = U.S. $1.00.
xi
RISK FACTORS
An investment in our Equity Shares involves a high degree of risk. You should carefully consider all of the information in this
Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity
Shares. If any of the following risks actually occur, our business, financial condition and results of operations could suffer, the
trading price of our Equity Shares could decline, and you may lose all or part of your investment.
Internal Risk Factors
We operate in a very competitive industry.
There is substantial competition in the airline industry. As the Indian airline industry is further liberalized, we expect
competition to intensify as new entrants begin to compete against us, our existing competitors further expand their operations and
we enter new markets where we compete with well established competitors.
Competition with existing competitors in the market has been, and we believe will continue to be, intense. Currently, our
principal competitors in the domestic sector include Indian Airlines, a Government-owned company, together with its subsidiary,
Alliance Air, and Air Sahara and Air Deccan, two privately owned companies. We may face competition from other new
competitors in the near future. According to published reports, other enterprises are contemplating entering the domestic aviation
market.
Certain of our competitors, including Government-owned companies, may have significantly greater resources than those
available to us. Our existing and future competitors or new entrants into the market may undercut our fares in the future,
increase capacity on their routes in an effort to increase their market share or attempt to conduct low-fare or “no frills” airline
operations. For example, according to published reports, Indian Airlines is planning to undertake an expansion of its aircraft
fleet and is awaiting Government approval for such expansion. In such an event, we cannot assure you that our level of market
share, yields and volume of passenger traffic, and revenues would not be adversely affected.
Our market position will depend upon effective marketing initiatives and our ability to anticipate and respond to various
competitive factors affecting the industry, including pricing strategies by competitors. Any failure by us to compete effectively,
including in terms of pricing or providing high-quality innovative services, could have a material adverse effect on our results of
operations.
We also compete with other airlines for labor in skilled positions such as pilots, aircraft maintenance engineers (“AMEs”),
technicians and in-flight crew. Our competitors may offer wage and benefit packages that are more attractive than our wage and
benefit packages. If we are unable to attract and retain qualified employees, particularly skilled personnel such as pilots that
have been trained by us, our business and expansion plans may be adversely affected.
We also compete with other airlines for access to airport facilities, parking bays for aircraft and prime time departure slots. An
inability to lease, acquire or access airport infrastructure, facilities or services on reasonable terms or at preferred times may have
an adverse impact on our operations.
We have only a limited number of suppliers for our aircraft and engines. Any problem with these aircraft, whether real or
perceived, could significantly harm our business.
One of the key elements of our business strategy is to operate limited types of aircraft, with each type having similar equipment.
Operating a fleet of similar aircraft with similar equipment leads to cost savings because maintenance issues are simplified, spare
parts and inventory requirements are reduced, scheduling is more efficient and training costs are lowered. Operating limited
types of aircraft also allows our employees to become knowledgeable about the airframe and engine, thereby increasing their
efficiency and productivity.
As of the date of this Draft Red Herring Prospectus, 34 aircraft in our total fleet of 42 aircraft are Boeing 737s, while eight
aircraft are ATR 72-500s. We chose the Boeing 737 because of its reliability, advanced technology, and fuel efficiency. We use
the ATR 72-500s primarily for short haul flights. We have entered into lease agreements for seven additional Boeing 737-800
aircraft expected to be delivered in 2005 for lease terms ranging between approximately six and seven years. In December 2004
we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with CFM56-7B24 engines. The
expected date of delivery of such aircraft is between January 2006 and October 2007. Definitive purchase agreements will need
to be negotiated and entered into on or prior to January 31, 2005, unless otherwise extended. If the purchase agreements are
entered into, then closer to the delivery dates of each aircraft we will determine the financing arrangements under which these
aircraft will be obtained. The entry into such purchase agreement and financial arrangements in connection therewith is also
subject to the Company obtaining board approval and such necessary regulatory approvals as may be required.
All of our Boeing 737 aircraft are equipped with engines manufactured by CFM International, S.A. (“CFM International”), with
the Boeing 737 Classic series (Boeing 737-300, 737-400 and 737-500) using one type of CFM engine and the Boeing 737 NG
xii
series (Boeing 737-600, 737-700, 737-800 and 737-900) using another type of CFM engine. Our ATR 72-500s are equipped
with engines manufactured by Pratt & Whitney Canada Corp.
Our dependence on these limited types of aircraft and engines makes us particularly vulnerable to any problems that might be
associated with such aircraft or the engines. Our business would be significantly harmed if a design defect or mechanical
problem with such aircraft or engines were discovered, causing our aircraft to be grounded while any such defect or problem is
being corrected, assuming it could be corrected at all. The DGCA could also suspend or restrict the use of our aircraft in the
event of any actual or perceived mechanical or design problems while it conducts its own investigation. Our business would also
be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the Boeing 737 or the ATR 72-500
aircraft because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving a Boeing
737 or an ATR 72-500 aircraft.
A number of factors could adversely affect our ability to obtain additional Boeing 737 or the ATR 72-500 aircraft, including any
accidents, industrial unrest or natural calamity or other event affecting the manufacturing facilities of the Boeing Company
(“Boeing”) or Avions de Transport Regional (“ATR”) and thereby affecting their ability to fulfill their contractual obligations or
to do so in a timely manner. We could experience similar problems in the procurement of engines manufactured by CFM
International and by Pratt &Whitney Canada Corp.
If these or other parties are unable to perform their contractual obligations to deliver aircraft or engines to us, we would have to
approach another supplier for aircraft or engines of a similar seat configuration and mission capability. Airbus is currently the
only other manufacturer from which we could acquire alternate aircraft to our Boeing 737 fleet. If we were to purchase aircraft
from Airbus, we would lose the fleet commonality benefits described above. We cannot also assure you that any such aircraft
would have the same operating advantages as the Boeing 737. In addition, we cannot assure you that we could acquire such
aircraft in the same time frame as currently expected or at comparable prices. We would incur substantial transition costs,
including costs associated with retraining our employees and replacing our manuals. Our operations could also be harmed by the
failure or inability of Boeing, CFM International, ATR or Pratt & Whitney Canada Corp. to provide sufficient parts or related
support services on a timely basis.
We rely on maintaining high daily aircraft utilization for our revenues. High aircraft utilization also makes us vulnerable to
delays. If an aircraft becomes unavailable, we may suffer greater damage to our service, reputation and profitability than
airlines with larger fleets.
One of the key elements of our business strategy is to maintain high daily aircraft utilization, which represents the average
number of Block hours operated per day per aircraft for the total aircraft fleet. High daily aircraft utilization allows us to enhance
the efficiency of our operations and generate more revenue from our aircraft and is achieved in part by reducing turnaround time
at airports so that we can fly more hours on an average in a day. Aircraft utilization is reduced by delays resulting from the
following factors, most of which are beyond our control:
• security requirements;
• air traffic and airport congestion;
• adverse weather conditions, especially in North India during winter months;
• defects or mechanical problems with our aircraft;
• unavailability of cockpit and in-flight crew;
• strikes or work stoppages; and
• acts of third parties upon which we rely for requirements such as fueling and maintenance.
In addition, the expansion of our business to include new destinations and more frequent flights on existing routes could increase
the risk of delays, to the extent the expansion increases our exposure to congested airports, longer flight durations or air traffic
congestion. Delays could reduce our daily aircraft utilization and, in turn, limit our ability to achieve and maintain profitability
as well as damage our reputation. Further, high aircraft utilization increases the risk that once an aircraft falls behind schedule
during the day, it could remain behind schedule during the remainder of that day, which could result in disruption in operating
performance leading to passenger dissatisfaction as a result of delayed or cancelled flights or missed connecting flights.
Our business is dependent on the Mumbai airline market and a reduction in demand in this market could harm our business.
Also, any interruptions or disruptions at the Mumbai airport or at any of our other hubs could harm our business.
Currently, 1,008 of our 1,924 weekly flights have Mumbai as either their destination or origin. In addition, we park 19 of our
fleet of 42 aircraft at the Mumbai airport overnight. Mumbai is the primary base of our operations. As a result, we remain
dependent on the Mumbai airport and airline market. A small part of our workforce at Mumbai is unionized. Our business could
be harmed by any circumstances causing a reduction in traffic to and from the Mumbai area, such as adverse changes in
economic conditions, work stoppages or slowdowns by our workforce in Mumbai, negative public perception of the city,
significant price increases in airport access costs and fees imposed on passengers or the impact of terrorist attacks or strikes in the
city or in the State of Maharashtra or neighboring States.
xiii
In addition to Mumbai, the other hubs of our operations are Delhi, Bangalore, Chennai and Kolkata. Our operations at each of
these hubs include flights that gather and distribute traffic from markets in the geographic region surrounding the hub to other
major cities. Any interruptions or disruptions at these airports could also harm our business.
If we commence services to additional international destinations, we will face different risks than those associated with our
domestic operations.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004 and May
2004, respectively, pursuant to the Government of India’s permission allowing private domestic air carriers to fly to these
destinations. The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20 aircraft to
provide services to other international destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman,
Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three years. The Company is
accordingly considering the feasibility of flying to other international destinations. However, these policy changes are not yet
effective, and detailed guidelines will need to be notified by the Ministry of Civil Aviation. As and when the changes in policy
become effective, the Government will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaty
for the respective countries to which we desire to fly. There is no certainty when these policy changes will become effective and
whether or when we will be permitted to fly to destinations of our choice.
If we commence services to additional international destinations, we will face different risks than those associated with our
domestic operations. We have only limited experience in operating flights to international destinations. In particular, for long
haul destinations, we would be required to operate bigger, wide-bodied aircraft than the types that we currently operate. We also
would need to acquire flight slots from local airport authorities or carriers. These expanded activities could require us to make
significant capital expenditure and/or incur substantial indebtedness. In addition, the operation of such larger aircraft over long
routes would involve additional complexities, including securing the services of qualified pilots, flight staff and engineers with
international experience.
Factors that may have an impact on our international growth strategy include:
• delay or inability to obtain permissions and approvals from regulatory authorities;
• delay or inability to acquire flight slots on terms that are financially viable;
• changes to our cost structure;
• factors affecting demand in international travel to and from India, including the general condition of the global
economy;
• operational, financial, marketing and legal challenges (including compliance with foreign laws) that are different from
those that we currently encounter;
• our ability to operate and manage in a cost effective manner, a larger operation;
• greater exposure to exchange rate volatility;
• our ability to secure a sufficient number of additional aircraft on favorable lease or purchase terms; and
• our ability to hire, train and retain sufficient numbers of pilots, flight crew and engineers with international experience.
Many of these factors are beyond our control. There can be no assurance that we will be able to successfully expand our
international operations, if and when we are permitted, and our failure to do so may have a material adverse effect on our
prospects and future results of operations. See “Business – International Operations” on page 52 of this Draft Red Herring
Prospectus.
Our failure to successfully implement our growth strategy would harm the market value of our Equity Shares.
Our growth strategy involves expanding the number of markets we serve, including international markets, and increasing the
frequency of flights to the markets we currently serve. Achieving these goals is essential for us to benefit from cost efficiencies
resulting from economies of scale and to increase our operating revenues and profits. Increasing the number of markets we serve
and our flight frequencies depend on our ability to identify the appropriate Indian and international markets upon which to focus
and to gain suitable airport access and route approval in these markets. Any condition that would prevent or delay our access to
airports or routes that will be vital to our growth strategy, including the ability to process more passengers, the imposition of
flight capacity restrictions, or our ability to maintain existing slots or obtain additional slots could constrain the expansion of our
operations.
Expansion of our markets and flight frequencies may also strain our existing management resources and operational, financial
and management information systems to the point that they may no longer be adequate to support our operations, requiring us to
make significant expenditures in these areas.
In the light of these factors, we cannot assure you that we will be able to successfully establish new markets or expand our
existing markets, and failure to do so would harm our strategy, business and the value of our Equity Shares.
xiv
We rely heavily on automated systems to operate our business, and any failure of these systems could harm our business.
We depend on automated systems to operate our business, including our computerized airline reservation system, SABRE, global
distribution systems (“GDSs”) such as Abacus, Amadeus, Galileo, Sabre GDS and Worldspan, telecommunications systems,
websites and other automated systems. Our reservation and website systems must be able to accommodate a high volume of
traffic and deliver important flight information. Substantial or repeated reservation, website or telecommunications systems
failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline.
Any disruption in these systems could result in the loss of important data, increase our expenses and generally harm our business.
Our maintenance costs will increase as our fleet ages.
The average age of our aircraft is currently approximately 4.5 years and our aircraft require less maintenance currently than they
will in the future. We also currently incur lower maintenance expenses because some of the parts on our aircraft are under multi-
year warranties. As our fleet ages and the warranties on our aircraft expire, our maintenance costs will increase, both on an
absolute basis and as a percentage of our operating expenses. For example, in fiscal 2006 and 2007, D Checks are scheduled for
nine and eight Boeing 737 aircraft, respectively, which will result in the unavailability of such aircraft for a period of
approximately 45 days during each such D Check. Although we cannot reasonably predict how much our maintenance costs will
increase in the future, we expect that they will increase.
We may be unable to maintain our company culture as our business grows. If we are unable to attract and retain qualified
personnel at reasonable costs, our business may be harmed.
We believe that our growth potential and maintenance of our service-oriented company culture are directly linked to our capacity
to attract and maintain the best professionals available in the Indian airline industry. We are dedicated to providing professional,
high-quality service in a positive work environment and being innovative in finding ways to improve our business. We place
high emphasis on the selection and training of employees with the potential to add value to our business and who we believe fit
in with and contribute to our company culture. As we grow, we may be unable to identify, hire or retain enough people who
meet the above criteria, or we may have trouble maintaining this company culture as we become a larger company. Our
company culture is crucial to our business plan, and failure to maintain that culture could adversely affect our business and
results of operations.
Although our labor costs are lower than airlines in developed countries, we expect salaries, wages and benefits to increase on a
gross basis and these costs may increase as a percentage of our overall expenses, which could harm our business. Our expansion
plans will require us to hire, train and retain a significant number of new employees in the future. From time to time, the airline
industry has experienced a shortage of personnel, especially pilots, AMEs and technicians. We have also experienced a high
level of attrition of our in-flight crew. Attrition rates for employees (based on the average number of personnel at the beginning
of such period and at the end of such period) in fiscal 2002, 2003 and 2004 were 8.9%, 13.2% and 14.1%, respectively, and
11.0% (on an annualized basis) in the six months ended September 30, 2004. In-flight crew attrition rates for such periods were
15.4%, 18.3%, 26.9% and 21.2% (on an annualized basis), respectively. In addition, attrition rates for airport services staff in
fiscal 2002, 2003 and 2004 and for the six months ended September 30, 2004 were 10.6%, 18.3%, 15.9% and 13.6% (on an
annualized basis), respectively. We compete with other airlines for labor in these highly skilled positions. For certain of our non-
unionized staff such as pilots, cabin attendants and engineers, we have in consultation with such staff agreed to certain annual
compensation levels until 2007. These contemplate annual increases in fiscal years 2006 and 2007. Our competitors may offer
wage and benefit packages that are more attractive than our wage and benefit packages. We may be adversely affected if highly
skilled employees such as pilots, who have been trained by us, leave our employment and join our competitors. If we are unable
to attract and retain qualified and skilled employees at a reasonable cost, our business and expansion plans may be adversely
affected.
Our success depends in large part upon our senior management, directors and key personnel and our ability to attract and
retain them.
We are highly dependent on our senior management, our directors and our other key personnel. Our future performance will
depend upon the continued services of these persons. We do not maintain key man life insurance for any of the senior members
of our management team, our directors or our other key personnel. Competition for senior management in our industry is intense,
and we may not be able to retain our senior management personnel or attract and retain new senior management personnel in the
future. The loss of any of the members of our senior management, our directors or other key personnel may adversely affect our
business and results of operations.
Mr. Naresh Goyal and Tail Winds have significant control over us, including as a result of the terms of our Articles of
Association, and have the ability to direct our business and affairs; their interests may conflict with your interests as a
shareholder.
Our promoters, Tail Winds and Mr. Naresh Goyal, will control approximately 80% of our outstanding Equity Shares upon
completion of the Offer.
xv
.
Our Articles of Association confer certain rights on Mr. Naresh Goyal, the NG Group and certain companies controlled by Mr.
Naresh Goyal (such as Jet Enterprises) relating to the governance of the Company. Mr. Goyal is the permanent Chairman of the
Company and Chairman of our Board, and is entitled to chair all meetings of shareholders or directors, respectively, for so long
as he is willing to do so (irrespective of the shareholding of Mr. Goyal or the NG Group). In Mr. Goyal’s absence at any
shareholders’ or directors’ meeting, one of the directors nominated by the NG Group shall preside. The Chairman shall have the
casting vote at any shareholders’ or directors’ meeting and has the power to direct the convening of any Board meeting. In
addition, irrespective of the shareholding of Mr. Goyal or NG Group, the quorum for any meeting of the board of directors shall
require the presence of at least one third of its total strength, which must include at least an equal number of directors who are
NG Group nominees, unless the absent NG Group nominee directors consent in writing to a quorum requirement being satisfied.
However, in the event of a quorum not being available at an adjourned meeting the directors present shall constitute the quorum
and may transact business at such an adjourned meeting. .
For so long as the NG Group holds 26% or more of the Equity Shares of the Company:
• Approval of the NG Group shall be required to authorize or issue any share capital;
• The NG Group shall be entitled to appoint one third of the Company’s directors, which directors may be removed or
replaced only by the NG Group;
• The NG Group shall be entitled to designate one or more of its appointed directors as the Managing Director(s),
Manager or Executive Director(s) of the Company, and the NG Group shall be entitled to specify the terms of
appointment of, or remove, any Managing Director, Manager or Executive Director;
• The quorum for any meeting of shareholders shall require the presence of a representative of the NG Group (although
actions may be taken at an adjourned meeting even if an NG Group representative is not present); and
• The NG Group shall be entitled to appoint one of its nominated directors to each committee of the Board, subject to
applicable requirements of law.
In addition, for so long as the NG Group holds 10% or more of the Equity Shares of the Company, if Mr. Goyal is unable to
continue as the Chairman of the Company, then the Chairman of the Board shall act as Chairman of the Company. In addition,
for so long as the NG Group holds 10% or more of the Equity Shares of the Company, if Mr. Goyal is unable to continue as the
Chairman of the Board, then one of the NG Group Directors shall act as Chairman of the Board.
Our Articles of Association can only be amended if members holding not less than 75% of our Equity Shares (and who are
entitled to vote) cast votes in favor of such amendments and such votes include the favorable votes of the NG Group (so long as
the NG Group is a shareholder and vote on such amendments, irrespective of the amount of Equity Shares held by the NG
Group).
Accordingly, our promoters and the NG Group have the ability to exercise significant influence over matters requiring
shareholders’ or directors’ approval, even if their ownership interest in our equity capital should be reduced significantly. This
control could delay, defer or prevent a change of control of us, impede a merger, consolidation, take-over or other business
combination involving us, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control
of us. For further details, see “Main Provisions of the Articles of Association.”
We have entered into certain transaction with certain promoter group companies, including with respect to our licenses to use the
“Jet Airways” mark and our principal GSA agreement. These transactions may potentially involve conflicts of interest. See
“Risk Factors- We do not own the ‘Jet Airways’ mark” and “Related Party Transactions” as set out on pages xvi and 109,
respectively, of this Draft Red Herring Prospectus.
We rely on third parties to provide us with facilities and services that are integral to our business.
We have entered into agreements with third-party contractors to provide certain facilities and services required for our
operations, such as aircraft maintenance. We expect to enter into similar agreements in any new markets we enter. The loss or
expiration of these contracts or any inability to renew them or negotiate contracts with other providers at comparable rates could
harm our business. Our reliance on others to provide essential services for us also gives us less control over costs, and the
efficiency, timeliness and quality of contract services.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs.
Approximately 11% of our aggregate workforce as of September 30, 2004 was unionized, comprising certain categories of our
employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of settlements with the respective unions at
Mumbai, Delhi and Kolkata, which are valid from periods between 2005 and 2008. Industrial action or work stoppages by our
employees could be disruptive to our operations and could harm our business and results of operations.
xvi
We also rely on the services of approximately 2,100 travel agents in India who sell our tickets and who receive commission for
the sale of such tickets. Any concerted action by these travel agents against us could adversely affect our results of operations.
We do not own the “Jet Airways” mark.
There is significant goodwill in the “Jet Airways” name and trademark, which is a registered trademark in India. The use of the
“Jet Airways” trademark (together with certain variations thereof) has been licensed to us for use in India on an exclusive, non-
assignable basis by Jet Enterprises Private Limited (a company substantially owned by Mr. Naresh Goyal) (“Jet Enterprises”)
pursuant to a Trade Marks Registered User Agreement dated October 15, 2000, as amended (the “Registered User Agreement”).
Certain other variations of the “Jet Airways” trademark and certain other related trademarks (for which Jet Enterprises has
applied, or proposes to apply for, registration) have also been licensed to us by Jet Enterprises on an exclusive non-assignable
basis for use in India pursuant to a Common Law Trade Marks User Agreement dated October 15, 2000, as amended (the
“Common Law Agreement”). Once a trademark is registered, such trademark should be licensed to us under a registered user
agreement.
Under the Registered User Agreement, we are required to pay Jet Enterprises license fees that vary between 0.10% and 0.20% of
our gross revenues (as defined in the Registered User Agreement), while under the Common Law Agreement, we are required to
pay a fixed annual license fee of Rs.0.1 million for each trademark licensed under the Common Law Agreement. The Registered
User Agreement and the Common Law Agreement are valid for a period of fifteen years, commencing October 2000, and are
renewable at the option of Jet Enterprises for a further period of ten years.
Jet Enterprises has taken steps to register the “Jet Airways” mark and related trademarks outside India. The “Jet Airways”
trademark is currently registered in Hong Kong, Singapore, U.A.E., the U.K. and Mauritius and Jet Enterprises is seeking to
register this trademark in certain other jurisdictions outside India.
Certain parties have raised objections to the registration of the “Jet Airways” trademark in the U.K. and in the United States. For
further particulars, see litigation of promoter group companies beginning on page 128 of this Draft Red Herring Prospectus.
We intend to enter into additional trademark license agreements with Jet Enterprises for the use of the trademark in Sri Lanka,
Nepal and other countries. Pursuant to a letter dated December 15, 2004, Jet Enterprises has confirmed to us that as long as we
are not in default under any registered user agreements or common law agreements pursuant to which Jet Enterprises has licensed
trademarks to us, Jet Enterprises will license the use of the “Jet Airways” and related trademarks to us for use in the other
countries where Jet Enterprises has registered or applied for registration of the “Jet Airways” trademark and where we seek to
operate in the future. License fees will be payable to Jet Enterprises for the use of these trademarks under such other license
agreements that may be entered into by us with Jet Enterprises. We cannot, however, provide any assurance that such licenses
will be granted by Jet Enterprises to us or that the terms of such licenses, including license fees payable under such agreements,
will be favorable to us.
If the “Jet Airways” trademark and related trademarks become unavailable to us or we are required to pay a higher license fee for
the use of these trademarks, our business, financial condition and results of operations could be materially and adversely affected.
In addition, Article 3 of our Articles of Association specifies that Jet Enterprises has, pursuant to certain trademark license
agreements, granted the Company an exclusive, non-assignable license to use certain trademarks, including the “Jet Airways”
trademark, in accordance with the terms of such license agreements. Our Articles of Association further contemplate that upon
expiry or termination of such license agreements, we will discontinue the use of the name “Jet Airways” and related trademarks,
service marks, copyrights, domain names and designs, including any variations thereof. In such event, we are also required to
change our corporate name and assign all rights relating to the name “Jet Airways” and related intellectual property rights to Jet
Enterprises. Under our Articles, our shareholders are also required, subject to applicable law, to exercise their voting rights to
ensure that we comply with such terms.
We have high levels of indebtedness. If we fail to comply with our financing covenants, some of our financing agreements
may be terminated.
As of September 30, 2004, we had Rs.31,481 million long-term indebtedness and subordinated debt obligations. Approximately
32.2% of our total indebtedness (including subordinated debt) is on a floating rate basis and linked to LIBOR.
Under certain of our financing agreements, we are required to comply with specified covenants. In addition, certain of our lease
agreements require that Tail Winds should continue as the majority shareholder of the Company and Mr. Naresh Goyal should
hold not less than 51% of the shares of Tail Winds, and a failure to comply with either condition will result in an event of default.
The terms of our financing agreements may limit our ability to obtain additional financing for working capital and other purposes
and could result in the diversion of substantial cash flow from our operations to service our financing obligations, thereby
limiting our ability to plan for or react to changes in our business and the airline industry and to general economic conditions.
Our general sales agents for India and certain other countries are controlled by our promoter, Mr. Naresh Goyal.
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Our general sales agent (“GSA”) for India is Jetair Private Limited (“Jetair”), which is controlled by Mr. Naresh Goyal. We have
a GSA agreement with Jetair for a period of four years commencing April 1, 2004. Such agreement with Jetair requires
Government approval under the Companies Act, and we currently have received approval for such agreement for a period of
three years commencing April 1, 2004. Pursuant to such GSA agreement, we pay Jetair an overriding commission of 3% on all
passenger sales and 2.5% on all cargo sales. This commission is payable in addition to the sales commissions that is payable to
sales and travel agents of 5% on Rupee fares and cargo and 7% on foreign exchange fares. Our agreement with Jetair provides
for charge back of certain expenses, including remuneration of certain employees (sales, reservation and service staff) who are
rendering services which should be rendered by Jetair as our GSA, computer reservation system (“CRS”) costs (up to a
maximum of 25% of such CRS costs) and Societe International de Telecommunications Aeronautiques (“SITA”) communication
charges, in amounts as determined by us. In fiscal 2004 and the six months ended September 30, 2004, commissions to Jetair
constituted 2.5% and 3.1%, respectively, of our Total Expenses for such periods. We propose to join the Billing Settlement Plan
(“BSP”) system in India, an IATA sponsored standardized ticketing and collection system. If we migrate sales to the BSP
system, we expect that our GSA agreement with Jetair may require modification.
While we are already a part of the BSP systems in certain countries outside India, there can be no assurance that we will join the
BSP system in India or amend the terms of the GSA agreement with Jetair.
In addition, we have GSA agreements with Jet Airways LLC, Dubai, UAE and its two subsidiaries Jet Airways of India Inc.,
USA (for USA and Canada) and India Jet Airways (Pty) Ltd., South Africa (for South Africa). These companies are all promoter
group companies. In fiscal 2004 and the six months ended September 30, 2004, commissions to these companies constituted
0.5% and 0.4%, of our Total Expenses for such periods.
Our transactions with these promoter group companies may potentially involve conflicts of interest. There can be no assurance
that in such circumstances, our promoter will not favor the interests of Jetair or other promoter group companies over our
interests.
Any further issuance of Equity Shares by us or sales of our Equity Shares by Tail Winds or any other major shareholder may
adversely affect the trading price of the Equity Shares.
Any future issuance of our Equity Shares by us could dilute your shareholding. Any such future issuance of our Equity Shares or
sales of our Equity Shares by Tail Winds or any other major shareholder may also adversely affect the trading price of our Equity
Shares, and could impact our ability to raise capital through an offering of our securities. In addition, any perception by investors
that such issuances or sales might occur could also affect the trading price of our Equity Shares. Upon completion of the Offer,
20% of our post-Offer paid-up equity capital on a fully diluted basis held by Tail Winds will be locked up for a period of three
years from the date of allotment of Equity Shares in the Offer. All other remaining Equity Shares that are outstanding prior to
the Offer will be locked up for a period of one year from the date of allotment of Equity Shares in the Offer.
The trading price of our Equity Shares may be affected by variations in our results of operations.
We expect our quarterly operating results to fluctuate in the future based on a variety of factors, including:
• the timing and success of our growth plans as we lease or purchase additional aircraft, increase flights in existing
markets and enter new markets;
• changes in passenger fares, fuel, aircraft rentals, interest component of hire purchase rentals and maintenance costs; and
• increases in personnel, marketing and other operating expenses to support our anticipated growth.
In addition, seasonal variations in traffic, weather conditions such as fog and poor visibility, and certain expenditures affect our
operating results from quarter to quarter. The highest levels of traffic and revenue on our routes are generally realized from
October to February. Given our high proportion of fixed costs, this seasonality affects our profitability from quarter to quarter.
Many of our areas of operations in North India experience bad weather conditions in the winter, causing increased costs
associated with delayed and cancelled flights and accommodating passengers who have been unable to travel.
Due to the factors described above, our operating results may vary from quarter to quarter. In addition, it is possible that in any
future quarter our operating results could be below the expectations of investors and any published reports or analyses regarding
the Company. In that event, the price of our Equity Shares could decline, perhaps substantially.
The issue of Equity Shares pursuant to our proposed Employee Stock Purchase Scheme or any grant of stock options under
our proposed Employee Stock Option Scheme will result in a charge to our profit and loss account and will adversely impact
our profits.
After the listing of our Equity Shares in this Offer, we intend to adopt either an Employee Stock Purchase Scheme (the “ESPS”)
or an Employee Stock Option Scheme (the “ESOP”) in which eligible employees and directors of the Company and any other
person permitted under applicable law or regulation can participate, subject to such approvals as may be necessary. The criterion
for selection will be determined by our Board and approved by our shareholders. The ESPS or ESOP will comply with the SEBI
(Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares pursuant
xviii
thereto will be subject to compliance with all applicable laws and regulations. We propose to issue a maximum of 0.5% of our
post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur in fiscal 2006, although
there can be no assurance as to the timing of adoption of any such scheme, which may occur in fiscal 2006 or thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss account equal to the product of
such number of Equity Shares issued and the difference between the applicable market price of our Equity Shares and the price at
which our employees and directors will purchase the Equity Shares. We have not as yet determined the issue price at which
Equity Shares will be sold, the number of Equity Shares proposed to be issued, the identity of such eligible personsnd the timing
of adoption of the ESPS scheme or the date of issue of Equity Shares thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of the number of Equity Shares
proposed to be issued in accordance with the accounting principles used for determining such charge using the fair value method
or applicable market price of our Equity Shares. Such charge will be amortized over the vesting period of the stock option. We
have not as yet determined the number of stock options to be granted, the exercise price or the number of Equity Shares to be
issued, the identity of the eligible persons and the timing of the ESOP scheme.
There are a number of legal proceedings against us, our directors, our promoters and promoter group companies.
We, our directors, our promoters and promoter group companies are parties to certain legal proceedings initiated by or against us
that are incidental to our business and operations. These legal proceedings are pending at different stages of adjudication before
various courts and tribunals. Should any new developments arise, such as a change in Indian law or rulings against us by
appellate courts or tribunals, we may need to make provisions in our financial statements, which could increase our expenses and
our current liabilities. Furthermore, if significant claims are determined against us and we are required to pay all or a portion of
the disputed amounts, this may have a material adverse effect on our business and profitability.
We have challenged the grant by the Cochin International Airport Limited (“CIAL”) of an exclusive ground handling services
contract to Air India at the Monopolies and Restrictive Trade Practices Commission. As a result of this contract, we are
prevented from arranging our own ground handling services (which we are entitled to provide at all other airports in India) and
instead are required to use the services of Air India. Under such arrangements, we are required to pay Air India ground handling
charges that are significantly greater than the costs we would otherwise have incurred in arranging our own ground handling
services. We are currently making payments of a part of such charges to Air India under protest. In the event that we are
required to pay Air India the entire outstanding amounts, including any interest payable thereon, our financial condition and
results of operations could be adversely affected.
We have filed a writ petition in the High Court, Mumbai (being Writ Petition No.208 of 2001), challenging the order of the
Municipal Corporation of Greater Mumbai levying octroi duty (an entry tax) of approximately Rs. 290 million on certain of the
Company’s fleet of aircraft. If the imposition of the octroi duty is upheld, our results of operations could be adversely affected.
In addition, there are certain outstanding civil litigation initiated by and against us. We are also subject to certain consumer
claims, claims by our employees and certain claims against us by the income tax and sales tax authorities in India. We believe
that these claims, even if finally determined against us, will not result in a material adverse effect to our results of operations.
Mr. Naresh Goyal and certain of our promoter group companies are parties to certain legal proceedings by and against them that
are incidental to their business and operations. They are subject to certain civil and criminal cases filed against them and certain
claims made by the income tax authorities. We believe these claims, even if finally determined against them, will not result in a
material adverse effect to our Company’s business.
For more information regarding legal proceedings by or against us, our directors, our promoters and our promoter group
companies, please see the section entitled “Outstanding Litigation” beginning on page 116 of this Draft Red Herring Prospectus.
Certain of our promoter group companies are loss making.
Certain of our promoter group companies have incurred losses in the financial years ended March 31, 2002, March 31, 2003
and/or March 31, 2004. For more information, please see the section entitled “Our Promoters and Group Companies” beginning
on page 96 of this Draft Red Herring Prospectus.
As at September 30, 2004, we had contingent liabilities as disclosed in our Statement of Assets and Liabilities under Indian
GAAP, and our results of operations could be adversely affected if any of these contingent liabilities materializes.
Our contingent liabilities, as of September 30, 2004, were Rs.4,039 million. These comprised the following:
(Rs. in millions)
Unprovided income tax demands which are disputed in appeals 37
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Unprovided claims against the Company, pending civil and consumer suits 79
Unprovided claims for Octroi duty on aircraft by the Municipal Corporation of Greater Mumbai not accepted by
the Company
290
Disputed claims against the Company towards landing and navigation charges made by the AAI 197
Disputed claims against the Company towards ground handling charges levied at Cochin International Airport. 235
Letters of credit outstanding 1,629
Bank guarantees outstanding 1,572
Total Rs. 4,039
Note: In addition to the aforesaid contingent liabilities, we will be required to pay arrears of cumulative dividends aggregating Rs.88 million in respect of the
cumulative convertible redeemable preference shares issued to International Finance Corporation (“IFC”).
If any of these contingent liabilities materializes, our results of operations could be adversely affected.
We have not entered into any definitive agreements to utilize a substantial portion of the net proceeds of the Fresh Issue.
We intend to use the net proceeds of the Fresh Issue for repayment of debt, capital expenditure and general corporate purposes.
See “Objects of the Offer” on page 28 of this Draft Red Herring Prospectus. We have not entered into any definitive agreements
to utilize the net proceeds for capital expenditures relating to investments in equipment, engines and spares, including a flight
simulator, or for the purchase of any land in connection with an investment in an integrated training center, or for general
corporate purposes. There can be no assurance that we will be able to conclude definitive agreements for such capital
expenditures on terms anticipated by us. Pending any use of the net proceeds of the Fresh Issue, we intend to invest the funds in
high quality, interest bearing liquid instruments including deposits with banks. These investments will be authorized by our
Board or a duly authorized committee thereof.
External Risk Factors
Substantial increases in fuel costs or the unavailability of sufficient quantities of fuel would harm our business.
Fuel expenditure constitutes a significant portion of our Total Expenses. In fiscal 2002, fiscal 2003, fiscal 2004 and the six
months ended September 30, 2004, aircraft fuel expenditure constituted 19.9%, 20.4%, 21.9% and 26.1%, respectively, of our
Total Expenses for such periods. Significant increases in fuel costs would harm our financial condition and results of operations.
Historically, our fuel expenditure has been subject to wide price fluctuations in the price of aviation turbine fuel (“ATF”), which
is based primarily on the international price of crude oil. The price of crude oil is influenced by geopolitical issues, government
regulation and various supply and demand factors, including periods of market surplus and shortage. The price of ATF in India
is also dependent on other factors including the following:
• limited competition in India because ATF is currently available at airports from only three Government-controlled
companies (Indian Oil Corporation (“IOC”), Bharat Petroleum Corporation Limited (“BPCL”) and Hindustan Petroleum
Corporation Limited (“HPCL”));
• periodic variations in the ex-refinery price charged for ATF by IOC, BPCL and HPCL; the price is fixed every month
based on the Arab Persian Gulf Platt ATF prices and the cost of crude oil;
• fluctuations in the exchange rate between the U.S. Dollar and the Rupee, since a substantial percentage of crude oil is
imported;
• excise duty on ATF, which is currently 8% (in addition, applicable education cess is also required to be paid);
• sales tax on ATF is levied at all the stations we currently service in India (except for Diu, Leh and Port Blair), and is
currently between 4% and 30.55%, with a weighted average of approximately 22.1% for the six month period ended
September 30, 2004; and
• inability to enter into price hedging arrangements for fuel supply due to Government regulations, which do not permit
domestic airlines such as us to hedge the price of ATF on the basis that we do not import ATF.
Because of the effect of these events on the price and availability of fuel, the cost and future availability of fuel cannot be
predicted with any degree of certainty. In the event of a fuel supply shortage or higher fuel prices, we may be required to curtail
some of our scheduled services. Also, some of our competitors may have more leverage than us in obtaining fuel. We cannot
assure you that future increases in prices of fuel can be offset, in part or at all, by increases in passenger fares.
Lack of airport infrastructure and facilities in India could adversely affect our business.
We, like other airlines, are dependent on the quality of airport infrastructure for our future expansion and the availability and cost
of terminal space, slots and aircraft parking are critical to our operations. Two of the key airport facilities from which we
operate, Mumbai and Delhi, are highly congested and passenger processing is currently at or near maximum capacity. An
increase in the number of airlines operating from Mumbai and Delhi may result in an increase in congestion and delays at these
airport facilities, which could have a material adverse effect on our operations. All parking bays for aircraft and prime time
departure slots in Mumbai and Delhi are already fully utilized. There is limited availability of parking bays in other major
airports we connect. We are expanding our fleet and require additional ground and maintenance facilities, including gates and
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hangars, and support equipment. These and other required facilities and equipment may be unavailable in a timely or economic
manner. Our inability to lease, acquire or access airport facilities on reasonable terms or at preferred times to support our growth
could have a material adverse effect on our operations.
In February, 2004, the Government invited expressions of interest in connection with the proposed restructuring and
modernization of the airports at Mumbai and Delhi. Work has commenced on green-field airport projects at Bangalore and
Hyderabad which are being constructed by private parties. These developments may lead to increases in the cost of using airport
infrastructure and facilities and may also result in an increase in related costs such as landing charges. Such increases may
adversely affect our operating results.
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline.
Investors, particularly FIIs, should carefully review such foreign investment restrictions prior to making any investment in
our Equity Shares.
Pursuant to the industrial policy of the Government of India (the “Industrial Policy”) and the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended (the “FEMA Regulations”),
any investment in an Indian domestic airline by persons resident outside India requires the prior approval of the Foreign
Investment Promotion Board, the Government of India (“FIPB”). However, the Ministry of Civil Aviation, Government of India
(“MoCA”), pursuant to Notification No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of
India on November 13, 2004) has permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector
up to 49% through the “automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also
permits investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline. Amendments to
the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are awaited.
The Reserve Bank of India (the “RBI”), by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognised
Overseas Corporate Bodies (“OCBs”), such as Tail Winds, as an eligible class of investors under the various investment
routes/schemes under the rules and regulations promulgated under the Foreign Exchange Management Act, 1999, as amended
(“FEMA”). Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3, 2003, issued the Foreign
Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003 (the “OCB
Regulations”) to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8, 2003, the RBI clarified, among
other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the OCB
Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA Regulations (i.e., with
the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI), an
erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for the transfer
of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to residents, subject to the
terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi and Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested the FIPB
to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain clarifications on behalf of
an Indian company in the domestic airlines sector which was contemplating an initial public offering. The FIPB was informed
that the company was promoted by a Non Resident Indian (“NRI”) who held the shares of such company through an OCB in
which such NRI had a 100% shareholding. The FIPB was further informed that the initial public offering by the company would
be made to persons within the definition of Indian residents (including Foreign Institutional Investors (“FIIs”) and Qualified
Institutional Buyers (“QIBs”) registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer
for sale of shares in the company by the OCB to such Indian residents.
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are eligible,
and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the “adverse
list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
xxi
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and QIBs
registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial institutions or other
non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for the Allotment of Equity Shares under this Offer. We will be
required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a domestic airline.
In addition, our permission to operate scheduled services granted by the Director General of Civil Aviation (“DGCA”) and the
guidelines issued by the DGCA from time to time, including the Aeronautical Information Circular No.4/2004 dated March 1,
2004 issued by the DGCA (the “AIC No. 4”) specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector must not be
a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector must not
have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in Indian
nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector may have
representation on the board of directors of a domestic airline company, but such representation shall not exceed one-
third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the Company in
accordance with AIC No. 4, read with the MoCA Notification No. AV.13011/10/96 DT (Vol II) dated November 10, 2004, and
other applicable laws, rules, regulations, guidelines and approvals.
The foreign investment restrictions described above may prevent us from raising funds by the issue of shares or convertible
securities to persons resident outside India, reduce our operational flexibility or prevent us from entering into a transaction, such
as a takeover, that is in the best interest of our shareholders.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the Selling
Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that they are eligible
under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company and will not
offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible under applicable laws, rules,
regulations, guidelines and approvals to acquire Equity Shares of the Company. The Company, the Selling Shareholder, the
Underwriters and their respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for
advising any investor on whether such investor is eligible to acquire Equity Shares of the Company.
The airline industry in India is subject to extensive regulation. Changes in government regulation imposing additional
restrictions on our operations could increase our operating costs and result in service delays and disruptions.
The MoCA is the approving authority for the lease or acquisition of additional aircraft by private airlines. We are also required
to operate on certain routes to economically less developed parts of India as specified by the DGCA under its Route Dispersal
Guidelines. The DGCA regulates the Route Dispersal Guidelines, and any changes in these guidelines may affect our ability to
generate revenues and profits. The DGCA is also the authority that issues and regulates the operating permit of airlines, certifies
and registers aircraft, permits increases in route frequencies and administers all related aviation regulations.
In addition, the guidelines issued by the DGCA (including AIC No. 4) stipulate the following restrictions and conditions that
affect our business and operations:
• we must be registered and have our principal place of business within India;
• the Chairman of our Board and at least two thirds of our Directors must be citizens of India;
• we must not enter into any shareholders agreement or similar arrangements with a foreign airline or an entity acting on
behalf of a foreign airline, which allows such foreign airline to have effective control in our management.
• we are not permitted to enter into an agreement with a foreign airline which may give such foreign airline the right to
interfere in the management of our business;
• we are not permitted to enter into financial or commercial tie-ups with a foreign airline;
• no foreign airline is permitted to have management or ownership interest in us;
xxii
• we are not permitted to enter into any financial arrangements with a foreign airline for the purpose of lease-finance,
hire-purchase or other loan arrangements;
• we are not permitted to enter into management contracts with foreign airlines; and
• we require specific approvals from the DGCA for certain arrangements, such as employing foreign pilots and engineers.
Any adverse change in these regulations or the imposition of additional restrictions and conditions that affect our business and
operations could impact our ability to grow.
The Airports Authority of India (“AAI”) determines landing charges, route navigation facility charges, terminal navigation
landing charges, allocation of parking bays and allocation of slot timings at 41 of the 42 airports to which we fly in India. For
Cochin, a privately owned airport, the CIAL determines landing charges. Our performance can be affected by any adverse
increase in such charges, unavailability of parking bays and departure slots required by us.
The Government of India is currently considering permitting private domestic air carriers to fly to additional international
destinations. Any delay or inability to obtain permissions and approvals from relevant regulatory authorities could have a
material adverse effect on our international expansion strategy and results of operations.
The Indian aviation regulatory framework is undergoing changes. Indian regulatory authorities may re-evaluate foreign
investment restrictions and other regulations currently applicable to the Indian airline industry. We cannot yet assess how the
evolving regulatory framework will affect our business and results of operations. No assurance can be given that these or other
changes in the Indian airline industry regulations will not have a material adverse effect on our business and results of operations.
Exchange rate instability may adversely affect our financial condition and results of operations.
Our revenues are denominated substantially in Rupees and a significant part of our operating expenses, such as fuel, aircraft and
engine maintenance services, interest and principal obligations under the terms of our foreign debt and aircraft lease payments
are denominated in, or linked to, U.S. Dollars. We face exchange rate risks to the extent that our expenses and debt repayments
are denominated in currencies other than Indian rupees. In fiscal 2004, approximately 15% of our Total Revenues, which are
derived from tickets sold in foreign currencies and 25% of our Total Expenses, such as aircraft and engine maintenance services,
aircraft lease payments, computer reservation systems costs and aircraft insurance, were in currencies other than Indian Rupees,
predominantly U.S. Dollars. In addition, 32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004
is foreign currency denominated.
Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our exchange rate risk.
While in the past we have entered into derivative contracts with various counterparties to protect ourselves against a depreciation
of the Rupee in relation to the U.S. Dollar, there can be no assurance that we will be able to continue to do so. As of September
30, 2004, there were no foreign currency forward contracts outstanding.
Any exchange rate fluctuations that we are unable to effectively hedge against, may lead to a decrease in our profit margins, or to
operating losses caused by increases in U.S. Dollar denominated costs, increases in interest expense or exchange losses on
unhedged fixed obligations and indebtedness denominated in foreign currency.
The airline industry is characterized by low profit margins and high fixed cost obligations, and we may be unable to compete
effectively with other airlines with greater financial resources or lower operating costs.
The airline industry is characterized generally by low profit margins and high fixed cost obligations, primarily for hire purchase
charges, engineering and maintenance charges, aircraft fuel, debt service and rent. The expenses of an aircraft flight do not vary
significantly with the number of passengers and tonnage of cargo carried and, as a result, a relatively small change in the number
of passengers or in pricing could have a disproportionate effect on an airline’s operating and financial results. Accordingly, a
minor shortfall in expected revenue levels could harm our business.
In addition, the airline industry is highly competitive and is particularly susceptible to price discounting because airlines incur
only nominal costs to provide service to passengers occupying otherwise unsold seats. We currently compete with other airlines
on all of our routes. We may be unable to compete effectively with other airlines that introduce service or discounted fares in the
markets that we serve.
Our reputation and financial results could be harmed in the event of an accident or incident involving our aircraft.
An accident or incident involving one of our aircraft could involve repair or replacement of a damaged aircraft and its
consequential temporary or permanent loss from service, and significant potential claims of injured passengers and others.
Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry
practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses resulting from an
accident or incident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our
xxiii
business and operating results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception
that we are less safe or reliable than other airlines, which would harm our business.
Airlines are often affected by factors beyond their control, including traffic congestion at airports, weather conditions, bird
hits, increased security measures, natural disasters and epidemics, any of which could harm our operating results and
financial condition.
We, like other airlines, are subject to delays caused by factors beyond our control, including air traffic congestion at airports,
adverse weather conditions, natural disasters, bird hits and increased security measures. Delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn affect profitability. During periods of fog, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic
control problems, bird hits and breaches in security could harm our financial condition and results of operations. In addition, any
epidemics or infectious outbreaks or other health related concerns that impact customers’ willingness to travel could adversely
affect our business and results of operations.
The airline industry tends to experience adverse financial results during general economic downturns.
Since a substantial portion of airline travel, for both business and leisure, is discretionary, the airline industry tends to experience
adverse financial results during general economic downturns. Soft economic conditions would continue to put pressure on the
profitability of the industry and us. Any general reduction in airline passenger traffic will harm our business and results of
operations.
Insurance cover is unavailable for certain risks or may be inadequate.
The availability of insurance is fundamental to airline operations. However, insurance cover is generally not available for certain
risks such as mechanical breakdowns. We believe our insurance coverage is consistent with industry practice. To the extent that
any uninsured risks materialize, our operating results and financial performance could be detrimentally affected.
Insurance costs for airlines increased substantially as a result of the September 11, 2001 terrorist attacks in the United States,
and further increases would harm our business.
Following the September 11, 2001 terrorist attacks, aviation insurers dramatically increased airline insurance premiums and
significantly reduced the maximum amount of insurance coverage liability available to airlines.
Aviation insurers could further increase their premiums in the event of additional terrorist attacks, hijackings, airline crashes or
other events adversely affecting the airline industry. Significant increases in insurance premia would harm our financial
condition and results of operations.
Our performance is linked to the stability of policies and the political situation in India.
The role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained
significant over the years. Since 1991, the Government of India has pursued policies of economic liberalization, including
significantly relaxing restrictions on the private sector. Since 1996, the Government of India has changed six times. There can
be no assurance that these liberalization policies will continue in the future. The rate of economic liberalization could change,
and specific laws and policies affecting airlines, foreign investment, currency exchange rates and other matters affecting
investments in Indian companies could change as well. A significant change in India’s economic liberalization and deregulation
policies could disrupt business and economic conditions in India, thus affecting our business.
The current Indian central government is a coalition of several parties. The withdrawal of one or more of these parties could
result in political instability. Any political instability could delay the reform of the Indian economy and could have a material
adverse effect on the market for our services.
Terrorist attacks or war or conflicts involving India or other countries could adversely affect business sentiment and the
financial markets and adversely affect our business.
Incidents such as the September 11, 2001, terrorist attacks on New York and Washington D.C., and other recent incidents such as
those in Bali, Indonesia, and Madrid, Spain, may adversely affect global equity markets and economic growth as well as the
Indian economy and stock markets. Such acts negatively impact business and economic sentiment, which could adversely affect
our business and profitability.
Also, India has from time to time experienced, and continues to experience, social and civil unrest and hostilities with
neighboring countries. Armed conflicts, particularly between India and Pakistan, could disrupt communications and adversely
affect the Indian economy. Such events could also create a perception that investments in Indian companies involve a high
degree of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including our
xxiv
Equity Shares. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could
have an adverse effect on our business.
After this Offer, the price of our Equity Shares may be volatile, or an active trading market for our Equity Shares may not
develop.
Prior to this Offer, there has been no public market for our Equity Shares. The trading price of our Equity Shares may fluctuate
after this Offer due to a variety of factors, including our results of operations and the performance of our business, competitive
conditions, general economic, political and social factors, volatility in the Indian and global securities markets, trends in business
and leisure travel, the performance of the Indian and global economy and significant developments in India’s fiscal regime.
There can be no assurance that an active trading market for our Equity Shares will develop or be sustained after this Offer, or that
the price at which our Equity Shares are initially offered will correspond to the prices at which they will trade in the market
subsequent to this Offer.
Note to Risk Factors
• Public offer of 17,266,801 Equity Shares for cash at a price of Rs.[?] per Equity Share, aggregating Rs.[?] million,
comprising a Fresh Issue of 14,245,111 Equity Shares by the Company and an Offer for Sale of 3,021,690 Equity Shares
by the Selling Shareholder. The Offer comprises a Net Offer to the public of 16,066,801 Equity Shares and an
Employee Reservation Portion of 1,200,000 Equity Shares. The face value of the Equity Shares is Rs.10 and the Offer
Price is [?] times of the face value. The Offer will constitute 20% of the fully diluted post Offer paid-up equity capital
of the Company.
• The book value per Equity Share was Rs.17.81 and Rs.26.46 as of March 31, 2004 and as of September 30, 2004,
respectively, as per our restated financial statements under Indian GAAP.
• The net worth of the Company was Rs.2,164 million and Rs.2,848 million as of March 31, 2004 and as of September 30,
2004, respectively, as per our restated financial statements under Indian GAAP.
• For related party transactions, see “Related Party Transactions” on page 109 of this Draft Red Herring Prospectus.
• The average cost of acquisition of our Equity Shares by our promoters is Rs.8.70 per Equity Share.
• Investors may note that in case of over-subscription in the Offer, allotment to Non Institutional Bidders, and Retail
Individual Bidders shall be on a proportionate basis. For more information, see “Method of Proportionate Basis of
Allotment” on page 166 of this Draft Red Herring Prospectus.
• For any clarification or information relating to the Offer, investors are free to contact the BRLMs, who will be obliged
to provide such clarification or information to the investors.
• Investors may contact the BRLMs and the Syndicate Members for any complaints pertaining to the Offer.
• Investors are advised to see “Basis for Offer Price” on page 162 of this Draft Red Herring Prospectus.
1
SUMMARY
You should read the following summary together with the Risk Factors and the more detailed information about us
and our financial statements included in this Draft Red Herring Prospectus.
Overview
We are a leading airline in India, providing regular scheduled services on routes between all of India’s major cities.
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We believe that our focus on providing high-quality, reliable service has enabled us to
become the preferred airline for travelers in India.
We have flown over 48 million revenue passengers (defined as fare paying passengers flown on all flight segments)
since commencing operations on May 5, 1993 until November 30, 2004. We flew approximately 5.82 million
revenue passengers in fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers
in fiscal 2004 and 3.78 million revenue passengers in the six months ended September 30, 2004. Our share of the
domestic market based on revenue passengers was 11.2% in fiscal 1995, 45.3% in fiscal 2002, 45.9% in fiscal 2003,
45.3% in fiscal 2004 and 42.3% in the six months ended September 30, 2004. Source: DGCA
Our aircraft fleet currently comprises 42 aircraft, of which 34 are Boeing 737 aircraft and eight are ATR 72 aircraft.
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India and
currently operate 1,924 flights weekly.
We intend to maintain a disciplined growth strategy by increasing frequency on our existing routes and entering
attractive new markets. Our aircraft fleet has grown from four aircraft in 1993 to 42 aircraft today. Operating a
fleet consisting of limited types of aircraft lowers our operating costs as maintenance issues are simplified, spare
parts inventory requirements are reduced, scheduling is more efficient and training costs are lower, ground time is
reduced and reliability is enhanced. The current average age of our aircraft is 4.5 years. We believe our average
fleet age compares favorably with airlines of our size in India and overseas.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March
2004 and May 2004, respectively. In addition, we are actively evaluating the feasibility of commencing operations
of regular scheduled services selectively to other international destinations, subject to receipt of necessary
permissions and approvals from regulatory authorities.
Our Operating Revenues have increased from Rs.25,263 million in fiscal 2002 to Rs.28,757 million in fiscal 2003
and Rs.34,474 million in fiscal 2004. In the six months ended September 30, 2004, our operating revenues were
Rs.19,264 million, an increase of 17.9% from our operating revenues of Rs.16,345 million in the six months ended
September 30, 2003. Market growth, increase in our fleet size, our pricing strategy and our entry into new markets
have been primarily accountable for increases in our revenues.
Tail Winds Limited, an Isle of Man company, holds over 99.99% of our Equity Shares. Tail Winds Limited is
wholly-owned by Mr. Naresh Goyal. Mr. Naresh Goyal, our Chairman, has more than three decades of management
and operational experience in the travel and airline industry and brings the benefit of this expertise to our business
strategy.
Competitive Strengths
We believe the following are our principal competitive strengths, which differentiate us from other airlines:
Focus on business travel: We offer several services directed towards the convenience of the business traveler,
including telephone check-in facilities, through and “in-city” check-in facilities, priority baggage service, high
frequency services on major routes, same-day return flights on major routes at convenient timings, point to point
connections, providing flight information on cellular phones of customers, our customer loyalty program, e-
ticketing, business class section on almost all flights and airport lounges for business class passengers at most
airports. These facilities and our focus on providing high-quality reliable service have contributed to us becoming
the preferred airline for business travelers in India.
Young fleet comprising limited types of aircraft: Our young fleet has enabled us to enjoy a high degree of
performance reliability and to develop a reputation for being an airline that delivers a safe, on-time, modern and
comfortable travel experience. Our aircraft types provide us with state-of-the-art technology and simplified
maintenance procedures that allows us to make adjustments to effectively manage our response to market
developments. 34 of our fleet of 42 aircraft are Boeing 737 variants and the remaining eight are ATR 72-500
aircraft. We were the first airline to introduce the Boeing 737 NG aircraft in India. Operating a fleet of limited
2
types of aircraft leads to increased cost savings in terms of maintenance and spare parts, scheduling is more efficient
and employee efficiency and productivity are increased.
Utilizing our aircraft efficiently: In fiscal 2004 and the six months ended September 30, 2004, our aircraft operated
an average of 9.46 and 9.84 hours per day, respectively. By achieving high utilization, we are able to optimize crew
movement, spread our fixed costs over a greater number of flights and available seat kilometers. We achieve high
aircraft utilization because:
• newer aircraft can be scheduled to fly more hours per day as they are more reliable and require less
maintenance than older aircraft; and
• our staff are able to achieve quick, efficient, airport turnarounds which enable us to increase the number of
daily flights per aircraft.
Strong brand and customer loyalty: We believe that we have established a strong brand that helps to distinguish us
from our competitors by identifying us as a safe and reliable airline that is highly focused on customer service and
that provides an enjoyable flying experience. We believe that our focus on every aspect of customer service, such
as our choice of aircraft, aircraft interiors, our care of passengers in-flight and on the ground, our attention to detail,
the convenient connections which we offer and our high reliability, has enhanced brand awareness and our
reputation for quality. We believe that our strong brand has enabled us to establish alliances with other leading
brands for our unique frequent flyer programs, including with international airlines, domestic and international
hotels, a car rental company and for a co-branded credit card.
Some of the key areas of our customer focus are:
• our fleet of modern generation aircraft with custom designed aircraft interiors;
• our friendly and efficient in-flight service, with meals or heavy snacks being served on nearly all flights;
• high on-time performance;
• tele check-in facilities for business class travelers and Jet Privilege members;
• city check-in facilities in Mumbai, Delhi, Kolkata, Chennai and Bangalore;
• same day return check-in facilities;
• our Jet Privilege frequent flyer program; and
• e-ticketing in accordance with IATA standards and on-line reservations.
We also offer through check-in facilities to passengers of 11 leading international airlines to and from our
connecting destinations. We also believe that our five-tier “Jet Privilege” loyalty program is an innovative program
among those offered by other domestic airlines in India.
We believe we are meeting and exceeding our customer service expectations. We have received numerous awards
that recognize the quality of our service, including the Business World award for the most respected company in the
travel and hospitality sector in 2003 and 2004, the Best Domestic Airline of Asia by the Asian readers of Travel
Trade Gazette for the years 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline
Category) for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004.
Motivated workforce and proven management team: We benefit from a highly motivated workforce that brings
high enthusiasm to air travel and a commitment to superior standards of friendly and reliable quality service that we
believe distinguishes us in our markets. We believe that the positive feedback we have received from our customers
is directly a result of the priority our employees place on delivering top quality customer service. We invest a
significant amount of time and resources into carefully developing the best training practices and selecting
individuals to join our team who share our focus on quality and improvement. We conduct ongoing training
programs that incorporate industry best practices and encourage strong and open communication channels among
members of our team so that we can continue to improve the services we provide. We are led by a management
team with significant airline industry experience.
Access to facilities at major airports: The major hub of our operations is Mumbai where 19 of our fleet of 42
aircraft are parked (of which 18 have been allotted overnight parking bays and one aircraft is parked for a few hours
at night), followed by 12 in Delhi, six at Chennai, three in Kolkata and two at Bangalore. Our access to overnight
parking bays and landing slots at these five hubs helps us to originate flights from these cities. It also enhances our
aircraft utilization and efficiency of our maintenance activities.
Extensive sales and distribution network: We have access to the sales and distribution network of Jetair, which is a
leading GSA in India with offices in approximately 69 locations. Jetair represents, in addition to us, 15
international airlines in India. In addition, we are represented by general sales agents in 74 countries outside India
that sell and/or distribute our tickets to international in-bound passengers. Our airline reservation system is hosted
on SABRE. We offer 24-hour reservations services at Mumbai, Delhi, Kolkata and Chennai. We also have
3
agreements with major GDSs, including Abacus, Amadeus, Galileo, Sabre GDS and Worldspan. We have entered
into interline agreements with major international airlines and marketing cooperation agreements with three
international airlines. We have joined billing settlement plan programs in North America, U.K., France, Germany,
Switzerland and other key countries. We introduced e-ticketing and direct internet booking in July 2004. We
intend to encourage the use of direct internet bookings by our customers because we believe it is an efficient
distribution channel.
Business Strategy
The key elements of our business strategy include:
Differentiate our product and service: We believe a key to our long-term success is that we offer customers a
better alternative in airline travel. We offer our passengers a unique flying experience by providing new aircraft,
pre-assigned seating, reliable performance, meals on nearly all flights, city check-in facilities in Mumbai, Delhi,
Kolkata, Chennai and Bangalore, tele check-in facilities for business class travelers and Jet Privilege members,
same day return check-in facilities and a well developed frequent flyer program. We place high emphasis on
customer service and quality. We intend to continue to communicate openly with our customers regarding their
needs and areas which require continued improvement. Based on customer feedback, we believe that passengers
prefer our customer service to that of our competitors and that this preference is an important factor in their decision
to fly with us over other airlines.
Continue to maintain a young fleet comprising a minimal number of different aircraft types: We intend to
continue our strategy of maintaining a young fleet and a minimal number of different aircraft types to preserve the
simplicity of our operations and control our operating costs.
Maximize revenues through efficient use of technology, focused marketing and optimization of resources: We
intend to continue to maximize our revenues through efficient use of technology, focused marketing and
optimization of resources. For this purpose, we use a state-of-the-art yield management system developed by
SABRE. We also intend to continue to focus on improving productivity and unit costs through reduction of
recurring maintenance costs and more efficient utilization of our crew.
Further strengthen the brand name under which we operate: We intend to continue to enhance the “Jet Airways”
brand recognition in the marketplace through brand building efforts, communication and promotional initiatives
such as participation in industry events, public relations and investor relations efforts. We believe that these
initiatives, as well as the listing of our Equity Shares, will enhance the visibility of our brand name and strengthen
our recognition as a leader in the Indian aviation industry.
Focus on domestic aviation sector: We intend to further penetrate our key markets in India by increasing the
number of flights per day on our key routes and commencing flights to new destinations in India. We believe that
this is important to passengers who choose airlines based on depth of schedule. We intend to continue our focus on
providing high-quality services and facilities to our customers to consolidate our position as a preferred airline for
business travelers in India.
Operate flights to select international destinations, subject to obtaining necessary Governmental approvals and
other conditions. We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu,
Nepal, in March 2004 and May 2004, respectively, pursuant to the Government of India permitting private sector
domestic carriers to fly to certain SAARC countries. The Government of India announced on December 29, 2004
that the Union Cabinet has approved a change in the aviation policy, allowing Indian scheduled carriers with a
minimum of five years continous operations and at least 20 aircraft to provide services to other international
destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia
Arabia, which would be reserved for Air India and Indian Airlines for three years. However, these policy changes
are not yet effective, and detailed guidelines will need to be notified by the Ministry of Civil Aviation. As and
when the changes in policy become effective, the Government will also need to negotiate, and allocate to us,
entitlements under the applicable bilateral treaties for the respective countries to which we desire to fly. The
Government will also specify the frequency of flights that we will be entitled to operate. There is no certainty when
these policy changes will become effective and whether or when we will be permitted to fly to destinations of our
choice. We believe that other international destinations may be attractive primarily due to the significant revenue
growth potential and high yields that may be obtained, in light of the increasing customer demand for flights to and
from these destinations and India. We believe that we are well placed to service these markets due to our reputation
for high-quality service and customer awareness of our brand. A significant number of passengers including persons
of Indian origin and non-resident Indians from these destinations use our airline in India. We believe there has been
an increase in the growth of outbound travel by Indian residents and intend to target this market.
Reduce existing high interest debt: We have significant financing obligations, relating to debt incurred in
connection with financing the purchase of our aircraft and engines as well as operating leases for our aircrafts and
4
engines. We believe that reducing significant financing obligations will improve our ability to meet our strategic
goals. We intend to reduce our existing high interest debt, including through utilization of the proceeds of the Fresh
Issue.
Continue to focus on personnel training and on motivating our workforce: We intend to continue to focus on
personnel training to improve employee productivity and to ensure that our employees understand our core
strategies. We believe in open communication, which creates a dynamic working environment and in setting out
clear well defined policies and goals. We intend to continue providing competitive wages and incentives to motivate
our workforce.
5
THE OFFER
Equity Shares offered by:
Fresh Issue by the Company 14,245,111 Equity Shares
Offer for Sale by the Selling Shareholder 3,021,690 Equity Shares
Total 17,266,801 Equity Shares
Of which:
Employee Reservation Portion 1,200,000 Equity Shares
Therefore:
Net Offer to the Public 16,066,801 Equity Shares
QIB Portion
At least 9,640,081 Equity Shares
(Allocation on a discretionary basis)
Non Institutional Portion Up to 2,410,020 Equity Shares
(Allocation on a proportionate basis)
Retail Portion Up to 4,016,700 Equity Shares
(Allocation on a proportionate basis)
Equity Shares outstanding prior to the Offer 72,088,900 Equity Shares
Equity Shares outstanding after the Offer 86,334,011 Equity Shares
Objects of the Offer Please see the section entitled “Objects of the Offer” on page
28 of this Draft Red Herring Prospectus.
6
SUMMARY FINANCIAL INFORMATION
SEBI Guidelines require us to include summary financial statements information as restated to reflect the retrospective
effect of the accounting policies adopted by the Company as of September 30, 2004 (“Summary Restated Statements”).
The following summary financial information, other than for the six months ended September 30, 2003, has been
extracted from the Summary Restated Statements prepared in accordance with Indian GAAP, the Companies Act and
SEBI Guidelines, included in the section entitled “Financial Information”. The Summary Restated Statements have
been examined as described in the joint Auditors Report of Deloitte Haskins & Sells and Chaturvedi & Shah dated
December 20, 2004, in the section entitled “Financial Information”. The Auditors’ Report refers to the auditors’
reliance on the financial statements for the years ended March 31, 2000, March 31, 2001, March 31, 2002, March 31,
2003 and March 31, 2004 audited by C.C.Chokshi & Company.
This Draft Red Herring Prospectus also includes audited financial statements for the six months ended September 30,
2004, prepared in accordance with Indian GAAP and which have not been restated in accordance with SEBI
Guidelines (the “Interim Audited Financial Statements”). The Interim Audited Financial Statements have been audited
by Deloitte Haskins & Sells and Chaturvedi & Shah as described in their audit report dated December 20, 2004
included in the section entitled “Financial Information”. The summary financial statements given below for the six
months ended September 30, 2003 have not been restated in accordance with SEBI Guidelines, and have been
extracted from the audit report for such period prepared by Deloitte Haskins & Sells and Chaturvedi & Shah which
audit report is not included in this Draft Red Herring Prospectus.
You should read this summary information in conjunction with our Summary Restated Statements and Interim Audited
Financial Statements including the significant accounting policies and notes thereto and the reports thereon and also
the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in this Draft Red Herring Prospectus. Financial statements prepared in accordance with Indian GAAP differ
in certain significant respects from financial statements prepared under IFRS or U.S. GAAP. See the section entitled
“Summary of Significant Differences between Indian GAAP, IAS/IFRS and U.S. GAAP” on page 251 of this Draft Red
Herring Prospectus for more information.
Summary of Statement of Profits and Losses
Year ended March 31,
Six months
ended
September
30,
Six months
ended
September
30,
2000 2001 2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating revenues 226,076 275,606 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
Expenditure
Employees Remuneration and
Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Other Operating Expenses
(including maintenance &
airport charges etc) 6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,700,001 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenses 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
EBITDAR
(1) (4)
5,255,688 6,146,587 6,794,097 6,953,761 10,907,614 4,707,275 5,709,321
EBITDA
(2) (4)
2,854,956 3,670,465 3,828,997 4,173,497 8,641,186 3,502,021 4,702,655
EBIT
(3) (4)
768,852 1,070,189 340,663 (559,218) 3,489,643 956,459 2,411,794
Profit (Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Profit (Loss) after taxation as per
audited accounts 101,750 124,813 (134,313) (2,444,501) 1,631,095 (155,023) 1,293,597
(1) EBITDAR is defined as profit before interest, taxation, depreciation, amortization and aircraft rentals (fixed), excluding Non-operating
Revenues and excluding any adjustments to profit as required under SEBI Guidelines.
(2) EBITDA is defined as profit before interest, taxation, depreciation and amortization, excluding Non-operating Revenues and excluding any
adjustments to profit as required under SEBI Guidelines.
7
(3) EBIT is defined as profit before interest and taxation, excluding Non-operating Revenues and excluding any adjustments to profit as required
under SEBI Guidelines.
(4) The Company believes that EBITDAR, EBITDA and EBIT provide useful information but should not be considered as an indication of, or as
an alternative to, profit attributable to shareholders or as an alternative to cash flow as a measure of liquidity. Other companies may calculate
EBITDAR, EBITDA and EBIT in a different manner than the Company.
Summary of Statement of Profits and Losses, as Restated
Year ended March 31,
Six months ended
September 30,
2000 2001 2002 2003 2004 2004
(Rs. thousands)
Profit (Loss) after taxation as per
audited accounts (A) 101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Add (Less):
Total of adjustments after tax
impact 90,048 193,480 (176,735) 1,249,038 (139,230) (609,682)
Net Profit (Loss), as restated 191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
8
Summary of Statement of Assets and Liabilities, as Restated
As of March 31,
2000 2001 2002 2003 2004
As of
September 30, 2004
(Rs. thousands)
Net fixed assets (including
capital work in progress) 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
Investments - - - 597,000 2,334,164 5,008,292
Current assets, loans and
advances 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
Of which:
Cash and bank balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
Current liabilities and provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
Deferred tax (Asset)/Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
Loans 16,556,083 17,833,194 31,996,450 34,983,525 29,019,090 28,139,790
Of which:
Secured loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
Unsecured loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Subordinated debt - - 2,640,000 2,840,733 3,080,775 3,341,100
Net worth 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Of which:
Share capital 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
Summary of Key Financial Ratios
As of March 31,
2000 2001 2002 2003 2004
As of
September 30, 2004
EPS
(1)
(Basic) (Rs.) 2.66 4.25 (5.34) (17.84) 19.44 8.70
(4)
Cash EPS
(2)
(Basic) (Rs.) 32.50 41.75 45.05 50.03 90.65 41.96
(4)
Net asset value per Equity Share
(Rs.) 18.73 21.97 16.20 (1.64) 17.81 26.46
Return on Net Worth 14.20% 13.95% (16.67%) (177.75%) 68.93% 24.01%
EBITDAR margin
(3)
26.52% 24.59% 26.89% 24.18% 31.64% 29.64%
(1) Earnings per Equity Share. EPS for September 30, 2004 above is not comparable with the other periods as it is not annualized.
(2) Net profit after tax and annualized return on preference capital before depreciation and provision for obsolesence divided by total number of
Equity Shares.
(3) EBITDAR margin is calculated by dividing EBITDAR for the relevant period by Operating Revenues for such period.
(4) The EPS for September 30, 2004 is not comparable with that of other periods as it is not annualized.
Summary of Operating Data
As of and for the year ended March 31,
As of and for the six months
ended September 30,
2002 2003 2004 2003 2004
Passengers carried (millions) 5.82 6.41 6.91 3.27 3.78
ASKMs
(1)
(millions) 7,780 8,496 9,162 4,542 4,796
RPKMs
(2)
(millions) 4,777 5,291 5,852 2,771 3,245
Passenger Load Factor
(3)
(%) 61.4% 62.3% 63.9% 61.0% 67.7%
Number of aircraft at period end 38.0 41.0 41.0 39.0 41.0
Average number of aircraft during period 34.9 38.9 40.8 40.6 41.0
Number of domestic stations served (+
international stations served) 44 40 41 (+1) 40 42 (+2)
Aircraft utilization
(4)
(hours/day per aircraft) 9.66 9.41 9.46 9.48 9.84
Average stage length (kilometers)
(5)
792 805 816 821 818
____________
(1) Available Seat Kilometers; represents the average number of Block hours operated per day per aircraft for the total aircraft fleet.
(2) Revenue Passenger Kilometers; represents the number of kilometres flown by revenue passengers.
(3) Revenue Passenger Kilometres expressed as a percentage of Available Seat Kilometres.
(4) The average number of Block hours operated per day per aircraft for the total aircraft fleet.
(5) The average number of kilometres flown per flight.
9
GENERAL INFORMATION
Authority for the Offer
Jet Airways
The Fresh Issue by the Company has been authorized by a resolution of its Board of Directors passed at their meeting
held on November 4, 2004, subject to the approval of the shareholders through a special resolution to be passed
pursuant to Section 81(1A) of the Companies Act. The shareholders approved the Fresh Issue of Equity Shares at an
EGM of the shareholders of the Company held on December 28, 2004. Pursuant to the authority granted by the Board
of Directors of the Company at its meeting held on November 4, 2004, a Committee of the Board approved the Fresh
Issue by the Company on January 4, 2005.
Selling Shareholder
The Offer for Sale has been authorized by a resolution of the board of directors of Tail Winds Limited dated December
27, 2004, which has also (i) authorized the Company to take decisions on its behalf in relation to the Offer and (ii)
appointed the Company to act as its attorney with respect to any matter in connection with the Offer. The Selling
Shareholder assumes no responsibility for any of the statements made by the Company in this Draft Red Herring
Prospectus relating to the Company, its business and related disclosures, except statements relating to the Selling
Shareholder.
Prohibition by SEBI
Our Company, our Directors, our promoters, the directors and persons in control of our promoters, our group
companies, other companies promoted by our promoters and companies with which our Company’s Directors are
associated as directors, have not been prohibited from accessing or operating in the capital markets or restrained from
buying, selling or dealing in securities under any order or direction passed by SEBI.
Eligibility for the Offer
Our Company is eligible for the Offer in accordance with Clause 2.2.2 of the SEBI Guidelines as described below:
• The Offer is made through the 100% Book Building Process wherein a minimum of 50% of the Net Offer will
be allotted to QIBs; and
• The post-Offer capital of the Company shall be more than Rs.100 million.
Further, the Offer is subject to the fulfillment of the following conditions as required under Clause 19(2)(b) of the
Securities Contracts (Regulation) Rules, 1957, as amended (“SCRR”):
• A minimum of 2,000,000 Equity Shares (excluding reservations, firm allotments and promoters contribution)
are offered to the public;
• The Net Offer size, which is the Offer Price multiplied by the number of Equity Shares offered to the public, is
a minimum of Rs.1,000 million; and
• The Net Offer is made through the Book Building Process with allocation of 60% of the Offer size to QIBs as
defined under the SEBI Guidelines.
The Company undertakes that the number of tranferees and allottees in the Offer shall be at least 1,000. Otherwise, the
entire application money shall be refunded forthwith. Further, if at least 60% of the Net Offer cannot be allotted to
QIBs, then the entire application money shall be refunded forthwith. In case of delay, if any, in refund, the Company
shall pay interest on the application money at the rate of 15% per annum for the period of delay.
The promoters, the Company, group companies and associate companies are not defined as willful defaulters by the
RBI/Government of India authorities and there are no violations of securities laws committed by them in the past or
pending against them. No penalty has been imposed by SEBI and other regulatory bodies against us, our Directors, our
promoters and other companies promoted by our promoters.
10
Disclaimer Clause
AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO
SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING
PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME
HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY
EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE
OFFER IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR
OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD
MANAGERS, DEUTSCHE EQUITIES INDIA PRIVATE LIMITED, HSBC SECURITIES AND CAPITAL
MARKETS (INDIA) PRIVATE LIMITED, UBS SECURITIES INDIA PRIVATE LIMITED, CITIGROUP
GLOBAL MARKETS INDIA PRIVATE LIMITED, DSP MERILL LYNCH LIMITED AND KOTAK
MAHINDRA CAPITAL COMPANY LIMITED, HAVE CERTIFIED THAT THE DISCLOSURES MADE IN
THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN
CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES AS FOR THE
TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN
INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED OFFER. IT SHOULD
ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE
FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN
THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS ARE
EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY
DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS
PURPOSE, THE BOOK RUNNING LEAD MANAGERS, DEUTSCHE EQUITIES INDIA PRIVATE
LIMITED, HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PRIVATE LIMITED, UBS
SECURITIES INDIA PRIVATE LIMITED, CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED,
DSP MERRILL LYNCH LIMITED AND KOTAK MAHINDRA CAPITAL COMPANY LIMITED HAVE
FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED JANUARY 6, 2005 IN ACCORDANCE
WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:
“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATIONS
LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC.
AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED
HERRING PROSPECTUS PERTAINING TO THE SAID OFFER.
ON THE BASIS OF SUCH EXAMINATION AND DISCUSSIONS WITH THE COMPANY, IT’S
DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE
STATEMENTS CONCERNING THE OBJECTS OF THE OFFER, PROJECTED PROFITABILITY, PRICE
JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND
OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT:
(A) THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH
THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE OFFER;
(B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID OFFER AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY
OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH;
AND
(C) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR
AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS
TO THE INVESTMENT IN THE PROPOSED OFFER.
WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT
RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH
REGISTRATIONS ARE VALID.
WHEN UNDERWRITTEN WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE
UNDERWRITERS TO FULFIL ANY UNDERWRITING COMMITMENTS.
WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR
INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO
LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE PROMOTERS
CONTRIBUTION SUBJECT TO LOCK-IN WILL NOT BE DISPOSED/SOLD/TRANSFERRED BY THE
11
PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED
HERRING PROSPECTUS WITH SEBI TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD
AS STATED IN THE DRAFT RED HERRING PROSPECTUS.
ALL LEGAL REQUIREMENTS PERTAINING TO THE OFFER WILL BE COMPLIED WITH AT THE
TIME OF FILING OF THE RED HERRING PROSPECTUS WITH THE REGISTRAR OF COMPANIES,
MUMBAI, MAHARASHTRA, IN TERMS OF SECTION 56, SECTION 60 AND SECTION 60B OF THE
COMPANIES ACT.
THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE
COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT
OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND/OR OTHER CLEARANCES
AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED OFFER. SEBI FURTHER RESERVES
THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGERS,
ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED HERRING PROSPECTUS.”
Caution
The Industrial Policy prohibits foreign airlines from making any direct or indirect equity investment in a domestic
airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines issued by
the DGCA from time to time, including AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
In addition, there are various restrictions under Indian laws and regulations applicable to foreign investment in a
domestic airline. For more information relating to foreign investment restrictions in our Company, see the section
entitled “Regulations and Policies – Foreign Ownership Restrictions” on page 111 of this Draft Red Herring
Prospectus.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares in
compliance with all applicable laws, rules, regulations, guidelines and approvals, including, without limitation, AIC
No. 4.
Investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs
and QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental
financial institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and
NRIs.
Investors should note that this Offer is not being made to any multilateral or bilateral development financial
institution or to any OCB.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates
and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals
to acquire Equity Shares of the Company and will not offer, sell, pledge or transfer the Equity Shares of the
Company to any person who is not eligible under applicable laws, rules, regulations, guidelines and approvals to
acquire Equity Shares of the Company. The Company, the Selling Shareholder, the Underwriters and their
respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for
advising any investor on whether such investor is eligible to acquire Equity Shares of the Company.
12
The Company, its Directors, the Selling Shareholder and the BRLMs accept no responsibility for statements made
otherwise than in this Draft Red Herring Prospectus or in the advertisements or any other material issued by or at our
instance and anyone placing reliance on any other source of information, including our website, www.jetairways.com,
would be doing so at his or her own risk.
The BRLMs accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding
entered into among the BRLMs, the Company and the Selling Shareholder (acting through the Company, its duly
constituted attorney), and the Underwriting Agreement to be entered into among the Underwriters, the Company and
the Selling Shareholder (acting through the Company, its duly constituted attorney).
All information shall be made available by the BRLMs and the Company to the public and investors at large and no
selective or additional information would be available for a section of the investors in any manner whatsoever,
including at road show presentations, in research or sales reports, at bidding centers or elsewhere.
Disclaimer in Respect of Jurisdiction
The Offer is being made in India to persons resident in India including Indian nationals resident in India who are
majors, Hindu Undivided Families (HUFs), companies, corporate bodies and societies registered under the applicable
laws in India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions,
scheduled commercial banks, regional rural banks, co-operative banks (subject to RBI permission), trusts registered
under the Societies Registration Act, 1860, as amended, or any other law relating to trusts, and who are authorized
under their constitution to hold and invest in equity shares, venture capital funds (“VCFs”) registered with SEBI, State
Industrial Development Corporations, permitted insurance companies, provident funds with a minimum corpus of Rs.
250 million and pension funds with a minimum corpus of Rs. 250 million and to permitted non-residents including
NRIs, FIIs registered with SEBI and foreign venture capital investors (“FVCIs”) registered with SEBI, provided that
they are eligible under all applicable laws and regulations to hold Equity Shares of the Company.
This Draft Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to Equity
Shares offered hereby in any jurisdiction other than India or to any person to whom it is unlawful to make an offer or
invitation in such jurisdiction. Any person into whose possession this Draft Red Herring Prospectus comes is required
to inform himself or herself about, and to observe, any relevant restrictions. Any dispute arising out of this Offer will be
subject to the exclusive jurisdiction of appropriate court(s) in Mumbai only.
No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for
that purpose, except that this Draft Red Herring Prospectus has been submitted to SEBI. Accordingly, the Equity
Shares may not be offered or sold, directly or indirectly, in any jurisdiction, except in accordance with the legal
requirements applicable in such jurisdiction, and this Draft Red Herring Prospectus may not be distributed in any
jurisdiction other than India. Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of our Company since the
date hereof or that the information contained herein is correct as of any time subsequent to this date.
Disclaimer Clause of the NSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to NSE. NSE has, pursuant to its letter
dated [•], given permission to the Company to use the NSE’s name in this Draft Red Herring Prospectus as one of the
stock exchanges on which this Company’s securities are proposed to be listed subject to the Company fulfilling criteria
for listing including the criteria related to the paid-up capital and market capitalization (i.e., the paid up capital shall be
not less than Rs.100 million and the market capitalization shall be not less than Rs.250 million at the time of listing).
The NSE has scrutinized this Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company. It is to be distinctly understood that the aforesaid permission given
by NSE should not in any way be deemed or construed to mean that this Draft Red Herring Prospectus has been cleared
or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of
the contents of this Draft Red Herring Prospectus; nor does it warrant that this Company’s securities will be listed or
will continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of this
Company, its promoters, its management or any scheme or project of this Company.
Every person who desires to apply for or otherwise acquires any securities of the Company may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against the NSE whatsoever by reason of
any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition
whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
13
Disclaimer Clause of the BSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to BSE. BSE has pursuant to its letter
dated [•], given permission to this Company to use BSE’s name in this Draft Red Herring Prospectus as one of the
stock exchanges on which this Company’s securities are proposed to be listed. BSE has scrutinized this Draft Red
Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this
Company.
BSE does not in any manner:
• warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring
Prospectus; or
• warrant that this Company’s securities will be listed or will continue to be listed on BSE; or
• take any responsibility for the financial or other soundness of this Company, its promoters, its management or
any scheme or project of this Company;
and it should not for any reason be deemed or construed to mean that this Draft Red Herring Prospectus has been
cleared or approved by BSE. Every person who desires to apply for or otherwise acquires any securities of this
Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against
BSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such
subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason
whatsoever.
Filing
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the
Companies Act, will be delivered for registration to the RoC and a copy of the Prospectus to be filed under Section 60
of the Companies Act will be delivered for registration with the RoC. A copy of this Draft Red Herring Prospectus has
been filed with the Corporation Finance Department of SEBI at Ground Floor, Mittal Court, “A” Wing, Nariman Point,
Mumbai 400 021.
Listing
Applications have been made to the NSE and BSE for permission to deal in and for an official quotation of our Equity
Shares. NSE will be the Designated Stock Exchange.
If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the Stock
Exchanges mentioned above, our Company will forthwith repay, without interest, all moneys received from the
applicants in pursuance of this Draft Red Herring Prospectus. If such money is not repaid within eight days after our
Company becomes liable to repay it, i.e., from the date of refusal or within 70 days from the Bid/Offer Closing Date,
whichever is earlier, then the Company, and every Director of the Company who is an officer in default shall, on and
from such expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application
money, as prescribed under Section 73 of the Companies Act.
Our Company, with the assistance of the BRLMs, shall ensure that all steps for the completion of the necessary
formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within
seven working days of finalization and adoption of the basis of allotment for the Offer.
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the
Companies Act, which is reproduced below:
“Any person who:
(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares
therein, or
(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other
person in a fictitious name,
shall be punishable with imprisonment for a term which may extend to five years.”
14
Minimum Subscription
If we do not receive the minimum subscription of 90% of the Fresh Issue amount, including devolvement of
Underwriters, if any, within 60 days from the Bid/Offer Closing Date, our Company shall forthwith refund the entire
subscription amount received. If there is a delay beyond eight days after our Company becomes liable to pay the
amount, our Company shall pay interest prescribed under Section 73 of the Companies Act.
Withdrawal of the Offer
Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Offer any time after the
Bid/Offer Opening Date without assigning any reason therefor.
Letters of Allotment or Refund Orders
We shall give credit to the beneficiary account with depository participants within two working days of finalization of
the basis of allotment of Equity Shares. We shall dispatch refund orders, if any, of value up to Rs.1,500, by “Under
Certificate of Posting”, and will dispatch refund orders above Rs.1,500, if any, by registered post or speed post at the
sole or first Bidder’s sole risk within 15 days of the Bid/Offer Closing Date.
In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Guidelines, we further
undertake that:
• Allotment and transfer of Equity Shares will be made only in dematerialized form within 15 days from the
Bid/Offer Closing Date;
• Dispatch of refund orders will be done within 15 days from the Bid/Offer Closing Date; and
• We shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if
allotment or transfer is not made, refund orders are not dispatched and/or demat credits are not made to
investors within the 15-day time period prescribed above.
We will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Offer.
Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by us, as an Escrow
Collection Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such
cheques, pay orders or demand drafts at other centers will be payable by the Bidders.
Offer Program
BID/OFFER OPENS ON :
BID/OFFER CLOSES ON :
Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the
Bid/Offer Period as mentioned above at the bidding centers mentioned on the Bid cum Application Form except that on
the Bid/Offer Closing Date, the Bids shall be accepted only between 10 a.m. and 1 p.m. (Indian Standard Time) and
uploaded until such time as may be permitted by the NSE and BSE on the Bid/Offer Closing Date.
In case of revision in the Price Band, the Bid/Offer Period will be extended for three additional days after
revision of Price Band subject to the Bidding/Offer Period not exceeding 13 days. Any revision in the Price
Band and the revised Bid/Offer Period, if applicable, will be widely disseminated by notification to the NSE and
BSE, by issuing a press release, and also by indicating the change on the web site of the BRLMs and at the
terminals of the Syndicate.
Book Running Lead Managers to the Offer
Deutsche Equities India
Private Limited
DB House
Hazarimal Somani
Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4800
Fax:: 91 22 2200 6765
Email: [email protected]
HSBC Securities and
Capital Markets (India)
Private Limited
52/60, Mahatma Gandhi
Road
Fort, Mumbai 400 001
Tel: 91 22 2267 4921
Fax:: 91 22 2263 1984
Email: [email protected]
UBS Securities India
Private Limited
2
nd
Floor, Hoechst
House
Nariman Point
Mumbai 400 021
Tel: 91 22 2286 2000
Fax:: 91 22 2281 4676
Email: [email protected]
Citigroup Global Markets
India Private Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9982
Fax: 91 22 5631 9803
Email: jet.ipo@citigrou
p.com
DSP Merrill Lynch
Limited
Mafatlal Centre, 10
th
Floor,
Nariman Point
Mumbai 400 021
Tel : 91 22 2265 1702
Fax: 91 22 2262 1187
Email:
[email protected]
Kotak Mahindra Capital
Company Limited
3rd Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
Tel: 91 22 5634 1100
Fax: 91 22 2282 6632
Email:
[email protected]
15
Statement of Inter-Se Allocation of Responsibility
The responsibilities and co-ordination for various activities in this Offer have been distributed among the BRLMs as
under:
Sr.No. Activities Responsibility Co-ordinator
1.
Capital structuring with the relative components and formalities such as
type of instruments etc.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
UBS
2.
Due diligence of our Company’s operations/ management/ business
plans/ legal etc. Drafting and design of the Draft Red Herring Prospectus
and of statutory advertisement including memorandum containing salient
features of the Prospectus. The BRLMs shall ensure compliance with
stipulated requirements and completion of prescribed formalities with the
Stock Exchanges, RoC and SEBI including finalization of Prospectus and
RoC filing of the same.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
HSBC
3.
Drafting and approval of all publicity material other than statutory
advertisement as mentioned in (2) above including corporate
advertisement, brochure, roadshow presentations, FAQs, corporate films
etc.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
Citigroup
4.
Appointment of other intermediaries viz. Registrar(s), Printers,
Advertising Agency and Bankers to the Offer.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
KMCC
5.
International Institutional Marketing of the Offer, which will cover, inter
alia,
Finalizing the list and division of investors for one to one meetings; and
Finalizing roadshow schedule and investor meeting schedules
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
Deutsche Equities
6.
Domestic Institutional Marketing of the Offer, which will cover, inter
alia,
Finalizing the list and division of investors for one to one meetings; and
Finalizing roadshow schedule and investor meeting schedules
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
DSPML
7.
Non-Institutional and Retail Marketing of the Offer, which will cover,
inter alia,
Formulating marketing strategies, preparation of publicity budget;
Finalizing Media and PR strategy;
Finalizing centres for holding conferences for brokers etc.;
Finalizing collection centres; and
Follow-up on distribution of publicity and Offer material including form,
prospectus and deciding on the quantum of the Offer material.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
KMCC
8
Managing the Book, co-ordination with Stock Exchanges for book
building software, bidding terminals and mock trading and finalization of
pricing and institutional allocation in consultation with the Company
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
UBS
9.
The post bidding activities including management of escrow accounts,
coordination non-institutional allocation, intimation of allocation and
dispatch of refunds to Bidders etc. The post Offer activities will involve
essential follow up steps, which include the finalization of listing of
instruments and dispatch of certificates and demat delivery of shares,
with the various agencies connected with the work such as the Registrar
to the Offer and Bankers to the Offer and the bank handling refund
business. The merchant banker shall be responsible for ensuring that
these agencies fulfil their functions and enable it to discharge this
responsibility through suitable agreements with the Company.
Deutsche Equities, HSBC,
UBS, Citigroup, DSPML,
KMCC
DSPML
Syndicate Member(s)
Kotak Securities Limited
Bakhtawar, 1st Floor
229 Nariman Point
Mumbai 400 021
India
Tel: (91) 22 5634 1100
Fax: (91) 22 5630 3927
Registered Office of the Company
Jet Airways (India) Limited
SM Centre, Andheri Kurla Road,
Andheri (East),
Mumbai 400 059, India
16
Tel: 91 22 2850 5080
Fax: 91 22 2856 0622
Email: [email protected]
Company Secretary and Compliance Officer
Mr. A.R. Rajaram
Jet Airways (India) Limited
SM Centre, Andheri Kurla Road
Andheri (East)
Mumbai 400 059, India
Tel: (91) 22 28527744
Fax: (91) 22 28527745
Email: [email protected]
Advisor to the Offer
Infrastructure Development Finance Company Limited
Ramon House
169, Backbay Reclamation
Mumbai – 400 020
Tel: 91 22 5633 9100
Fax: 91 22 2283 8156
Monitoring Agency
[ ] will be appointed the Monitoring Agency by our Company to monitor the proceeds of the Fresh Issue.
Registrar to the Offer
Karvy Computershare Private Limited
Karvy House, 46, Avenue 4, Street No.1
Banjara Hills, Hyderabad 500 034
Tel.: (91) 402 331 2451,
Fax: (91) 402 331 1968
Email: [email protected]
Investors can contact the Compliance Officer or the Registrar to the Offer in case of any pre-Offer or post-Offer
related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary
accounts, refund orders etc.
Legal Advisors to the Company
As to Indian law: As to the federal laws of the United States of America:
Gagrat & Co. Hogan & Hartson LLP
Plaza Cinema Building Columbia Square
Connaught Circus 555 Thirteenth Street NW
New Delhi 110 001, India Washington DC 20004, USA
Tel: (91) 11 2332 2311 Tel: (1 202) 637 5600
Legal Advisors to the Underwriters
As to Indian law: As to the federal laws of the United States of America:
P&A Law Offices Jones Day
1
st
Floor, Dr. Gopal Das Bhavan 31/F Edinburgh Tower, The Landmark
28, Barakhamba Road 15 Queen’s Road Central
New Delhi 110 001, India Hong Kong
Tel: (91) 11 2373 8793 Tel: (852) 2526 6895
Auditors to the Company
Deloitte Haskins & Sells
12, Dr. Annie Besant Road
17
Opposite Shiv Sagar Estate
Worli, Mumbai 400 018, India
Tel: 91 22 5667 9000
Chaturvedi & Shah
(member of Nexia International)
Laxmi Towers
‘A’ Wing, Bandra Kurla Complex
Mumbai 400 051, India
Tel: 91 22 5642 8400
Bankers to the Offer and Escrow Collection Banks
Citibank N.A.
Bombay Mutual Building
293 D.N. Road
Fort, Mumbai 400 001
India
Tel: 91 22 2269 1713
Fax: 91 22 2269 1715
Deutsche Bank AG
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
Tel: 91 22 5658 4600
Fax: 91 22 2207 6553
The Hong Kong and Shanghai Banking Corporation
52/60, Mahatma Gandhi Road,
Mumbai 400 001
Tel: 91 22 2267 4921
Fax: 91 22 2262 3890
Kotak Mahindra Bank Limited
Mittal Court, 'C' Wing,
Nariman Point,
Mumbai 400 021
Tel: 91 22 2265 5285
Fax: 91 22 2281 7527
Bankers to the Company
Abu Dhabi Commercial Bank Ltd.
Rehmat Manzil
75-B Veer Nariman Road
Mumbai 400 038
Tel: 91 22 2283 9509
Fax: 91 22 2287 0686
Barclays Bank Plc
21/23 Maker Chambers VI
Nariman Point
Mumbai 400 021
Tel: 91 22 5638 7114
Fax: 91 22 5638 7184
Calyon Bank
Hoechst House, 11th Floor
Nariman Point
Mumbai 400 021
Tel: 91 22 5631 9000
18
Fax: 91 22 5635 1813
Citibank N.A.
7
th
Floor, Plot C-61
Bandra Kurla Complex
G-Block, Bandra
Mumbai 400 051
Tel: 91 22 2653 5029/5030
Fax: 91 22 2653 5861/5862
Corporation Bank
Veena Chambers
21 Dalal Street
Mumbai 400 023
Tel: 91 22 2267 1715
Fax: 91 22 2267 2101
Deutsche Bank AG
Kodak House
222, Dr. D.N. Road
Fort
Mumbai 400 001
Tel: 91 22 2206 1050/2207 0692
Fax: 91 22 2207 2966/2206 7322
HDFC Bank Ltd.
Ground Floor, Maneckji Wadia Bldg.
(Kalpataru Heritage)
Nanik Motwani Marg
Fort
Mumbai 400 023
Tel: 91 22 2490 2961
Fax: 91 22 2496 3994
The Hong Kong and Shanghai Banking Corporation
52/60 Mahatma Gandhi Road
Mumbai 400 001
Tel: 91 22 2268 1020
Fax: 91 22 2265 3812
ICICI Bank Limited
Free Press House
215, Nariman Point
Mumbai 400 021
Tel: 91 22 2281 8077/2653 6457/35
Fax: 91 22 2653 1233
IDBI Bank Ltd.
Mittal Tower, ‘C’ Wing
Nariman Point
Mumbai 400 021
Tel: 91 22 2282 4057/65
Fax: 91 22 2282 4071
ING Vysya Bank Ltd.
Mittal Towers, A Wing, Ground Floor
210, Nariman Point
Mumbai 400 021
Tel: 91 22 2288 2616/5666 6419
Fax: 91 22 2281 8558
Standard Chartered Bank
19
90 Mahatma Gandhi Road
Mumbai 400 001
Tel: 91 22 2268 3575
Fax: 91 22 2262 4912
State Bank of India
Overseas Branch
World Trade Centre
Cuffe Parade
Mumbai 400 005
Tel: 91 22 2218 1518/2218 9161
Fax: 91 22 2218 8343/8741
UTI Bank Ltd.
1
st
Floor, Janmabhoomi Bhavan
Janmabhoomi Marg
Fort
Mumbai 400 005
Tel: 91 22 2283 5782/84/86/87/88
Fax: 91 22 2284 4113
Credit Rating
Since the Offer is of equity shares, credit rating is not required.
Trustees
Since the Offer is of equity shares, the appointment of Trustees is not required.
Book Building Process
Book building refers to the collection of Bids from investors, which is based on the Price Band, with the Offer Price
being finalized after the Bid/Offer Closing Date. The principal parties involved in the Book Building Process are:
• The Company;
• Book Running Lead Managers; and
• Syndicate Member(s) who are intermediaries registered with SEBI or registered as brokers with the Stock
Exchange(s) and eligible to act as underwriters.
The SEBI Guidelines have permitted an issue of securities to the public through the 100% Book Building Process,
wherein at least 60% of the Net Offer shall be allocated on a discretionary basis to QIBs. Further, up to 15% of the Net
Offer shall be available for allotment on a proportionate basis to Non Institutional Bidders and up to 25% of Net Offer
shall be available for allotment on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Offer Price. We will comply with the SEBI Guidelines for this Offer. In this regard, we have
appointed the BRLMs to procure subscriptions to the Offer.
The Book Building Process under the SEBI Guidelines is relatively new and investors are advised to make their own
judgment about investment through this process prior to making a Bid in the Offer. Pursuant to amendments to the
SEBI Guidelines, QIBs are not allowed to withdraw their Bid after the Bid/Offer Closing Date. See “Terms of the
Offer” on page 140 of this Draft Red Herring Prospectus for more details.
Steps to be taken by the Bidders for Bidding:
• Check whether he/she is eligible for Bidding including having regard to all applicable Indian laws, rules,
regulations, guidelines and approvals;
• A Bidder must necessarily have a demat account; and
• Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red
Herring Prospectus and in the Bid cum Application Form.
Investors should note that:
20
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
Illustration of Book Building and Price Discovery Process (Investors should note that this illustration is solely for
the purpose of illustration and is not specific to the Offer)
Bidders can bid at any price within the Price Band. For instance, assume a Price Band of Rs.20 to Rs.24 per Equity
Share, offer size of 1,800 Equity Shares and receipt of five Bids from Bidders. A graphical representation of the
consolidated demand and price would be made available at the bidding centers during the Bidding/Offer Period. The
illustrative book as set forth below shows the demand for the Equity Shares of the Company at various prices and is
collated from Bids from various investors.
Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription
500 24 500 27.78%
1,000 23 1,500 83.33%
1,500 22 3,000 166.67%
2,000 21 5,000 277.78%
2,500 20 7,500 416.67%
The price discovery is a function of demand at various prices. The highest price at which the Company is able to offer
the desired quantity of Equity Shares is the price at which the book cuts off, i.e., Rs.22 in the above example. The
Company, in consultation with the BRLMs, will finalize the Offer Price at or below such cut off price, i.e., at or below
Rs.22. All Bids at or above this Offer Price and cut-off Bids are valid Bids and are considered for allocation in the
respective category.
Underwriting Agreement
After the determination of the Offer Price and prior to filing of the Prospectus with the RoC, the Company, the Selling
Shareholder (acting through the Company, its duly constituted attorney) and the Underwriters will enter into an
Underwriting Agreement for the Equity Shares proposed to be offered through the Offer. It is proposed that pursuant to
the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the
event that the members of the Syndicate do not fulfill their underwriting obligations. Pursuant to the terms of the
Underwriting Agreement, the obligations of the Underwriters are subject to certain conditions to closing, as specified
therein.
The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
(This portion has been intentionally left blank and will be completed prior to filing of the Prospectus with RoC)
Name and Address of the Underwriters
Indicated Number of Equity Shares to be
Underwritten
Amount Underwritten
(Rs. in million)
Deutsche Equities India Private Limited
DB House
Hazarimal Somani Marg
Fort, Mumbai 400 001
India
[?] [?]
HSBC Securities and Capital Markets (India)
Private Limited
52/60 Mahatma Gandhi Road
Fort, Mumbai 400 021
India
[?] [?]
UBS Securities India Private Limited
2
nd
Floor, Hoechst House
Nariman Point, Mumbai 400 021
India
[?] [?]
Citigroup Global Markets India Private
Limited
4
th
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
21
DSP Merrill Lynch Limited
Mafatlal Centre, 10
th
Floor
Nariman Point, Mumbai 400 021
India
[?] [?]
Kotak Mahindra Capital Company Limited
3
rd
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
Kotak Securities Limited
1
st
Floor, Bakhtawar
229 Nariman Point
Mumbai 400 021
India
[?] [?]
The above Underwriting Agreement is dated [•].
In the opinion of our Board of Directors and the BRLMs (based on a certificate given by the Underwriters), the
resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective
underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1)
of the SEBI Act or registered as brokers with the Stock Exchange(s).
Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments.
Notwithstanding the above table, the BRLMs and the Syndicate Members shall be responsible for ensuring payment
with respect to Equity Shares allocated to investors procured by them. In the event of any default in payment, the
respective Underwriter, in addition to other obligations defined in the Underwriting Agreement, will also be required to
procure/subscribe to the extent of the defaulted amount as specified in the Underwriting Agreement. Allotment to
QIBs is discretionary as per the terms of this Draft Red Herring Prospectus and may not be proportionate in any way
and the patterns of allotment to the QIBs could be different for the various Underwriters.
22
CAPITAL STRUCTURE
Our share capital as of the date of filing of Draft Red Herring Prospectus with SEBI is set forth below:
Aggregate nominal
value
Aggregate value at
Offer Price
(Rs. million)
A. Authorized Capital
130,000,000 Equity Shares of Rs.10 each 1,300
70,000,000 Preference Shares of Rs.10 each 700
B. Issued, Subscribed And Paid-Up Capital
72,088,900 Equity Shares of Rs.10 each 720.9
69,828,750 Cumulative Convertible Redeemable Preference
Shares (“CCRPS”) of Rs.10 each
698.2
C. Offer to the public pursuant to this Draft Red Herring Prospectus
17,266,801 Equity Shares of Rs.10 each
Out of the above:
a) Fresh Issue
14,245,111 Equity Shares of Rs.10 each 142.5 [•]
b) Offer for Sale
3,021,690 Equity Shares of Rs.10 each 30.2 [•]
D. Employee Reservation Portion
1,200,000 Equity Shares of Rs.10 each 12.0 [•]
E. Net Offer to the Public
16,066,801 Equity Shares of Rs.10 each 160.7 [•]
F. Equity Capital after the Offer
86,334,011 Equity Shares of Rs.10 each
863.3
G. Share Premium Account
Before the Offer 0
After the Offer [•]
(a) The authorized share capital was increased from Rs.1 million to Rs.300 million pursuant to a resolution passed
by our shareholders at an EGM held on January 6, 1993.
(b) The authorized share capital was increased from Rs.300 million to Rs.330 million pursuant to a resolution
passed by our shareholders at an EGM held on December 16, 1993.
(c) The authorized share capital was increased from Rs.330 million to Rs.950 million pursuant to a resolution
passed by our shareholders at an EGM held on December 19, 1994.
(d) The authorized share capital was increased from Rs.950 million to Rs.2,000 million, which was divided into
equity share capital of Rs.1,000 million and preference share capital of Rs.1,000 million, pursuant to a
resolution passed by our shareholders at an EGM held on December 1, 2000.
(e) The authorized share capital of Rs.2,000 million was reclassified into equity share capital of Rs.1,300 million
and preference share capital of Rs.700 million pursuant to a resolution passed by our shareholders at an EGM
held on December 28, 2004.
The details of the Equity Shares being offered in the Offer for Sale by the Selling Shareholder is as under:
Name of the Shareholder Number of equity shares offered % of pre-Offer equity capital
Tail Winds Limited 3,021,690 4.2%
Equity Shares, being offered by the Selling Shareholder as a part of the Offer for Sale, have been held by such Selling
Shareholder for a minimum period of one year at the time of filing the Draft Red Herring Prospectus with SEBI.
23
Notes to the Capital Structure
1. Share Capital History
Equity Share Capital
Date on which
Equity Shares
were allotted and
made fully paid-up
Number of
Equity
Shares
Face
value
Offer
Price
Nature of
payment of
consideration
Reasons for
allotment
Cumulative
paid-up
equity
capital
Cumulative
share
premium
Name of Person/
Entity to which
Equity Shares
Allotted
(Rs.) (Rs.) (Rs.
millions)
April 1, 1992 2 10 10 Cash Signatories to
Memorandum of
Association
* Nil Mr. P.V. Venkata
Chalam; Mrs. Anita
Naresh Goyal
April 1, 1992 9,998 10 10 Cash Further allotment 0.10 Nil Mr. P.V. Venkata
Chalam; Mrs. Anita
Naresh Goyal
June 11, 1993 2,585,000 10 10 Cash Further allotment 25.95 Nil Tail Winds Limited
July 6, 1993 6,262,000 10 10 Cash Further allotment 88.57 Nil Tail Winds Limited
July 30, 1993 1,143,000 10 10 Cash Further allotment 100.00 Nil Tail Winds Limited
February 23, 1994 8,796,000 10 10 Cash Further allotment 187.96 Nil Tail Winds Limited
November 17, 1994 12,547,000 10 10 Cash Further allotment 313.43 Nil Tail Winds Limited
June 19, 1996 31,343,000 10 10 Cash Further allotment 626.86 Nil Tail Winds Limited
November 21, 1996 9,402,900 10 Nil Not applicable Bonus shares 720.88 Nil Tail Winds Limited
Total 72,088,900
* Rs. 20 only
Preference Share Capital
Date on which
preference shares
were allotted and
made fully paid-up
Number of
preference
shares
Face
value
Offer
Price
Nature of
payment of
consideration
Reasons for
allotment
Cumulati
ve Paid-
up equity
capital
Cumulative
Share
Premium
Name of person/
entity to which
preference shares
allotted
(Rs.) (Rs.) (Rs.
millions)
February 15, 2001 69,828,750 10 10 Cash Issue of
preference shares
698.29 Nil International Finance
Corporation
2. Promoters Contribution and Lock-in
Name
Date on which equity
shares were allotted/
acquired and made
fully paid-up
Nature of
payment of
consideration
Number of
Equity
Shares
Percentage
of pre-
Offer
paid-up
equity
capital (%)
Percentage
of post-Offer
paid-up
equity
capital (%)
Lock-in
period
Tail Winds June 19, 1996 Cash 7,863,903 10.91% 9.11% Three years
Tail Winds November 21, 1996 Bonus Shares 9,402,900 13.04% 10.89% Three years
Total 17,266,803 23.95% 20.00%
In addition to the lock-in periods specified above, the entire pre-Offer issued equity share capital of the Company less
the number of Equity Shares for which transfer is made under the Offer for Sale will be locked in for a period of one
year from the date of Allotment of Equity Shares in this Offer. The total number of Equity Shares which are locked in
for one year is 51,800,407.
Locked-in Equity Shares held by the promoters can be pledged with banks or financial institutions as collateral security
for loans granted by such banks or financial institutions. Further, in terms of clause 4.16(b) of the SEBI Guidelines,
Equity Shares held by the promoters may be transferred to and among the promoter group or to a new promoter or
persons in control of the Company subject to continuation of the lock-in in the hands of the transferees for the
remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as
applicable.
In addition, the Equity Shares subject to lock-in will be transferable subject to compliance with the SEBI Guidelines as
amended from time to time.
On December 28, 2004, Mr. Naresh Goyal transferred by way of sale one Equity Share each (held by Mr. Goyal as a
nominee of Tail Winds) to Mr. Saroj K. Datta, Mr. Carl Saldanha, Mr. Prasun Sengupta, Mr. Mahiyar Sadri and Ms.
24
Jennifer D’Silva, respectively, at a consideration of Rs.800 per Equity Share. Other than such transaction, no Equity
Shares have been acquired, purchased or sold by our promoters or any director of Tail Winds during a period of six
months preceding the date on which this Draft Red Herring Prospectus is filed with the SEBI.
Mr. Naresh Goyal, one of the directors of Tail Winds, holds Equity Shares of our Company:
Name of director Number of Equity Shares held
Mr. Naresh Goyal as nominee of Tail Winds 9,995
3. Equity Shares held by the top ten shareholders
Our top seven shareholders and the Equity Shares held by them on the date of filing this Draft Red Herring Prospectus
with SEBI and ten days prior to the date of filing this Draft Red Herring Prospectus with SEBI are as follows:
Number of Equity Shares held
Name
On the date of
filing this Draft
Red Herring
Prospectus with
SEBI
Ten days prior to
the date of filing
this Draft Red
Herring
Prospectus with
SEBI
Tail Winds
72,078,900 72,078,900
Mr. Naresh Goyal as nominee of Tail Winds 9,995 9,995
Mr. Saroj K. Datta 1 1
Mr. Carl Saldanha 1 1
Mr. Prasun Sengupta 1 1
Mr. Mahiyar Sadri 1 1
Ms. Jennifer D’Silva 1 1
Our top two shareholders and the Equity Shares held by them two years prior to the date of filing this Draft Red
Herring Prospectus with SEBI are as follows:
Name
Number of Equity Shares held two years prior
to the date of filing this Draft Red Herring
Prospectus with SEBI
Tail Winds 72,078,900
Mr. Naresh Goyal as nominee of Tail Winds
10,000
4. IDFC is not an existing promoter or shareholder of our Company. As of the date of this Draft Red Herring
Prospectus, there are no outstanding warrants, options or rights to convert debentures, loans or other financial
instruments into our Equity Shares save and except for the conversion right accorded to IDFC pursuant to the
Subordinated Rupee Debt Agreement dated August 20, 2001 which IDFC has conditionally waived pursuant to its letter
dated December 17, 2004.
5. Shareholding Pattern
The table below presents our shareholding pattern before the proposed Offer and as adjusted for the Offer.
Equity Shares owned prior to the Offer Equity Shares owned after the Offer
Shareholder Category Number % Number %
Promoters 72,088,895 100.00% 69,067,205 80.00%
Mr. Saroj K. Datta 1 * 1 *
Mr. Carl Saldanha 1 * 1 *
Mr. Prasun Sengupta 1 * 1 *
Mr. Mahiyar Sadri 1 * 1 *
Ms. Jennifer D’Silva 1 * 1 *
Public (pursuant to the Offer) Nil 0% 17,266,801 20.00%
Total 72,088,900 100.00% 86,334,011 100.00%
* less than 0.000001%
25
6. Buyback and Standby Arrangements
None of Tail Winds, the Company, their respective director(s) or the BRLMs has entered into any buyback and/or
standby arrangements for the purchase of our Equity Shares from any person.
7. We have not raised any bridge loan against the proceeds of the Offer.
8. Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by
persons resident outside India requires the prior approval of the FIPB. However, the MoCA, pursuant to a Notification
No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of India on November 13, 2004)
has permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector up to 49% through
the “automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also permits
investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline.
Amendments to the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are
awaited.
The RBI, by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognized OCBs, such as Tail Winds,
as an eligible class of investors under the various investment routes/schemes under the rules and regulations
promulgated under the FEMA. Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3,
2003, issued the OCB Regulations to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8,
2003, the RBI clarified, among other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the
OCB Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA
Regulations (i.e., with the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI),
an erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for
the transfer of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to
residents, subject to the terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi & Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested
the FIPB to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain
clarifications on behalf of an Indian company in the domestic airlines sector which was contemplating an initial public
offering. The FIPB was informed that the company was promoted by an NRI who held the shares of such company
through an OCB in which such NRI had a 100% shareholding. The FIPB was further informed that the initial public
offering by the company would be made to persons within the definition of Indian residents (including FIIs and QIBs
registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer for sale of shares in
the company by the OCB to such Indian residents.
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
26
No further approvals of the FIPB or the RBI are required for the Allotment of Equity Shares under this Offer. We will
be required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines
issued by the DGCA from time to time, including AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4, read with the MoCA notification No. AV.13011/10/96 DT (Vol II) dated
November 10, 2004, and other applicable laws, rules, regulations, guidelines and approvals.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor whether such investor is eligible to acquire
Equity Shares of the Company.
9. At least 60% of the Net Offer shall be allocated to QIBs on a discretionary basis. Further, up to 15% of the
Net Offer will be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 25% of the Net
Offer will be available for allocation to Retail Individual Bidders, subject to valid Bids being received from them at or
above the Offer Price. Under-subscription, if any, in the Non-Institutional and Retail Individual categories would be
allowed to be met with spill over from any other category at the sole discretion of the Company and the BRLMs.
10. Only permanent employees and directors of the Company and Tail Winds who are Indian Nationals based in
India and are physically present in India on the date of submission of the Bid-cum-Application Form (“Employees”)
would be eligible to apply in this Offer under the Employee Reservation Portion on competitive basis. Employees
other than as mentioned hereinabove are not eligible to participate under the Employee Reservation Portion. Bids by
Employees can be made also in the “Net Offer” to the public and such Bids shall not be treated as multiple Bids. If the
aggregate demand in the Employee Reservation Portion is greater than 1,200,000 Equity Shares at or above the Offer
Price, allocation shall be made on a proportionate basis subject to a maximum Allotment to any Employee of Rs.2.5
million. The unsubscribed portion, if any, from the Equity Shares in the Employee Reservation Portion will be treated
as part of the Net Offer and Allotment shall be made in accordance with the description in “Statutory and Other
Information” beginning on page 165 of this Draft Red Herring Prospectus.
11. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Offer, subject to the
maximum limit of investment prescribed under relevant laws applicable to each category of investor.
12. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment,
rights issue or in any other manner during the period commencing from submission of the Draft Red Herring
Prospectus with SEBI until the Equity Shares offered hereby have been listed.
13. We presently do not have any intention or proposal to alter our Company’s capital structure for a period of six
months commencing from the date of opening of this Offer, by way of split/ consolidation of the denomination of
Equity Shares or further issue of Equity Shares or securities convertible into Equity Shares, whether on a preferential
basis or otherwise except for issue of Equity Shares pursuant to either an ESPS or an ESOP scheme, for which we will
seek the approval of our shareholders after the completion of the Offer if we decide to proceed with an ESPS or ESOP
27
scheme. However, during such period or at a later date, we may issue Equity Shares or securities linked to Equity
Shares to finance an acquisition, merger or joint venture or as consideration for such acquisition, merger or joint
venture, if an opportunity of such nature is determined by our Board to be in the interest of our Company.
14. We have not issued any Equity Shares out of revaluation reserves or for consideration other than cash except
the issue of bonus shares described in “Notes to Capital Structure – Share Capital History” beginning on page 23 of this
Draft Red Herring Prospectus.
15. There will be only one denomination of the Equity Shares of our Company unless otherwise permitted by law
and our Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to
time.
16. We have seven members as of the date of this Draft Red Herring Prospectus.
17. The Equity Shares held by our promoters are not subject to any pledge.
28
OBJECTS OF THE OFFER
The objectives of the Offer are to achieve the benefits of listing, raise capital and retire certain outstanding debt. We
believe that listing of our Equity Shares will enhance our visibility and brand name.
The net proceeds of the Fresh Issue after deducting all Offer related expenses are estimated to be approximately Rs.[•]
million. We will not receive any proceeds of the Offer for Sale by the Selling Shareholder. For details of the Offer
expenses, see the section “Statutory and Other Information – Expenses of the Offer” on page 167 of this Draft Red
Herring Prospectus.
The main objects clause and objects incidental or ancillary to the main objects clause of our Memorandum enable us to
undertake our existing activities and the activities for which funds are being raised by us through the Fresh Issue.
The details of the proceeds of the Fresh Issue are summarized in the table below:
(in millions)
Gross proceeds of the Fresh Issue Rs.[•]
Offer related expenses Rs.[•]
Net proceeds of the Fresh Issue Rs.[•]
The following table summarizes the use of proceeds:
Estimated Cost (in
millions)
Repayment of debt and redemption of CCRPS Up to Rs.7,921
(1)
Capital expenditures Rs.4,610
General corporate purposes Rs.[•]
Total estimated cost Rs.[•]
(1)
Will be determined after finalization of the Offer Price.
Details of Use of Proceeds
Repayment of Debt and Redemption of CCRPS
We intend to use the net proceeds of the Fresh Issue to prepay existing high cost debt of Infrastructure Development
Finance Company Limited (“IDFC”) in August 2005 and to redeem the CCRPS issued to IFC, within 90 days of
completion of the Offer. In addition, the net proceeds will be used to pay all or a portion of the scheduled principal
amounts (excluding interest) of our existing long-term debt due through March 2006 of an amount of up to Rs.3,016
million.
The details of debt and CCRPS that we propose to repay or redeem with the net proceeds of the Fresh Issue are as
follows:
Amount
( Rs. millions)
Payment Date
Interest Rate / Yield
IFC 1,305
(1)(2)
Within 90 days of completion
of Offer
18.00%
(2)
IDFC 3,601
August 2005 12.45%
Current portion of existing long-term
debt
Up to 3,016
(3)
Periodically through March
2006
Upto 10.78%
Total Up to 7,921
(3)
(1) These amounts are U.S. Dollar liabilities translated into Rupees, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00; exact
Rupee equivalent amount of such U.S. Dollar liabilities will be determined at the time of repayment/prepayment.
(2) Amount paid is mandatory redemption amount of our CCRPS issued to IFC.
(3) This is currently an estimate only. This amount is an aggregate of several Rupee and U.S. Dollar liabilities, where U.S. Dollar liabilities have
been translated into Rupees, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00; exact Rupee equivalent amount of such U.S.
Dollar liabilities will be determined at the time of repayment/prepayment.
Capital Expenditures
We also intend to use the net proceeds for the following capital expenditures relating to our operations:
29
Estimated Cost
(U.S.$ million)
Estimated Cost
(Rs. million)
Investment in second flight simulator 15.0 690
(1)
Investment in maintenance hangar and related workshop 15.0 690
(1)
Investment in additional spare engines 25.0 1,150
(1)
Investment in additional spares and ground handling equipment 35.0 1,610
(1)
Investment in a new integrated training center 10.0
(2)
460
Total 100.0 4,601
(1) These are estimated U.S. Dollar liabilities, translated into Rupees for convenience purposes only, at an exchange rate of Rs.46.01 = U.S.$1.00.
(2) These are estimated Rupee liabilities, translated into U.S. Dollars, for convenience purposes only, at an exchange rate of Rs.46.01= US$1.00.
We have not entered into any definitive agreements for the purchase of any equipment or spares, including any flight
simulator, or purchase of any land in connection with our investment in a new integrated training center.
Investment in Flight Simulator
We need an additional simulator for training our pilots to fly Boeing NG aircraft. We purchased one simulator in June
2001. Based on existing usage and our expansion plans, we believe we require an additional simulator within the next
12 months. We believe the expected cost will be U.S.$15 million (Rs.690 million), including octroi and installation
costs, which we expect to finance from the net proceeds of the Fresh Issue.
Investment in maintenance hangar and related workshop
We are currently constructing a hangar with related workshops and training facilities at Mumbai airport. This hangar
will enable us to carry out scheduled and unscheduled maintenance tasks, including C and, in due course, D Checks.
Our new hangar would result in maintenance cost savings by reducing usage of third party hangar and support facilities.
The hangar is expected to be operational by March 2005. We expect to use approximately U.S.$15 million (Rs.690
million) of the net proceeds of the Fresh Issue to build support facilities (including tools, equipment and related
workshops) for the hangar and engineering training facilities in the complex.
Investment in additional spare engines
Currently, we have six spare aircraft engines. Based on spare engine calculations specified by CFM International and
our plans to lease additional aircraft, we require up to four additional spare engines by March 2006. We expect to use
approximately U.S.$25 million (Rs.1,150 million) of the net proceeds of the Fresh Issue to purchase such engines.
Investment in additional spares and ground handling equipment
In view of the expansion of our fleet, we will require additional spare parts and ground handling equipment. We expect
to use approximately U.S.$35 million (Rs.1,610 million) of the net proceeds of the Fresh Issue to purchase spare parts
and ground handling equipment.
Investment in a new integrated training center
We plan to build a new integrated training center in Mumbai to provide training facilities to our pilots, inflight crew
and ground staff. We estimate that we will require approximately 80,000 sq. feet of built up area for our training
facilities. We expect to use approximately Rs.460 million of the net proceeds of the Fresh Issue for the the land
required, the construction of and the facilities for the training centre and the acquisition of teaching aids required at our
training centre.
General corporate purposes
We intend to use the remaining net proceeds of Rs.[•] million for general corporate purposes, including expansion of
our operations domestically and/or internationally.
Offer Related Expenses
The Offer related expenses include, among others, underwriting and selling commissions, printing and distribution
expenses, legal fees, advertisement expenses and registrar and depository fees. The estimated Offer expenses are as
follows:
30
Activity
Expense (in millions)
Lead management, underwriting and selling commissions Rs.[?]
(1)
Advertising and marketing expenses [?]
Printing and stationery [?]
Other (registrars fees, legal fees, etc.) [?]
Total estimated Offer expenses [?]
_________
(1) Will be completed after finalization of Offer Price.
Other than listing fees which will be paid by our Company, all expenses with respect to the Offer will be shared
between the Company and the Selling Shareholder on a pro-rata basis, in the ratio of the Equity Shares issued by the
Company in the Fresh Issue and the Equity Shares sold by the Selling Shareholder in the Offer for Sale.
Interim Use of Proceeds
Pending use of net proceeds for general corporate purposes, we intend to invest the net proceeds from the Fresh Issue in
high quality, interest bearing liquid instruments including deposits with banks. These investments will be authorized
by our Board or a duly authorized committee thereof.
31
INDUSTRY
The Indian economy
India, the world's largest democracy in terms of population (1,064 million people), had a real GNP on purchasing
power parity basis of approximately U.S.$3,068 billion in 2003, making it the fourth largest economy in the world,
after the United States of America, China and Japan, as per the World Development Report 2005.
In 1991, the Government of India initiated a series of comprehensive macroeconomic and structural reforms to promote
economic stability and growth. The key policy reforms that were initiated by the Government were focused on
implementing fundamental economic reforms, deregulation of industry, accelerating foreign investment and pushing
forward a privatization program for disinvestment in public sector units. Consequent to the reform’s program, India’s
economy registering registered robust growth with an average real GDP growth of 5.8% over the period fiscal 1999 to
fiscal 2004.
The following table sets forth the annual percentage change in certain key indicators of the Indian economy.
As of and for the year ended March 31,
(annual percentage change, except for foreign exchange reserves)
2000 2001 2002 2003 2004
(%) (%) (%) (%) (%)
Real GDP growth
(1)
6.1 4.4 5.8 4.0 8.1
Industrial Production
(2)
6.6 5.1 2.6 5.8 6.8
Inflation Rate based on Wholesale Price Index (average)
(2)
3.3 7.1 3.7 3.4 5.4
Imports (% to GDP)
(2)
12.4 11.8 11.7 12.8 n.a.
Exports (% to GDP)
(2)
9.1 10.4 10.0 11.2 n.a.
Foreign Exchange Assets (in US$ billions)
(2)
35.1 39.6 51.1 71.9 107.5
_________
Source:
(1) Economic survey conducted by the Government of India annually. Data for 2003 is as per quick estimates and 2004 is as per advance estimates,
as provided in the Economic Survey.
(2) Data released by Centre for Monitoring Indian Economy (“CMIE”).
The following table sets forth, for the periods indicated, the inflow into India of foreign direct investment and portfolio
investment.
Year ended March 31,
2000 2001 2002 2003
(U.S.$ millions)
Foreign direct investment 2,167 4,029 6,131 4,660
Portfolio investment
3,024
2,760
2,020
979
_________
Source: Data released by CMIE.
Evolution of the Indian Aviation Industry
During the last two-and-a-half decades, world-wide, the air transport industry has substantially moved away from
government control and ownership towards deregulation and private ownership. The origins of this trend are generally
attributed to the deregulation of the U.S. airline industry in the late 1970s, which led to lower fares and higher
improved productivity of assets and capital. Spurred by these benefits, several countries have pursued the path of
liberalization and privatization. This transformation also subsumed another trend of privatization of government
owned airlines designated by a country’s government to operate international air services to and from that country as
evidenced in Australia (Qantas Airways), U.K. (British Airways), Germany (Lufthansa) and Japan (Japan Airlines).
The Indian aviation sector was also characterized by a high degree of Government control prior to 1990. The
Government of India nationalized the airline industry in 1953 through enactment of the Air Corporations Act. Pursuant
to this Act, there were only two players left in the Indian aviation sector, both of which were owned and controlled by
the Government: (a) Indian Airlines, primarily serving domestic sector with operations to select international
destinations and (b) Air India, serving the international sectors.
The liberalization in the Indian civil aviation industry began in 1990 with private sector players being allowed to
operate as air taxi operators, but not permitted to operate scheduled services. A number of private players commenced
32
domestic operations as air taxi operators including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC
Airlines and East West Airlines.
In 1994, with the repeal of the Air Corporations Act, private carriers were permitted to operate scheduled services.
Private air taxi operators were granted scheduled carrier status upon fulfillment of certain applicable criteria. However,
some of these operators could not continue with their business and closed operations by 1997. Among the many
private airlines which started operations with the deregulation of the Indian civil aviation sector, only two continue to
have operations in the country – Jet Airways and Air Sahara. In August 2003, Air Deccan, another private carrier
commenced operations taking the total number of private carriers providing scheduled services to three. According to
published reports, other enterprises are contemplating entering the Indian domestic aviation market.
Competitive Landscape
The Indian aviation sector can be broadly divided into following four main categories:
• Domestic airlines, which provide scheduled flights within India and to select international destinations;
• International airlines, which operate scheduled international air services to and from India;
• Non-scheduled operators, which includes charter operators and air taxi operators; and
• Air cargo services, which includes air transportation of cargo and mail.
The table below provides certain information regarding airlines operating scheduled domestic flights as of, unless
otherwise indicated, December 15, 2004:
Jet Airways
Air Sahara
(1)
Indian Airlines and its
subsidiary Alliance
Air
(2)
Air Deccan
(3)
Description Private full service
carrier, operates on
domestic and select
international routes.
Private full service
carrier, operates on
domestic and select
international routes.
Government owned,
operates both on domestic
and international routes
Private no frills airline,
operates on domestic
routes.
Incorporation year 1992 1993 1953 (Indian Airlines) 1995
(4)
Fleet size 42 20 62 11
Fleet type Boeing 737 and ATR Boeing 737 and CRJ-
200
Airbus, Boeing 737 and
Dornier
ATR and Airbus
No. of domestic
destinations served (+
international)
42 + 2 22 + 2 58 + 20 23
No. of domestic flights
per day
271 110 288 76
No. of seats per day 33,500 11,300 38,000 6,200
(1) Derived from information provided at www.airsahara.net, current as of November 1, 2004.
(2) Derived from information provided at www.indian-airlines.com, current as of December 15, 2004.
(3) Derived from information provided at www.airdeccan.net, current as of December 15, 2004.
(4) Originally incorporated as Deccan Aviation Private Limited, a non-scheduled and helicopter operator.
In addition to these four players, Air India also carries domestic passengers on domestic legs of its international flights,
offering both full and discounted fares.
Recent developments in the aviation industry
Naresh Chandra Committee Report – Road map for the civil aviation sector
In July 2003, the Ministry of Civil Aviation set up a five-member committee under the chairmanship of Mr. Naresh
Chandra, an eminent former bureaucrat, to prepare a comprehensive roadmap for the promotion of Indian civil aviation
sector that will provide the basis for a new National Civil Aviation Policy
The Committee held detailed consultations with airlines, chambers of commerce, the travel and tourism industries and
the public, and studied representations received from them. The Committee submitted the first part of its report in
December 2003, which recommended certain structural changes to strengthen the aviation sector and make air travel
more affordable. The Committee's recommendations included the following:
• Allow domestic private airlines to provide international air transport services to and from India.
• Reduce excise duty and sales tax on ATF.
33
• Rationalize IATT (Indian Air Travel Tax), FTT (Foreign Travel Tax) and PSF (Passenger Service Fee).
• Enable private sector oil companies to sell ATF at airports.
• Removal of minimum fleet size (five aircraft) and capital requirements (Rs.100 million) for setting up
operations.
• Privatization of Indian Airlines and Air India.
• Increase the limit of foreign investment in an airline from 40% to 49% and permitting foreign airlines to invest
in Indian air carriers.
• Allow foreign investment up to 100% in non-scheduled services such as chartered aircraft and helicopter
services.
• Airport charges to be reduced in line with international levels and reduction in route navigation and landing
charges.
• Corporatization of Air Traffic Control.
• Setting up of an Aviation Economic Regulatory Authority (“AERA”).
The second part of the Naresh Chandra Committee Report which deals with the implementation of the proposed
roadmap has been presented to the Government in October 2004. This part deals with training, aviation security, safety
regulations and steps required to be taken with respect to airport management and infrastructure.
Subsequent to the submission of the Naresh Chandra Committee Report, the following developments have taken place
in the Indian aviation sector:
• The Government permitted private domestic airlines to fly certain international destinations in the SAARC
region with effect from December 2003.
• The Government has abolished IATT and FTT from January 9, 2004.
• The Government has reduced excise duty on ATF from 16% to 8% from January 9, 2004.
• Landing charges for aircraft with less than 80 seats have been abolished and reduced by 15% for larger aircraft
with effect from February 11, 2004. Navigation charges for aircraft weighing less than 20 tonnes have been
substantially reduced with effect from February 11, 2004. For other aircraft, the method of calculating the
charges had already been rationalized to reflect both the weight of the aircraft and the distance flown.
• The Government issued a notification dated November 10, 2004 increasing the foreign investment limit from
40% to 49%, while maintaining its earlier position of not allowing foreign airlines to invest in domestic
airlines.
Domestic airlines being allowed to fly overseas
The Government has allowed private carriers to fly overseas to select destinations in the SAARC region. The
Government also announced on December 29, 2004 that the Union Cabinet has approved a change in aviation policy,
allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20 aircraft to provide
services to other international destinations. These destinations exclude the Gulf countries of UAE, Qatar, Oman,
Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three years. We are
accordingly considering the feasibility of flying to other international destinations, although it is uncertain when this
policy change will become effective and which destinations we may be permitted to service. This would enlarge the
growth opportunity for domestic carriers as they can extend their existing customer relationships and brand equity to
the international sectors.
Emergence of no frills airlines
With the emergence of no frills airlines in the United States and Europe and the resultant revolution witnessed by the
aviation sector, the concept of no frills airlines started generating interest in Asia and a number of no frills airlines have
34
emerged in the Asian continent. India saw its first no frills airline, Air Deccan, commencing operations in August
2003. It has been reported that other business houses are considering the commencement of no frills airline operations
in India.
Industry Growth
The domestic aviation sector growth fuelled by a fast growing economy and rising consumerism, has been relatively
resilient, as compared to other countries, to international events like September 11 and SARS and has maintained a
compounded annual growth rate (“CAGR”), of 8.9% over fiscal 2002 to fiscal 2004. This has been approximately the
same as growth in the international sector, which grew at a CAGR of 10.5% over fiscal 2002 to fiscal 2003. The table
below gives the growth in the number of passengers:
Fiscal
Domestic Sector
Passengers (millions)
(1)
Year on Year Growth
International Sector
Passengers (millions)
(2)
Year on Year Growth
1995 11.06 -
1996 12.19 10.3%
1997 11.70 -4.0%
1998 11.55 -1.3% 10.66
1999 12.02 4.2% 11.02 3.4%
2000 12.71 5.7% 11.45 3.9%
2001 13.71 7.9% 12.28 7.2%
2002 12.85 -6.3% 11.91 -3.05
2003 13.95 8.5% 13.16 10.5%
2004 15.25 9.3% - -
_________
Source: DGCA
(1) Information does not include air taxi operators.
(2) Scheduled passenger traffic to and from India.
According to the DGCA, the total number of passengers carried by scheduled domestic airlines in India was 15.25
million in fiscal 2004 and 8.80 million in the six months ended September 30, 2004.
The growth in demand has been matched by the growth in domestic capacity. The Indian aviation sector grew at a rate
of 7.7% over fiscal 2001 to fiscal 2003 in terms of Available Seat Kilometers.
Fiscal 1996 1997 1998 1999 2000 2001 2002 2003
ASKMs 12,334 14,645 16,436 17,928 19,089 19,897 20,849 22,833
Source: DGCA
Key Industry characteristics
Highly underpenetrated markets
Despite recent growth in air passenger traffic, India continues to have gross under penetration of air services with an
average air travel of 0.014 trips per person per year as compared to an average of 2.02 trips per person per year in the
United States. This signals the level of potential demand which may be generated as the economy grows and air travel
becomes more affordable for a larger population, which otherwise uses road or rail transports.*
* Source: derived from data released by the World Development Report 2005, the Bureau of Transportation Statistics, Department of Transportation,
U.S.A. and the DGCA.
High fixed cost operating environment
The domestic aviation sector in India experiences higher input costs in terms of fuel charges and airport related charges.
Domestic airlines generally have to pay higher charges than those paid by international airlines procuring fuel within
India since such international airlines are exempt from paying excise duty and sales tax*. Also, landing and navigation
charges at Indian airports are higher than similar charges at airports in neighboring countries such as Bangladesh, Sri
Lanka and Nepal.
* Source: Naresh Chandra Committee Report-I.
35
Regulatory and infrastructure constraints
The domestic aviation sector in India continues to be highly regulated. The Route Dispersal Guidelines require all
scheduled airlines to provide a certain number of ASKMs on routes classified as Category II and Category IIA, which
results in lower average passenger load factor and yield for airlines. See “Regulations and Policies” at page 110 of this
Draft Red Herring Prospectus. However, the Government is considering replacing these guidelines by a “subsidy
structure” although it is uncertain if or when such guidelines will be amended. The domestic aviation sector is also
characterized by entry barriers in terms of limited availability of parking bays and slots. The future growth of the
domestic aviation sector in India will depend to a large extent on the availability of quality infrastructure, particularly
airport infrastructure.
Demand Drivers
High economic growth
Growth in air transport (both passengers and cargo) is closely associated with growth in GDP, both internationally and
nationally. For a 1% increase in Indian GDP, domestic passengers are expected to increase by 1.1%. For international
passengers, this sensitivity is about 1.3%, indicating that past growth in this sector has been negatively impacted by
factors like high regulation, infrastructure constraints and capacity availability. The policies and program of economic
liberalization followed since the early 1990s, which have stimulated GDP growth and foreign investment, may be
considered as major factors contributing to the growth in domestic air travel between 1993 and 2004. The outlook for
the Indian economy remains favorable with the Reserve Bank of India projecting a 6% to 6.50% growth rate in fiscal
2005.
Increasing consumerism and affordability
The aviation market in India consists of two principal groups: leisure travelers and business travelers. Leisure traffic
tends to be more price-elastic. While historically, business travelers have formed the majority of the domestic air travel
in India, with increasing income levels and the emergence of flexible fare schemes, a shift is likely in the travel habit of
the middle to high income groups from premium class travel in trains to air traffic. In contrast to 15.25 million airline
passengers in fiscal 2004, the Indian railways carried approximately 52 million* passengers in its premium class
products, i.e., air conditioned and first class coaches.
* Source: CMIE
Growth in tourism
The Indian tourism market has been growing at a significant pace over the last few years, with the government giving
impetus to the industry through various schemes and organized events. Inbound tourist traffic into India increased by
13% from 2.4 million* in fiscal 2002 to 2.7 million* in fiscal 2003. Travel and tourism expenditure in India is
expected to achieve an annualized real growth of 8.8%* over the 10-year period from fiscal 2004 to fiscal 2014.
*Source: Tourism of India 2003 statistics, World Travel & Tourism Council India 2004 Report.
36
BUSINESS
Overview
We are a leading airline in India, providing regular scheduled services on routes between all of India’s major cities.
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We believe that our focus on providing high-quality, reliable service has enabled us to
become the preferred airline for travelers in India.
We have flown over 48 million revenue passengers (defined as fare paying passengers flown on all flight segments)
since commencing operations on May 5, 1993 until November 30, 2004. We flew approximately 5.82 million revenue
passengers in fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers in fiscal
2004 and 3.78 million revenue passengers in the six months ended September 30, 2004. Our share of the domestic
market based on revenue passengers was 11.2% in fiscal 1995, 45.3% in fiscal 2002, 45.9% in fiscal 2003, 45.3% in
fiscal 2004 and 42.3% in the six months ended September 30, 2004. Source: DGCA
Our fleet currently comprises 42 aircraft, of which 34 are Boeing 737 aircraft and eight are ATR 72-500 aircraft. We
currently provide regular scheduled services to 42 destinations in India and two destinations outside India and operate
1,924 flights weekly.
We intend to maintain a disciplined growth strategy by increasing frequency on our existing routes and entering
attractive new markets. Our aircraft fleet has grown from four aircraft in 1993 to 42 aircraft today. Operating a fleet
consisting of limited types of aircraft lowers our operating costs as maintenance issues are simplified, spare parts
inventory requirements are reduced, scheduling is more efficient and training costs are lower, ground time is reduced
and reliability is enhanced. The current average age of our aircraft is 4.5 years. We believe our average fleet age
compares favorably with airlines of our size in India and overseas.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively. In addition, we are actively evaluating the feasibility of commencing operations of regular
scheduled services selectively to other international destinations, subject to receipt of necessary permissions and
approvals from regulatory authorities.
Our Operating Revenues have increased from Rs.25,263 million in fiscal 2002 to Rs.28,757 million in fiscal 2003 and
Rs.34,474 million in fiscal 2004. In the six months ended September 30, 2004, our operating revenues were Rs.19,264
million, an increase of 17.9% from our operating revenues of Rs.16,345 million in the six months ended September 30,
2003. Market growth, increase in our fleet size, our pricing strategy and our entry into new markets have been
primarily accountable for increases in our revenues.
Tail Winds Limited, an Isle of Man company, holds over 99.99% of our Equity Shares. Tail Winds Limited is wholly-
owned by Mr. Naresh Goyal. Mr. Naresh Goyal, our Chairman, has more than three decades of management and
operational experience in the travel and airline industry and brings the benefit of this expertise to our business strategy.
Competitive Strengths
We believe the following are our principal competitive strengths, which differentiate us from other airlines:
Focus on business travel: We offer several services directed towards the convenience of the business traveler,
including telephone check-in facilities, through and “in-city” check-in facilities, priority baggage service, high
frequency services on major routes, same-day return flights on major routes at convenient timings, point to point
connections, providing flight information on cellular phones of customers, our customer loyalty program, e-ticketing,
business class section on almost all flights and airport lounges for business class passengers at most airports. These
facilities and our focus on providing high-quality reliable service have contributed to us becoming the preferred airline
for business travelers in India.
Young fleet comprising limited types of aircraft: Our young fleet has enabled us to enjoy a high degree of performance
reliability and to develop a reputation for being an airline that delivers a safe, on-time, modern and comfortable travel
experience. Our aircraft types provide us with state-of-the-art technology and simplified maintenance procedures that
allows us to make adjustments to effectively manage our response to market developments. 34 of our fleet of 42
aircraft are Boeing 737 variants and the remaining eight are ATR 72-500 aircraft. We were the first airline to introduce
the Boeing 737 NG aircraft in India. Operating a fleet of limited types of aircraft leads to increased cost savings in
terms of maintenance and spare parts, more efficient scheduling and better employee efficiency and productivity.
37
Utilizing our aircraft efficiently: In fiscal 2004 and the six months ended September 30, 2004, our aircraft operated an
average of 9.46 and 9.84 hours per day, respectively. By achieving high utilization, we are able to optimize crew
movement, spread our fixed costs over a greater number of flights and available seat kilometers. We achieve high
aircraft utilization because:
• newer aircraft can be scheduled to fly more hours per day as they are more reliable and require less
maintenance than older aircraft; and
• our staff are able to achieve quick, efficient, airport turnarounds which enable us to increase the number of
daily flights per aircraft.
Strong brand and customer loyalty: We believe that we have established a strong brand that helps to distinguish us
from our competitors by identifying us as a safe and reliable airline that is highly focused on customer service and that
provides an enjoyable flying experience. We believe that our focus on every aspect of customer service, such as our
choice of aircraft, aircraft interiors, our care of passengers in-flight and on the ground, our attention to detail, the
convenient connections which we offer and our high reliability, has enhanced brand awareness and our reputation for
quality. We believe that our strong brand has enabled us to establish alliances with other leading brands for our unique
frequent flyer programs, including with international airlines, domestic and international hotels, a car rental company
and for a co-branded credit card.
Some of the key areas of our customer focus are:
• our fleet of modern generation aircraft with custom designed aircraft interiors;
• our friendly and efficient in-flight service, with meals or heavy snacks being served on nearly all flights;
• high on-time performance;
• tele check-in facilities for business class travelers and Jet Privilege members;
• city check-in facilities in Mumbai, Delhi, Kolkata, Chennai and Bangalore;
• same day return check-in facilities;
• our Jet Privilege frequent flyer program; and
• e-ticketing in accordance with IATA standards and on-line reservations.
We also offer through check-in facilities to passengers of 11 leading international airlines to and from our connecting
destinations. We also believe that our five-tier “Jet Privilege” loyalty program is an innovative program among those
offered by other domestic airlines in India.
We believe we are meeting and exceeding our customer service expectations. We have received numerous awards that
recognize the quality of our service, including the Business World award for the most respected company in the travel
and hospitality sector in 2003 and 2004, the Best Domestic Airline of Asia by the Asian readers of Travel Trade
Gazette for the years 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline Category)
for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004.
Motivated workforce and proven management team: We benefit from a highly motivated workforce that brings high
enthusiasm to air travel and a commitment to superior standards of friendly and reliable quality service that we believe
distinguishes us in our markets. We believe that the positive feedback we have received from our customers is directly
a result of the priority our employees place on delivering top quality customer service. We invest a significant amount
of time and resources into carefully developing the best training practices and selecting individuals to join our team
who share our focus on quality and improvement. We conduct ongoing training programs that incorporate industry
best practices and encourage strong and open communication channels among members of our team so that we can
continue to improve the services we provide. We are led by a management team with significant airline industry
experience.
Access to facilities at major airports: The major hub of our operations is Mumbai where 19 of our fleet of 42 aircraft
are parked (of which 18 have been allotted overnight parking bays and one aircraft is parked for a few hours at night),
followed by 12 in Delhi, six at Chennai, three in Kolkata and two at Bangalore. Our access to overnight parking bays
and landing slots at these five hubs helps us to originate flights from these cities. It also enhances our aircraft
utilization and efficiency of our maintenance activities.
Extensive sales and distribution network: We have access to the sales and distribution network of Jetair, which is a
leading GSA in India with offices in approximately 69 locations. Jetair represents, in addition to us, 15 international
airlines in India. In addition, we are represented by general sales agents in 74 countries outside India that sell and/or
distribute our tickets to international in-bound passengers. Our airline reservation system is hosted on SABRE. We
offer 24-hour reservations services at Mumbai, Delhi, Kolkata and Chennai. We also have agreements with major
GDSs, including Abacus, Amadeus, Galileo, Sabre GDS and Worldspan. We have entered into interline agreements
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with major international airlines and marketing cooperation agreements with three international airlines. We have
joined billing settlement plan programs in North America, U.K., France, Germany, Switzerland and other key
countries. We introduced e-ticketing and direct internet booking in July 2004. We intend to encourage the use of
direct internet bookings by our customers because we believe it is an efficient distribution channel.
Business Strategy
The key elements of our business strategy include:
Differentiate our product and service: We believe a key to our long-term success is that we offer customers a better
alternative in airline travel. We offer our passengers a unique flying experience by providing new aircraft, pre-assigned
seating, reliable performance, meals on nearly all flights, city check-in facilities in Mumbai, Delhi, Kolkata, Chennai
and Bangalore, tele check-in facilities for business class travelers and Jet Privilege members, same day return check-in
facilities and a well developed frequent flyer program. We place high emphasis on customer service and quality. We
intend to continue to communicate openly with our customers regarding their needs and areas which require continued
improvement. Based on customer feedback, we believe that passengers prefer our customer service to that of our
competitors and that this preference is an important factor in their decision to fly with us over other airlines.
Continue to maintain a young fleet comprising a minimal number of different aircraft types: We intend to continue
our strategy of maintaining a young fleet and a minimal number of different aircraft types to preserve the simplicity of
our operations and control our operating costs.
Maximize revenues through efficient use of technology, focused marketing and optimization of resources: We intend
to continue to maximize our revenues through efficient use of technology, focused marketing and optimization of
resources. For this purpose, we use a state-of-the-art yield management system developed by SABRE. We also intend
to continue to focus on improving productivity and unit costs through reduction of recurring maintenance costs and
more efficient utilization of our crew.
Further strengthen the brand name under which we operate: We intend to continue to enhance the “Jet Airways”
brand recognition in the marketplace through brand building efforts, communication and promotional initiatives such as
participation in industry events, public relations and investor relations efforts. We believe that these initiatives, as well
as the listing of our Equity Shares, will enhance the visibility of our brand name and strengthen our recognition as a
leader in the Indian aviation industry.
Focus on domestic aviation sector: We intend to further penetrate our key markets in India by increasing the number
of flights per day on our key routes and commencing flights to new destinations in India. We believe that this is
important to passengers who choose airlines based on depth of schedule. We intend to continue our focus on providing
high-quality services and facilities to our customers to consolidate our position as a preferred airline for business
travelers in India.
Operate flights to select international destinations, subject to obtaining necessary Governmental approvals and other
conditions. We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in
March 2004 and May 2004, respectively, pursuant to the Government of India permitting private sector domestic
carriers to fly to certain SAARC countries. The Government of India announced on December 29, 2004 that the Union
Cabinet has approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years
continous operations and at least 20 aircraft to provide services to other international destinations. These destinations
exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air
India and Indian Airlines for three years. However, these policy changes are not yet effective, and detailed guidelines
will need to be notified by the Ministry of Civil Aviation. As and when the changes in policy become effective, the
Government will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the
respective countries to which we desire to fly. The Government will also specify the frequency of flights that we will
be entitled to operate. There is no certainty when these policy changes will become effective and whether or when we
will be permitted to fly to destinations of our choice. We believe that other international destinations may be attractive
primarily due to the significant revenue growth potential and high yields that may be obtained, in light of the increasing
customer demand for flights to and from these destinations and India. We believe that we are well placed to service
these markets due to our reputation for high-quality service and customer awareness of our brand. A significant number
of passengers including persons of Indian origin and non-resident Indians from these destinations use our airline in
India. We believe there has been an increase in the growth of outbound travel by Indian residents and intend to target
this market.
Reduce existing high interest debt: We have significant financing obligations, relating to debt incurred in connection
with financing the purchase of our aircraft and engines as well as operating leases for our aircrafts and engines. We
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believe that reducing significant financing obligations will improve our ability to meet our strategic goals. We intend
to reduce our existing high interest debt, including through utilization of the proceeds of the Fresh Issue.
Continue to focus on personnel training and on motivating our workforce: We intend to continue to focus on
personnel training to improve employee productivity and to ensure that our employees understand our core strategies.
We believe in open communication, which creates a dynamic working environment and in setting out clear well
defined policies and goals. We intend to continue providing competitive wages and incentives to motivate our
workforce.
Aircraft
We currently operate a fleet of 42 aircraft comprising 34 Boeing 737 aircraft and eight ATR 72-500 aircraft. In
addition, two Boeing 737-400 aircraft leased by us have been sub-leased to an airline in Japan. We expect to take
delivery of seven additional Boeing 737-800 aircraft in 2005.
Currently, 33 of our Boeing aircraft are configured with two classes, Economy, or Y class, and Club Premiere, or CP,
and one Boeing 737-800 aircraft is temporarily on a 175 Y configuration. The ATR 72-500 aircraft have a single
Economy class configuration.
We use Boeing aircraft on metropolitan routes where there is high demand. We use ATR aircraft primarily on lower
density regional routes and on certain low-demand flight timings on certain routes where we normally use Boeing 737
aircraft.
The composition of our fleet as of November 30, 2004 is more fully described below:
Aircraft Type
Configuration
Average
Age
(Years) Number
Hire Purchase/
Finance Lease
Hire
Purchase/
Finance Lease
Remaining
(Years)
Operating
Lease
Average
Term of
Operating
Lease
Remaining
(Years)
Boeing 737-400 112 Y and 24 CP 6.95 6 3 4.88 3 2.26
Boeing 737-700 102 Y and 20 CP 4.36 12 8 7.30 4 3.10
Boeing 737-800* 126 Y and 28 CP 4.15 14 11 7.81 3 4.83
Boeing 737-900 138 Y and 32 CP 1.47 2 2 10.50 0 -
ATR 72-500 64 Y 4.26 8 0 - 8 1.71
Total 4.5 42 24 7.50 18 2.63
________
* One existing Boeing 737-800 aircraft is temporarily on a 175 Y configuration.
The Boeing 737-400 aircraft are fitted with CFM56-3C engines, and the Boeing 737-700 and 737-800 aircraft are fitted
with CFM56-7B engines. The ATR72-500 aircraft are fitted with Pratt & Whitney-127 engines. 40 of our 42 aircraft
were new when we inducted them into our fleet. This allowed us to configure the aircraft, choose the seats and
interiors and design the galleys to meet our requirements.
Our simplified fleet structure allows us to maintain cost-efficient operations by reducing maintenance and training
costs, reducing spare parts inventory requirements and supporting high reliability and aircraft utilization. The average
daily utilization rate of our aircraft in fiscal 2002, 2003 and 2004 and for the six month period ended September 30,
2004 was approximately 9.66, 9.41, 9.46 and 9.84 Block hours, respectively.
Our Boeing 737 aircraft have common maintenance routines, require standardized training for our crews and have a
seat configuration that helps balance yield and optimize load factor on our routes.
We have hire purchase agreements for 23 Boeing 737 aircraft and a finance lease agreement for one aircraft. We have
operating leases for our remaining 18 aircraft. We have entered into lease agreements for seven Boeing 737-800
aircraft which we expect to be delivered in 2005 for periods ranging between six and seven years approximately.
In December 2004 we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with
CFM56-7B24 engines. The expected date of delivery of such aircraft is between January 2006 and October 2007.
Definitive purchase agreements will need to be negotiated and entered into on or prior to January 31, 2005, unless
otherwise extended. If the purchase agreements are entered into, then closer to the delivery dates of each aircraft we
will determine the financing arrangements under which these aircraft will be obtained. The entry into such purchase
agreement and financial arrangements in connection therewith is also subject to the Company obtaining board approval
and such necessary regulatory approvals as may be required.
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We have entered into a general terms agreement with CFM International in connection with certain warranties provided
for the CFM engines we use in our Boeing aircraft. In case of aircraft leased by us, we can acquire these warranties
only through an assignment of such warranties from the leasing company.
Under the terms of our hire purchase financing and finance lease arrangements, we are responsible for maintaining,
repairing and insuring the aircraft (including third party liability insurance) and paying various taxes. We have the
option to purchase the aircraft either during the term of hire purchase and finance lease on payment of outstanding
amounts or at the end of the term for a nominal option price.
Under the terms of our existing operating and finance lease agreements for Boeing 737 and ATR 72-500 aircraft, we
are responsible for repair, maintenance and overhaul, and insurance, although our lessors may be responsible for
making certain contributions towards maintenance. The Company is required to return the aircraft in an agreed
condition after expiry of the lease period.
Performance
The following table presents certain information relating to our operations for the fiscal periods indicated:
As of and for the year ended March 31, As of and for the six months
ended September 30,
2000 2001 2002 2003 2004 2003 2004
Period end fleet size
(1)
29 30 38 41 41 39 41
Average fleet size during period 27.5 29.6 34.9 38.9 40.8 40.6 41
ASKMs
(2)
(millions) 6,328 6,818 7,780 8,496 9,162 4,542 4,796
RPKMs
(3)
(millions) 4,093 4,810 4,777 5,291 5,852 2,771 3,245
Passenger Load Factor
(4)
(%) 64.7% 70.5% 61.4% 62.3% 63.9% 61.0% 67.7%
Average revenue per passenger
(5)
(Rs.)
3,385 3,502 3,517 3,506 4,031 4,046 4,145
(1) Fleet size represents aircraft which have a valid certificate of registration and certificate of airworthiness issued by the DGCA
(2) Available Seat Kilometers, defined as the aircraft seating capacity multiplied by the number of kilometers the seats are flown.
(3) Revenue Passenger Kilometers; represents the number of kilometres flown by revenue passengers.
(4) Revenue Passenger Kilometres expressed as a percentage of Available Seat Kilometres.
(5) Net Passenger Revenues divided by number of revenue passengers.
Routes and Schedules
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India, and
operate 1,924 flights weekly.
We use five hubs – Mumbai, Delhi, Chennai, Kolkata and Bangalore. We maintain engineering and maintenance
facilities at each of these hubs. The major hub of our operations is Mumbai followed by Delhi, Chennai, Kolkata and
Bangalore. The use of five hubs helps us originate flights from these cities.
The following table sets forth the cities we currently serve, the number of scheduled flights we operate per week
originating out of those cities and the date we commenced services from each city.
City
Frequency per week
out of each city
Month of introduction
Mumbai 504 May 1993
Delhi 290 May 1993
Bangalore 179 May 1993
Chennai 168 May 1993
Kolkata 108 June 1994
Hyderabad 84 May 1993
Cochin 42 May 1993
Goa 41 May 1993
Ahmedabad 39 May 1993
Guwahati 32 January 1995
Vadodara 29 July 1996
Pune 28 January 1997
Indore 27 December 1996
Udaipur 27 October 1999
Coimbatore 21 May 1993
Mangalore 21 May 1993
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Jaipur 21 July 1996
Bhopal 20 August 2001
Bagdogra 14 January 1995
Jammu 14 August 1996
Madurai 14 December 2001
Aurangabad 14 January 1997
Jodhpur 14 August 2001
Nagpur 14 September 2001
Rajkot 14 April 1998
Srinagar 14 August 1996
Varanasi 14 December 1998
Agartala 11 January 2004
Bhuj 7 April 1998
Bhavnagar 7 December 1999
Calicut 7 May 1993
Colombo 7 March 2004
Khajuraho 7 December 1998
Chandigarh 7 October 1999
Leh 7 June 2001
Port Blair 7 January 1999
Kathmandu 7 May 2004
Lucknow 7 November 1997
Patna 7 August 2004
Trivandrum 7 July 1996
Diu 6 December 1999
Imphal 6 December 1998
Porbandar 6 October 1999
Jorhat
4 September 1996
Total 1,924
We plan our flight timings based on customer convenience and optimal rotation of each aircraft. In this regard, we
offer direct flights between 32 city pairs. We also plan our schedules so that passengers can conveniently connect from
regional flights to major domestic and international routes.
We are required to comply with the Route Dispersal Guidelines, 1994 issued by the Government. For further details
regarding these guidelines, see the “Regulations and Policies” section at page 110 of this Draft Red Herring Prospectus.
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively, pursuant to the Government of India permitting private sector domestic carriers to fly to
certain SAARC countries.
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The map below sets forth our current route structure:
43
In-flight Service
We have established a strong reputation for delivering quality in-flight service. We spend time and attention in hiring
our in-flight crew. Recruits go through a rigorous and carefully designed training program encompassing service
procedure, customer care, safety and grooming and are required to satisfactorily complete their training program to
qualify for permanent positions. Cabin crew are also required to go through refresher training courses each year.
We serve meals or heavy snacks on nearly all our flights depending on the length of the flight. We pay considerable
attention to the selection of our menu, which we regularly change. As a part of our continued efforts at product
enhancement, we periodically change the cutlery, crockery and other supplies as well as service procedure on our
flights. We have catering contracts with various catering services, including Oberoi Flight Services and Taj SATS Air
Caterers.
We pay particular attention to the maintenance and upkeep of our cabin interiors. We seek to ensure the immediate
repair or replacement of all fittings and fixtures when required, and we have a program to regularly replace upholstery
and carpeting.
Ground Handling Services
We endeavor to ensure that customer service on the ground, at embarkation and at disembarkation, is of a high
standard. We maintain sufficient counters at all airports and seek to ensure that the waiting time for check-in,
particularly at peak hours, is minimal. We offer special services to our club premier passengers and frequent flyers.
We carefully monitor the quality of ground handling services.
Our check-in system at nearly all airports is automated. We continually upgrade our systems, procedures, equipment
and facilities at all airports.
We have an in-house training program for all our ground staff. We conduct courses for the handling of dangerous
goods and for weight and balance of the aircraft which have been approved by the DGCA.
We provide our own ground handling services at all airports except Cochin airport and the airports at Colombo, Sri
Lanka and Kathmandu, Nepal.
Service Quality
We have developed systems to track various aspects of our services. On time performance and the reasons for delays
are analyzed every day. We receive and analyze over 57,000 service tracker questionnaires every month, where
passengers are asked to evaluate all our services on a four-point scale. We undertake quality audits of in-flight and
ground services by a dedicated services and product quality team. We endeavor to promptly respond to any customer
complaint.
We believe we are meeting and exceeding our customer service expectations. During the six months ended September
30, 2004, based on feedback from our customers:
• We were rated either “good” or “excellent” for overall services by approximately 95% of our passengers who
completed our questionnaires.
• Ratings for in-flight services and efficiency of our stations were 97% and 95%, respectively.
We have received numerous awards that recognize the quality of our service, including the following:
• Citibank Diners Club Blue Moon Award for Service Excellence in 1995.
• H&FS Best Domestic Airline of the year Award for Excellence in Hospitality for the years 1996, 1998, 1999
and 2001.
• Air Transport World Market Development Award for the year 2000.
• Financial Express Business Traveler Award (Domestic Airline Category) for Business Class, Economy Class
and Best Service (Airport and In flight) in 2003 and 2004.
• Best Domestic Airline of Asia by the Asian readers of Travel Trade Gazette for the years 2003 and 2004.
• The Businessworld award for the most respected company in the travel and hospitality sector in 2003 and
2004.
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We were also ranked by the Businessworld magazine publication in 2004 as one of the ten most respected companies in
India.
As part of our continued emphasis on the quality of our service, in August 2004 we launched a new program called
“Seamless Customer Care”, which involves the participation of employees at the 42 domestic airports we connect. The
objective of this program is to focus on customer care and enhance the overall passenger experience by seeking input
from our employees at the airports we connect. A committee of the heads of each operational department chaired by
our Chief Operating Officer oversees this program.
Marketing, Sales and Distribution
Our primary marketing strategy is to attract new customers and retain existing customers by widely communicating our
high-quality value proposition. We market our services through advertising and promotions in newspapers, magazines,
outdoor advertising such as bill boards, radio, and through targeted public relations and promotional efforts. We
believe that our brand is widely recognized in India as representing high value service. Our brand has been selected as
a “superbrand” by the Indian Superbrands Council in August 2003.
We estimate that in fiscal 2004 and the six months ended September 30, 2004 approximately 80% of our passengers
were business travelers. The remaining passengers were largely leisure travelers and travelers visiting friends and
relatives. We believe we have a leading loyalty program among those offered by domestic airlines in India. Our five-
tier frequent flyer program had 413,970 members as of November 30, 2004. We have a dedicated service centre in
Mumbai which manages this program and communicates with members. Members can also accumulate miles by using
the services of our partners such as airlines, domestic and international hotels and our co-branded credit card and car
rental companies. The miles earned and accumulated by our customers under this program can be redeemed for
upgrades and free tickets.
Our GSA for India is Jetair. Jetair was promoted by Mr. Naresh Goyal in 1974 and is a promoter group company. Jetair
has offices in approximately 69 locations and represent 15 international airlines in India. Our GSA agreement with
Jetair is valid for a period of four years commencing April 1, 2004. Such agreement with Jetair requires Government
approval under the Companies Act and we currently have received approval for such agreement for a period of three
years commencing April 1, 2004. We pay Jetair an overriding commission of 3% on all passenger sales and 2.5% on
all cargo sales. This commission is over and above sales commissions payable to sales and travel agents of 5% on
Rupee fares and cargo and 7% on foreign exchange fares. Our agreement with Jetair also provides for charge back of
certain expenses, including remuneration of certain employees (sales, reservation and service staff) who are rendering
services which should be rendered by Jetair as our GSA,, CRS costs (up to a maximum of 25% of such CRS costs) and
SITA communication charges, in amounts as determined by us. In fiscal 2004 and the six months ended September 30,
2004, commissions to Jetair constituted 2.5% and 3.1%, respectively, of our Total Expenses for such periods.
We are considering joining the Billing Settlement Plan system, or BSP system, an IATA sponsored standardized
ticketing and collection system. Under the BSP, neutral standard traffic documentation common to all airlines on the
BSP system is issued and there is centralized reporting, billing and analysis of sales for our domestic operations. We
will not incur any credit risk for default in payment by a travel agent that is accredited by IATA. If we migrate sales to
the BSP, we expect that our GSA agreement with Jetair may require modifications, which will require Government
approval under the Companies Act.
Our GSA agreements include agreements with the following overseas promoter group companies: Jet Airways LLC,
Dubai, UAE and its two subsidiaries Jet Airways of India Inc., USA (for USA and Canada) and India Jet Airways (Pty)
Ltd., South Africa (for South Africa). In fiscal 2004 and the six months ended September 30, 2004, commissions to
such GSAs constituted 0.5% and 0.4%, of our Total Expenses for such periods.
We currently have GSA representation in 74 countries to promote the sale and distribution of our tickets to
international in-bound passengers.
Our airline reservation system is hosted on SABRE. We offer 24-hour reservations services at Mumbai, Delhi, Kolkata
and Chennai. We also have agreements with major global distribution systems, or GDSs, including Abacus, Amadeus,
Galileo, Sabre GDS and Worldspan. These agreements require us to pay a fixed commission per booking made. The
average cost per reservation in fiscal 2004 was US$2.80 (Rs.129.08).
We introduced e-ticketing and direct internet booking in April 2004. We intend to encourage the use of direct bookings
by our customers because it is an efficient distribution channel. No sales commission is payable on direct e-ticketing
and therefore increased use of direct e-ticketing will reduce distribution costs. We pay an overriding commission of
3% to Jetair for all internet passenger bookings and 2.5% on all internet cargo bookings.
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We are already a part of BSP systems in North America, UK, France, Germany, Switzerland and other key locations.
Pricing and Revenue Management
We offer several fare options as set forth below:
• Economy and club premier fares;
• Discounted fares for senior citizens and defense personnel;
• Advance Passenger Excursion, or APEX fares;
• “One Fare” scheme that allows passengers to buy four or six coupons for a fixed fare and use them on any
sector;
• “Night saver” fares for night flights which we operate on certain routes;
• “Check fares” on certain flights with no requirement for advance booking; and
• U.S. Dollar fares and “Visit India” fares for overseas travelers.
Our APEX fares are subject to certain advance purchase and cancellation conditions.
Yield management and pricing form the backbone of our revenue generation strategy and are also strongly linked to our
route and schedule planning and our sales and distribution activities. Yield management involves the use of historical
data and statistical forecasting models to produce knowledge about our markets and maximize our operating revenues.
Our yield management practices enable us to respond to changes in the market and also to anticipate such market
changes.
The number of seats we offer at each fare level in each market results from a continual process of analysis and
forecasting. Past booking history, seasonality, the effects of competition and current booking trends are used to
forecast demand. Current fares and knowledge of upcoming events at destinations that will affect traffic volumes are
included in our forecasting model to arrive at optimal seat allocations for our fares on specific routes. We use a
combination of approaches, taking into account yields and flight load factors, depending on the characteristics of the
markets served, to arrive at a strategy for achieving the best possible revenue per available seat kilometer, balancing the
average fare charged against the corresponding effect on our load factors. For this purpose, we use a state-of-the-art
yield management system developed by SABRE.
Engineering and Maintenance
Our maintenance procedures are regulated by the DGCA. Regulations framed by the DGCA are based on ICAO
requirements. Our maintenance programs are based on manufacturers’ maintenance planning documents, or MPDs, that
are approved and certified by the DGCA.
The maintenance performed on our aircraft can be divided into three general categories: line maintenance, “C” or phase
10 checks (“C Checks”) and heavy maintenance or “D” checks (“D Checks”). Line maintenance consists of routine,
scheduled maintenance checks on our aircraft, including pre-flight, daily and overnight checks and any diagnostic and
routine repairs. For instance, C Checks for our Boeing aircraft are carried out after a maximum of 4,800 flight hours.
These checks take an average of eight days for our Boeing 737 aircraft, and may result in the loss of service of such
aircraft for a period of up to 10 days. Heavy maintenance or D Checks consist of more complex inspections and
servicing of aircraft that require a longer maintenance period. Heavy maintenance checks are performed following a
pre-scheduled agenda of major overhauls defined in an aircraft’s manual, which is based on the number of flights flown
by the aircraft or the age of the aircraft. A typical D Check would result in the loss of service of a Boeing 737 aircraft
for approximately 45 days.
Typically, all our line maintenance and C Checks are performed by our own experienced technicians. We have our
own maintenance hangar facility in New Delhi. In addition, we have leased a maintenance facility at Bangalore from
Hindustan Aeronautics Limited (“HAL”), for C Checks on our Boeing aircraft. We also utilize the workshops and
hangar facilities of Air India at Mumbai on an “as-needed” basis. D Checks of Boeing aircraft are presently carried out
at facilities approved by the U.S. Federal Aviation Administration (“FAA”), and the DGCA.
We have not as yet been required to conduct a D Check on our existing fleet. However, in fiscal 2006 and 2007, nine
and eight Boeing aircraft, respectively, are scheduled to undergo D Checks, resulting in approximately one aircraft
being unavailable for the entire duration of such fiscal years.
We are in the process of establishing a maintenance hangar complex with workshop and allied facilities at Mumbai that
is scheduled to be completed by March 31, 2005. The hangar is being constructed on land leased from the AAI and
will provide maintenance and overhaul facilities at Mumbai airport, which is the main base of our operations. The
46
estimated cost of construction of the maintenance hangar and related workshops and engineering training facilities is
U.S.$15 million (Rs.690 million). The hangar will be used for C checks, line checks, storage and minor rectification of
engines and workshops for composite structural repair and, in due course, D Checks. We expect that the construction
of the hangar will reduce our maintenance costs and improve our operational efficiency.
We have also entered into various contracts in connection with maintenance support for our Boeing 737 fleet, including
the following:
• “Power by the hour” (“PBTH”) contract with Lufthansa Technik for the repair and maintenance of spares for our
Boeing fleet.
• PBTH contract with Israel Aircraft Industries Limited- Bedek Aviation Group, Israel, for the maintenance of
auxiliary power units (“APUs”) in our Boeing 737-400 Classic aircraft.
• Contract with Honeywell International Inc., USA, for the repair and overhaul of the APUs in our Boeing 737 NG
aircraft.
• PBTH contract and technical services contract with MTU Maintenance Hanover GmbH, Germany, for
engineering services and engine condition monitoring services in connection with our CFM 56-7 engines in our
Boeing 737 NG aircraft.
We have a global maintenance agreement and an equipment lease agreement with ATR, the manufacturer of the ATR
aircraft, to provide technical support for our ATR 72-500 aircraft.
Our technical personnel have the capability and required approvals and licenses from the DGCA to carry out C Checks.
All technical personnel are trained by our in-house training programs (type courses and refresher courses) and also by
programs offered by aircraft and engine manufacturers. These programs have been approved by the DGCA.
We have a quality control division that oversees the compliance of all airworthiness requirements and coordinates with
the DGCA for various engineering activities. Our engineering technical services division implements modifications,
determines the work scope of repairs and maintenance and plans shop visits for engines and APUs. This division is
also responsible for the engine trend monitoring program. We have a reliability section that monitors components and
analyses defects of systems and components. We also have an engineering planning division to forecast long and short-
term maintenance activities. The division is also engaged in optimization of resources and the minimization of aircraft
on ground for maintenance.
Our technical dispatch reliability, which is the percentage of flights not being delayed for more than 15 minutes for
technical reasons, for the period January 1, 2004 through November 30, 2004, was over 99%.
Flight Operations
Procedures and policies regarding our flight operations are regulated by DGCA and are based on ICAO requirements.
We have over 400 experienced pilots. We have a ground training school at Mumbai for flying crew. This training
school is approved by the DGCA. We have a full flight simulator for a Boeing NG aircraft and a B737-Classic flight
training device. This equipment has also been approved by the DGCA. We can therefore meet all training
requirements to enable pilots to obtain endorsements to fly Boeing 737 NG aircraft.
Our pilots that are qualified to fly ATR 72-500 aircraft are sent to the manufacturers’ training centers at Toulouse or
Bangkok for both initial and refresher training.
We have an operations control centre, or OCC, that is responsible for flight operations from various airports in India.
This department comprises dispatchers and flight controllers. A dispatcher ensures that each flight complies with
applicable rules and regulations (such as, for example, load restrictions). A flight controller is responsible for the
departure, deployment and relocation of aircraft.
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Air Safety
We are dedicated to ensuring the safety of our passengers and employees. We have taken numerous measures,
voluntarily and as required by regulatory authorities, to increase the safety of our operations. Our air safety department
is staffed by experienced pilots and other aviation professionals. As required by the DGCA, this department reports to
our Chief Executive Officer.
We comply with safety standards of the DGCA. We also maintain our aircraft in accordance with manufacturers’
specifications and all applicable safety regulations, and perform routine line maintenance every day. Our pilots have
extensive experience, with flight captains having an average of more than 4,000 hours of career flight time. We also
conduct ongoing courses, addressing the latest developments in safety issues.
We download and analyze the entire data from the digital flight data records of each aircraft. The results are discussed
with our flight operations department.
In addition to in-house audits, safety audits are carried out periodically by the DGCA, the Boeing Company and ATR.
Security
We pay particular attention to the security of our passengers and our aircraft.
We comply with the regulations and instructions issued by the (Indian) Bureau of Civil Aviation Security (the
“BCAS”), which is the regulatory authority responsible for airline security in India. These regulations and instructions
are in accordance with the standards and recommended practices specified by the ICAO.
We have developed an in-house training facility for security training. The training is structured on a self-enabling,
interactive computer based program with the ability to simulate live situations in the classroom. Our training program
has been recognized by BCAS.
We provide extensive training to ensure that our staff have appropriate skills to carry out responsibilities as specified in
our security training manuals. All crew and ground handling staff are required to undergo security awareness and
dangerous goods training to identify potentially dangerous goods and items that threaten the safety of the flight,
including inflammable liquids and containers that may explode under pressure.
We ensure compliance with international standard security measures, including the following:
• Installation of reinforced doors and review of policies and procedures on cockpit visits and occupying of jump
seats;
• Review of items allowed as cabin baggage;
• X-ray screening of registered baggage, cargo, courier, postal mail;
• Passenger/baggage reconciliation entailing removal of checked-in luggage from the aircraft when passenger
fails to board the aircraft;
• Appropriate security controls on catering services;
Cargo Services
While we are primarily a passenger airline, we also carry cargo on our Boeing flights. We generated approximately
4.9% of our Operating Revenues from the carriage of cargo in fiscal 2004.
We carry all types of cargo except cargo classified as dangerous goods by IATA. We have cargo warehouses for the
receipt and delivery of goods at all major stations. These are operated by our GSA, Jetair. For the carriage of bonded
international cargo on domestic routes, we have set up bonded warehouses at major locations in the country. We have
also entered into 39 cargo interline agreements with international airlines.
Our carriage of cargo has increased by 32.6% over the last three fiscal years, from 65,385 tons in fiscal 2002 to 86,749
tons in fiscal 2004.
We intend to introduce the automation of our cargo operations throughout our network by December 2005. We also
intend to maximize our revenues from carriage of cargo by focusing on high yield cargo.
48
Fuel
Costs of Aviation Turbine Fuel, or ATF, are a significant portion of our operating expenses. Significant increases in
fuel costs would have a material adverse effect on our operating results. The following chart summarizes our fuel
consumption and costs:
Year ended March 31 Six months ended September 30
2002 2003 2004 2003 2004
Liters consumed 311,630,964 336,697,650 363,936,616 180,668,509 192,299,410
Total cost (in Rupees, thousands) 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Average cost per liter (in Rupees) 16.98 19.32 20.38 19.67 24.51
Percentage of Total Expenses 19.9% 20.4% 21.9% 21.0% 26.1%
We are required to purchase ATF from three Government-controlled companies – IOC, BPCL and HPCL as they are
the only companies which have been permitted to have such facilities within airports. For the supply of ATF in India,
we have entered into contracts with these three companies. The price charged by these companies is uniform and is
revised every month based on the international price of crude oil. The components of the cost of ATF include central
excise duty (currently 8%) and applicable education cess, and sales tax that is levied by each state in India. Sales tax
on ATF is levied at all stations we currently service in India (except for Diu, Leh and Port Blair) and is currently
between 4% and 30.55%, with a weighted average of approximately 22.1% for the six month period ended September
30, 2004.
With regard to our operations in Kathmandu, Nepal and Colombo, Sri Lanka, we have entered into fuel supply
agreements with Nepal Oil Corporation Limited, a state run company, and AIR BP Limited, a UK company,
respectively.
Fuel prices have increased significantly in recent periods. Although we have been successful in increasing the price of
our fares, we experience significant price pressure as a result of increased competition in India. We cannot assure you
that we can continue to increase our fares in response to increases in fuel price.
Competition
We compete for our revenue passengers primarily on the basis of routes, fare levels, frequency of flights, reliability of
services, brand recognition, passenger amenities, such as frequent flyer programs, and customer service. We believe
our motivated workforce and proven management team, our focus on business travel, our young fleet comprising of
limited types of aircraft, our efficient aircraft utilization and our strong brand enable us to compete favorably in many
of these areas. We compete in the cargo services primarily on price and service capabilities.
Our market position will depend upon effective marketing initiatives and our ability to anticipate and respond to
various competitive factors affecting the industry, including pricing strategies by competitors. Any failure by us to
compete effectively, including in terms of pricing or providing innovative and high-quality services, could have a
material adverse effect on our results of operations.
Our principal competitors are currently Indian Airlines, including its subsidiary Alliance Air, and Air Sahara. Both
airlines are full-service carriers offering flights on domestic routes and certain international routes. Other competitors
include Air India, which carries domestic passengers on the domestic legs of its international flights and Air Deccan, a
“no frills” airline that commenced operations in August 2003. Certain of our competitors, including Government-
owned companies, may have significantly greater resources than those available to us.
According to published reports, additional new private carriers are contemplating entering the domestic aviation
market.
The airline industry is very competitive and we expect competition to continue in the future. We expect our
maintenance costs to increase as our fleet ages, and we may incur increased labor costs in the future.
The following table sets forth the historical market shares on domestic routes (in terms of passengers divided by seats),
based on revenue passenger kilometers, of the significant airlines in India for each of the periods indicated:
Year ended March 31
Market Share – Domestic 2002 2003
Jet Airways 45.3% 45.9%
Indian Airlines (including Alliance Air) 44.3% 39.6%
49
Air Sahara 4.8% 9.3%
Others
(1)
5.6% 5.2%
_________
(1) Consists of Air India and other air taxi operators, and since September 2003, also includes Air Deccan.
Source: DGCA
Our market share in fiscal 2004 and in the six months ended September 30, 2004, was 45.3% and 42.3%, respectively.
The Indian Railways is the largest transporter in India and in fiscal 2004, carried approximately 52 million premium
passengers, consisting of passengers traveling first class and air conditioned second class. We believe that the
discounted fares offered by us and other airlines will attract rail travelers to use air transportation services on certain
routes.
If we increase our international operations, the number of our competitors will increase and we will face competition
from airlines that are already established in these international markets and that participate in strategic alliances and
code sharing arrangements. These competitors may have longer operating histories, bigger fleets with experienced
pilots, crew and engineers and significantly greater resources than those available to us and may provide significant
competition to us.
People
We believe that our growth potential and the achievement of our strategy is directly linked to our ability to attract and
maintain the best professionals available in the airline business. We place great emphasis on the selection and training
of enthusiastic employees with the potential to add value to our business and who we believe fit in and contribute to our
business culture.
Employees in various departments and categories are as set out below:
As of March 31, As of September 30,
2003
2004
2004
Pilots 402 411 424
Cabin Attendants 735 769 980
Engineers 1,132 1,140 1,187
Customer service agents 1,974 1,866 1,902
Security 721 665 679
Marketing, sales and reservations 687 1,008 1,038
Others 891 844 849
Total 6,542 6,703 7,059
Less: Jetair Services
(1)
(1,075) (1,396) (1,464)
Total Available 5,467 5,307 5,595
______________
(1) These comprise employees whose salaries and related costs are charged back to Jetair under the terms of our GSA agreement with Jetair.
We provide extensive training for our pilots, AMEs and technicians, flight attendants and customer service
representatives. In addition to technical training, we offer in-house training in communication skills. We have an in-
house program to identify talented employees and train them to take positions of responsibility on a fast track.
Attrition rates (based on the average number of personnel at the beginning of such period and at the end of such period)
for our employees in fiscal 2002, 2003 and 2004 was 8.9%, 13.2% and 14.1% respectively and 11.0% (on an
annualized basis) in the six months ended September 30, 2004. In-flight crew attrition rates for such periods were
15.4%, 18.3%, 26.9% and 21.2% (on an annualized basis), respectively. In addition, attrition rates for airport services
staff for such periods were 10.6%, 18.3%, 15.9% and 13.6% (on an annualized basis), respectively. We continuously
recruit and train young candidates and train them in anticipation of such attrition. We also promote meritorious crew to
supervisory positions, positions in base management and as trainers in order to retain talent. In fiscal 2005 we have
implemented salary and wage revisions throughout the organization. We believe that this may reduce our attrition rates.
Employees are entitled to free or subsidized air transportation which is subject to space availability. The number of
such free tickets depends on the years of service with the Company.
We intend to reward our employees for their contributions to us and create employee ownership in us. by granting
Equity Shares in which eligible employees and directors of the Company and any other person permitted under
applicable law or regulation can participate, subject to such approvals as may be necessary. The criterion for selection
will be determined by our Board and approved by our shareholders. The ESPS or ESOP will comply with the SEBI
(Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares
50
pursuant thereto will be subject to compliance with all applicable laws and regulations. We propose to issue a
maximum of 0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur in fiscal 2006,
although there can be no assurance as to the timing of adoption of any such scheme, which may occur in fiscal 2006 or
thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss account equal to the
product of such number of Equity Shares issued and the difference between the applicable market price of our Equity
Shares and the price at which our employees and directors will purchase the Equity Shares. We have not as yet
determined the issue price at which Equity Shares will be sold, the number of Equity Shares proposed to be issued, the
identity of such eligible personsnd the timing of adoption of the ESPS scheme or the date of issue of Equity Shares
thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of the number of
Equity Shares proposed to be issued in accordance with the accounting principles used for determining such charge
using the fair value method or applicable market price of our Equity Shares. Such charge will be amortized over the
vesting period of the stock option. We have not as yet determined the number of stock options to be granted, the
exercise price or the number of Equity Shares to be issued, the identity of the eligible persons and the timing of the
ESOP scheme.
Approximately 11% of our workforce as of September 30, 2004 was unionized, consisting of certain categories of our
employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of settlements with the respective unions
at Mumbai, Delhi and Kolkata, which are valid from periods between 2005 and 2008. For certain of our non-unionized
staff such as pilots, cabin attendants and engineers, we have in consultation with such staff agreed to certain annual
compensation levels until 2007. These contemplate annual increases in fiscal years 2006 and 2007. Industrial action or
work stoppages by our employees could be disruptive to our operations and could harm our business and results of
operations. We have not experienced any material disruptions in our business and operations as a result of any work
stoppage, strike or employee unrest.
Insurance
We maintain passenger liability insurance in an amount consistent with airline industry practice and we insure our
aircraft against losses and damages on an “all risks” basis. We have obtained all insurance coverage required by the
terms of our aircraft lease and hire purchase agreements. We believe our insurance coverage is consistent with airline
industry standards and appropriate to protect us from material loss in light of the activities we conduct. No assurance
can be given, however, that the amount of insurance we carry will fully cover all material loss. See Risk Factors titled
“Insurance cover is unavailable for certain risks or may be inadequate” and “Insurance costs for airlines increased
substantially as a result of the September 11, 2001 terrorist attacks in the United States, and further increases would
harm our business” at page xxiii of this Draft Red Herring Prospectus.
Intellectual Property
There is significant goodwill in the “Jet Airways” name and trademark, which is a registered trademark in India. The
use of the “Jet Airways” trademark (together with certain variations thereof) has been licensed to us for use in India on
an exclusive, non-assignable basis by Jet Enterprises (a company substantially owned by Mr. Naresh Goyal) pursuant
to the Registered User Agreement with Jet Enterprises. Certain other variations of the “Jet Airways” trademark and
certain other related trademarks (for which Jet Enterprises has applied, or proposes to apply for, registration) have also
been licensed to us by Jet Enterprises on an exclusive, non-assignable basis for use in India pursuant to the Common
Law Agreement with Jet Enterprises.
Under the Registered User Agreement, we are required to pay Jet Enterprises license fees on a quarterly basis
calculated in the following manner:
• 0.20% of our revenue up to Rs.11,500 million;
• 0.15% of our revenue in excess of Rs.11,500 million up to Rs.23,000 million; and
• 0.10% of our revenue in excess of Rs.23,000 million.
For purposes of calculation of this license fee, revenues include passenger revenues, cargo revenues and other operating
revenues but exclude interest income and PSF handling fees. Under the Common Law Agreement, we are required to
pay a fixed annual license fee of Rs.0.1 million for each trademark licensed under the Common Law Agreement. The
Registered User Agreement and the Common Law Agreement are valid for a period of fifteen years, commencing
October 2000, and are renewable at the option of Jet Enterprises for a further period of ten years.
51
Jet Enterprises has taken steps to register the “Jet Airways” mark and related trademarks outside India. The “Jet
Airways” trademark is currently registered in Hong Kong, Singapore, U.A.E., the U.K. and Mauritius and Jet
Enterprises is seeking to register this trademark in certain other jurisdictions outside India. Certain parties have raised
objections to the registration of the “Jet Airways” trademark in the U.K. and in the United States. For further
particulars, see litigation of promoter group companies beginning on page 128 of this Draft Red Herring Prospectus.
We intend to enter into additional trademark license agreements with Jet Enterprises for the use of the trademark in Sri
Lanka, Nepal and other countries. Pursuant to a letter dated December 15, 2004, Jet Enterprises has confirmed to us
that as long as we are not in default under any registered user agreements or common law agreements pursuant to
which Jet Enterprises has licensed trademarks to us, Jet Enterprises will license the use of the “Jet Airways” and related
trademarks to us for use in the other countries where Jet Enterprises has registered or applied for registration of the “Jet
Airways” trademark and where we seek to operate in the future. License fees will be payable to Jet Enterprises for the
use of these trademarks under such other license agreements that may be entered into by us with Jet Enterprises. We
cannot, however, provide any assurance that such licenses will be granted by Jet Enterprises to us or that the terms of
such licenses, including license fees payable under such agreements, will be favorable to us.
If the “Jet Airways” trademark and related trademarks become unavailable to us or we are required to pay a higher
license fee for use of these trademarks, our business, financial condition and results of operations could be materially
and adversely affected.
In addition, Article 3 of our Articles of Association specifies that Jet Enterprises has, pursuant to certain trademark
license agreements, granted the Company an exclusive, non-assignable license to use certain trademarks, including the
“Jet Airways” trademark, in accordance with the terms of such license agreements. Our Articles of Association further
contemplate that upon expiry or termination of such license agreements, we will discontinue the use of the name “Jet
Airways” and related trademarks, service marks, copyrights, domain names and designs, including any variations
thereof. In such event, we are also required to change our corporate name and assign all rights relating to the name “Jet
Airways” and related intellectual property rights to Jet Enterprises. Under our Articles, our shareholders are also
required, subject to applicable law, to exercise their voting rights to ensure that we comply with such terms.
We have also assigned to Jet Enterprises the copyright in the artistic work relating to the “Jet Airways” mark and
variations thereto.
Property
We have taken various premises in India on rent, lease or leave and licence basis that can be classified as:
• airport premises;
• commercial premises; and
• employee residential premises.
Airport Premises
We have leased premises and work spaces from the Airports Authority of India, or AAI, in 41 of the 42 airports where
we operate, except at the Cochin airport. These premises and work spaces include:
• check-in counters;
• ticketing counters;
• back-up offices; and
• areas on the ramp for equipment storage and related purposes.
In stations where we have more frequent operations, we also lease space for engineering and cargo operations. The
extent of space that we lease at each airport is determined by the current size and expected growth of our operations and
the extent of space that the airport can offer.
We have also leased a hangar at the New Delhi airport. We have leased land from AAI at the Mumbai airport where we
are constructing our own hangar complex.
The lease rentals payable are specified by AAI and vary according to the usage, the location of the airport and
amenities available at such premises. We are responsible for the renovation, furnishing and maintenance of such
premises, and for the payment of utilities. Agreements with AAI for such premises are typically for a period of one
year and, in certain cases, for three years. The agreement for the hangar at the New Delhi airport is for three years and
52
that for the land at the Mumbai airport is for 10 years. These agreements are typically renewed at the expiry of such
lease periods.
At Bangalore airport, charges for the use of open spaces on the ramp are paid to Hindustan Aeronautics Limited. The
Cochin airport is operated by Cochin International Airport Limited, or CIAL, and we have leased certain premises at
the Cochin airport from CIAL for back office operations and for ticketing offices.
Commercial Premises
Our registered offices and major departments are located at SM Centre, Andheri (East), Mumbai. Certain of our
departments are located near to our corporate offices. These premises have been taken by us on leave and licence basis
and such agreements are valid for periods ranging between three and five years. We have offices for sales and ticketing
in all cities in India where we operate except Madurai, Patna and Agartala. We also have regional management located
in our offices at New Delhi, Kolkata, Hyderabad, Bangalore and Chennai. All such premises are taken on rent, lease or
leave and licence basis for terms ranging between three and five years.
We have also taken premises on leave and licence basis in Mumbai that house our simulator and our pilot training and
safety training schools. Our central stores, where we store items required by in-flight, catering and airport services, are
located in Mumbai. We have leased a store in Delhi, to service the northern region.
We have cargo warehouses in Mumbai, Chennai, Bangalore, Coimbatore, Imphal, Indore, Pune, Rajkot, Agartala and
Guwahati where our customers can deposit and collect cargo. The warehouses are located in the vicinity of the
respective airports and are operated by Jetair Private Limited, our GSA in India. All these premises are either on lease
or leave and licence agreements.
Employee Residential Premises
We provide accommodation for certain of our personnel, and have taken on leave and licence or lease 48 residential
premises, most of which are located in Mumbai. The agreements for these residential premises vary between 22 and 33
months.
As at November 30, 2004, we paid aggregate monthly rentals of Rs. 23.75 million for all our premises.
International Operations
We commenced operation of regular scheduled services to Colombo, Sri Lanka, and Kathmandu, Nepal, in March 2004
and May 2004, respectively, pursuant to the Government of India permitting private sector domestic carriers to fly to
certain SAARC countries. The Government of India announced on December 29, 2004 that the Union Cabinet has
approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years continous
operations and at least 20 aircraft to provide services to other international destinations. These destinations exclude the
Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and
Indian Airlines for three years. However, these policy changes are not yet effective, and detailed guidelines will need
to be notified by the Ministry of Civil Aviation. As and when the changes in policy become effective, the Government
will also need to negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the respective
countries to which we desire to fly. The Government will also specify the frequency of flights that we will be entitled
to operate. There is no certainty when these policy changes will become effective and whether or when we will be
permitted to fly to destinations of our choice.
In anticipation of such changes to the Government policy, we are in the process of evaluating the feasibility of
commencing operations of regular scheduled services to a select number of international destinations, subject to
approvals required from the Government of India. Our ability to operate a regular scheduled service to any international
destination would be subject to other factors, such as our ability to obtain satisfactory flight slots from local airport
authorities or other carriers and, for long-haul destinations, our ability to procure new aircraft, pilots, flight staff and
engineers that are required to operate such flights.
We are evaluating destinations which can be serviced by aircraft types already in our fleet. Boeing 737 NG aircraft can
service destinations with a maximum flight duration of 5½ hours at full load. We believe we will achieve economies of
scale by using aircraft types already in our fleet with regard to engineering and maintenance costs and the utilization
and training of pilots and of AMEs. For longer haul destinations, we will be required to induct wide-bodied aircraft
with longer range. In such an event, we will be required to train our cockpit and inflight crew and our engineering staff
and obtain certificates from the DGCA. We will also be required to keep spares, rotables and spare engines with regard
to such aircraft.
53
Our strategy will also be determined by:
• our estimate of demand;
• the profitability of each route;
• our ability to leverage our brand, our network, service standards and our relationships with other international
airlines;
• maintaining our operating efficiencies and our existing cost structure; and
• optimizing our existing human resources.
We believe that service to other select international destinations may be attractive primarily due to the significant
revenue growth potential and high yields that may be obtained, in view of increasing customer demand for flights
between India and other destinations. Our preliminary market studies and economic and technical analysis of the
alternative operating routes and suitable aircraft types indicate that several foreign destinations with high traffic
volumes to and from India would provide attractive opportunities for us. We believe that we are well placed to service
these markets due to our reputation for high-quality service and customer awareness of our brand in India and overseas.
We believe that our existing worldwide GSA representations, agreements with GDSs and our global marketing
initiatives will support such international operations. We believe that there is a significant demand from international
passengers who use our airline, particularly from persons of Indian origin, NRIs and business travelers who visit and
travel within India. There is also potential demand from resident Indians who travel overseas and who are familiar with
our airline.
We have made a preliminary assessment of the expenditures that we may incur for creating the required operational
capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases, acquisition of slot
positions at foreign airports, hiring of additional and suitably qualified personnel for the new aircraft types, handling
and catering agreements, acquisition of equipment, etc. before we can commence operations on such routes, if
permitted by the Government of India. Based on our preliminary assessment, we anticipate an outlay of Rs.3,000
million for such purposes.
If and when we receive Governmental permission to commence service to any of these new destinations, we plan to
proceed with commencement of service only if we believe that such service would be likely to benefit our business,
taking into account, among other things, the financial benefits of the permitted routes that could be flown and any new
aircraft type that may need to be operated, the potential risks and operating difficulties of any such new aircraft type,
and our ability to obtain debt or lease financing that may be needed to acquire new aircraft to service such destinations.
See “Risk Factors – If we commence services to additional international destinations, we will face different risks than
those associated with our domestic operations” on page xiii of this Draft Red Herring Prospectus.
Litigation
In the ordinary course of our business we are party to various legal actions that we believe are incidental to the
operation of our business. Except as disclosed in this Draft Red Herring Prospectus, as of the date hereof, we are not a
party to any proceeding that, if finally determined against us, would result in a material adverse effect on our business
and operating results. See also “Risk Factors – There are a number of legal proceedings against us, our directors, our
promoters and promoter group companies.” and the section “Outstanding Litigation” beginning at page 116 of this
Draft Red Herring Prospectus for a summary of litigation to which we are a party.
54
HISTORY AND CERTAIN CORPORATE MATTERS
Our History
Jet Airways was incorporated on April 1, 1992 as a private company with limited liability under the Companies Act.
We commenced operations as an Air Taxi Operator on May 5, 1993 with a fleet of four leased Boeing 737 aircraft. We
were granted scheduled airline status on January 14, 1995. Jet Airways became a deemed public company on July 1,
1996. On January 19, 2001, Jet Airways was reconverted into a private company. Jet Airways became a public
company on December 28, 2004.
At the time of incorporation of the Company, our shareholders were Mr. P.V.V. Chalam and Mrs. Anita Goyal. These
shares were transferred to Tail Winds on May 12, 1994, and Mr. Naresh Goyal holds them on behalf of Tail Winds in
terms of an RBI approval letter No. EC.BY.CO (S) 250/2251/TS/93/94 dated December 30, 1993.
Pursuant to an application dated March 12, 1993 made by our Company, the FIPB by its letter No. 267/FC/93/NRI
dated June 28, 1993 granted its approval to the foreign collaboration proposal for investment in Tail Winds in the
proportion of 60% by Mr. Naresh Goyal, 20% by Gulf Air and 20% by Kuwait Airways. Tail Winds in turn held 100%
of the Equity Share capital of our Company.
The MoCA by its letter dated April 17, 1997 directed the Company to take steps for disinvestment of Equity Shares
held, directly or indirectly, by foreign airlines pursuant to the Government of India’s policy on foreign equity and
NRI/OCB equity participation in the domestic air transport services sector. Consequently, with effect from October 15,
1997, Mr. Naresh Goyal acquired the 20% Equity Shares from each of Gulf Air and Kuwait Airways, respectively, and
became the 100% owner of Tail Winds which is an NRI/OCB and currently owns over 99.99% of our Equity Share
capital.
We currently provide regular scheduled services to 42 destinations in India and two destinations outside India,
operating 1,924 flights weekly. Our aircraft fleet has grown from four aircraft in 1993 to currently 42 aircraft
comprising 34 Boeing 737 aircraft and eight ATR 72-500 aircraft.
Main Objects of the Company
Our main objects as contained in our Memorandum of Association are:
• To establish, maintain, operate and provide safe, efficient, adequate, economical and properly coordinated air
transport services and lines of aerial conveyance (including scheduled and chartered domestic and
international services) for the carriage of passengers, baggage, mail and freight.
• To purchase, take on lease and/or hire or otherwise acquire, own, employ, maintain, work, manage, control, let
on hire, charter, lease, demise all forms of aerial conveyance for the purpose of transporting or carrying
passengers, baggage, mail and freight, and merchandise of all and every kind and description, whether as
principals, agents or otherwise on national and international routes.
The main objects clause and the objects incidental or ancillary to the main objects of the Memorandum of Association
of our Company enable us to undertake our existing activities and the activities for which the funds are being raised
through this Offer.
Changes in Memorandum of Association
Since our incorporation, the following changes have been made to our Memorandum of Association:
Date of shareholder
approval Changes
January 6, 1993 Increase in authorized share capital from Rs.one million to Rs.300 million.
December 16, 1993 Increase in authorized share capital from Rs.300 million to Rs.330 million.
December 19, 1994 Increase in authorized share capital from Rs.330 million to Rs.950 million.
July 1, 1996 Change in name to Jet Airways (India) Limited to reflect deemed public
company status.
December 1, 2000 Increase in authorized share capital from Rs.950 million to Rs.2,000 million,
which was divided into equity share capital of Rs.1,000 million and
preference share capital of Rs.1,000 million.
January 19, 2001 Change in name to Jet Airways (India) Private Limited to reflect reconversion
55
to private company status.
December 20, 2004 Change of registered office of our Company.
December 28, 2004 Change in name to Jet Airways (India) Limited to reflect public company
status and to alter the Memorandum and Articles of Association.
December 28, 2004 Change to reflect reclassification of the authorized share capital of Rs.2,000
million into equity share capital of Rs.1,300 million and preference share
capital of Rs.700 million.
Change in Registered Office
With effect from December 20, 2004, our registered office was changed from 41/42, Maker Chambers III, Nariman
Point, Mumbai 400 021, India to SM Centre, Andheri Kurla Road, Andheri (East), Mumbai 400 059, India.
Some Key Events
The chronology of some key events since our Company was incorporated on April 1, 1992 is as follows:
Year
Events
April 1, 1992 Incorporated as a private limited company.
May 5, 1993 Commenced operations as an air taxi operator.
April 4, 1994 First airline in India to operate the Boeing 737-400 aircraft.
January 14, 1995 Granted scheduled airline status.
December 30, 1996 First private airline in India to execute purchase agreement for Boeing aircraft.
November 12, 1997 First private airline in India to acquire its own aircraft using US EXIM guarantee.
September 26, 1998 First private airline in India to fly Boeing 737 NG aircraft.
October 6, 1998 First private airline in India to fly ATR 72-500 aircraft.
July 1, 2000 Introduced “Jet Mobile”, an online system that provides flight schedule updates to
passengers on their mobile phones.
February 5, 2001 Won the prestigious Air Transport World’s Market Development Award.
April 22, 2002 30 million passengers flown since commencement of operations.
May 14, 2003 First airline in India to operate the Boeing 737-900 aircraft
March 23, 2004 Commenced operations to Colombo, Sri Lanka.
May 14, 2004 Commenced operations to Kathmandu, Nepal.
56
SELECTED FINANCIAL INFORMATION
SEBI Guidelines require us to include summary financial statements information as restated to reflect the retrospective
effect of the accounting policies adopted by the Company as of September 30, 2004. The following selected financial
information, other than for the six months ended September 30, 2003, has been extracted from the Summary Restated
Statements prepared in accordance with Indian GAAP, the Companies Act and SEBI Guidelines, included in the
section entitled “Financial Information”. The Summary Restated Statements have been examined as described in the
joint Auditors Report of Deloitte Haskins & Sells and Chaturvedi & Shah dated December 20, 2004, in the section
entitled “Financial Information”. The Auditors’ Report refers to the auditors’ reliance on the financial statements for
the years ended March 31, 2000, March 31, 2001, March 31, 2002, March 31, 2003 and March 31, 2004 audited by
C.C.Chokshi & Company.
This Draft Red Herring Prospectus also includes audited financial statements for the six months ended September 30,
2004, prepared in accordance with Indian GAAP and which have not been restated in accordance with SEBI
Guidelines (the “Interim Audited Financial Statements”). The Interim Audited Financial Statements have been audited
by Deloitte Haskins & Sells and Chaturvedi & Shah as described in their audit report dated December 20, 2004
included in the section entitled “Financial Information”. The selected financial statements given below for the six
months ended September 30, 2003 have not been restated in accordance with SEBI Guidelines, and have been
extracted from the audit report for such period prepared by Deloitte Haskins & Sells and Chaturvedi & Shah which
audit report is not included in this Draft Red Herring Prospectus.
You should read this summary information in conjunction with our Summary Restated Statements and Interim Audited
Financial Statements including the significant accounting policies and notes thereto and the reports thereon and also
the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in this Draft Red Herring Prospectus. Financial statements prepared in accordance with Indian GAAP differ
in certain significant respects from financial statements prepared under IFRS or U.S. GAAP. See the section entitled
“Summary of Significant Differences between Indian GAAP, IAS/IFRS and U.S. GAAP” on page 251 of this Draft Red
Herring Prospectus for more information.
Statement of Profits and Losses
Year ended March 31, Six months ended September
30,
2000 2001 2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating Revenues
Passenger 18,650,561 23,606,633 23,622,474 26,748,979 32,155,701 15,208,634 18,068,701
Excess Baggage 192,995 231,544 251,116 292,736 286,674 118,534 173,753
Cargo 819,755 970,668 1,190,326 1,454,345 1,720,288 849,374 886,128
Other 154,280 191,678 198,949 260,748 311,548 167,944 135,599
Operating Revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating Revenues 226,076 275,606 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
Expenditure
Employees Remuneration and
Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Other Operating Expenses
(including maintenance & airport
charges etc.) 6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,700,001 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenditure 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
Profit /(Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Provision for Taxation
Current Tax 24,746 12,000 420 500 150,330 270 122,410
Deferred Tax - - - (12,377) - - 166,101
Profit /(Loss) after taxation as
per audited accounts (A) 101,750 124,813 (134,313) (2,444,501) 1,631,095 (155,023) 1,293,597
57
Statement of Profit and Losses, as Restated
Year ended March 31,
Six months ended
September 30,
2000 2001 2002 2003 2004 2004
(Rs. thousands)
Profit (Loss) after taxation as per
audited accounts 101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in accounting policies
Capitalization of Software
Purchased 30,369 2,648 1,081 2,285 - -
Depreciation (16,257) (21,341) (14,764) (7,371) (2,181) (577)
Frequent flyer expenses 7,147 42,001 (19,815) (58,896)
Reversal of Provisions as per AS-
29 (Net) 313,976 318,273 27,489 393,512 511,631 -
Deferred Tax (249,223) (274,327) 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior
Period Items (69,858) (4,762) 61,100 70,147 (60,201) (9,179)
Other adjustments 115,495 174,263 (318,163) (3,642) 13,509 -
Total of adjustments 131,649 236,755 (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments 41,601 43,275 - - 21,257 2,184
Net Profit/ (Loss), as restated 191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
_________
Statement of Assets and Liabilities, as Restated
As of March 31,
2000 2001 2002 2003 2004
As of September
30, 2004
(Rs. thousands)
A Fixed Assets
Gross Block 18,734,789 21,949,941 36,641,155 50,169,299 51,689,718 52,084,594
Less: Accumulated Depreciation 4,179,443 6,823,320 8,706,665 15,325,550 20,534,834 23,316,800
Net Block 14,555,346 15,126,621 27,934,490 34,843,749 31,154,884 28,767,794
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Net Block after adjustment for
Revaluation Reserve 14,555,346 15,126,621 20,634,824 29,435,052 27,279,199 25,756,214
Add: Capital Work In Progress 790,537 1,989,481 13,015,464 3,007,865 151,901 124,904
Total 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
B Investments - - - 597,000 2,334,164 5,008,292
C Current Assets, Loans and
Advances
a) Inventories 1,363,980 2,329,059 3,021,375 3,409,999 3,474,355 3,420,493
b) Sundry Debtors 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
c) Cash and Bank Balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
d) Loans and Advances 1,697,754 2,029,875 1,464,613 1,711,503 1,803,409 1,947,005
Total 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
D Liabilities & Provisions
a) Current Liabilities & Provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
b) Deferred Tax (Asset)/Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
c) Secured Loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
d) Unsecured Loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Total 21,089,315 23,168,579 39,881,962 41,598,215 35,841,619 36,629,682
E Subordinated Debt - - 2,640,000 2,840,733 3,080,775 3,341,100
F Net Worth (A + B + C – D -
E) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Net Worth Represented by
G Share Capital 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
H Reserves and Surplus
Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Contingency Reserve - 7,200 59,308 59,308 59,308 59,308
General Reserve 54,670 54,670 54,670 54,670 54,670 54,670
58
Profit & Loss Account 575,019 801,226 333,178 (860,599) 631,266 1,315,181
Total 629,689 863,096 7,746,822 4,662,076 4,620,929 4,440,739
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Total (Net of Revaluation
Reserves) 629,689 863,096 447,156 (746,621) 745,244 1,429,159
I Net Worth (G + H) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
59
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations together with our restated
Indian GAAP financial statements for the fiscal years ended March 31, 2002, 2003 and 2004, and for the six months
ended September 30, 2004, including the significant accounting policies and notes thereto and reports thereon which
appear elsewhere in this Draft Red Herring Prospectus. Indian GAAP differs in certain significant respects from IFRS
and U.S. GAAP. For more information on these differences, see “Summary of Significant Differences between Indian
GAAP, IFRS and U.S. GAAP on page 251 of this Draft Red Herring Prospectus.
Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month
period ended March 31 of that year.
Certain industry, technical and financial terms with initial capitals used in this discussion shall have the meanings
ascribed to such terms in the section titled “Glossary of Certain Industry, Technical and Financial Terms” beginning
on page vi of this Draft Red Herring Prospectus.
Overview
We are the largest domestic airline in India in terms of revenue passengers carried in fiscal 2004 and the six months
ended September 30, 2004. We began transporting passengers in May 1993 with a fleet of four Boeing 737-300 aircraft
and are currently operating 42 aircraft (comprising 34 Boeing 737 aircraft and eight ATR72-500 aircraft), serving 42
cities in India and two destinations outside India. In addition, we have also leased two Boeing 737-400 aircraft, which
have been subleased by us to Skynet Asia Airways, an airline in Japan, for a period of five years ending 2008. We
have entered into agreements to lease seven more Boeing 737-800 aircraft with CFM engines, which are expected to be
delivered to us in 2005, for lease terms varying between approximately six years and seven years. In December 2004
we paid Boeing a refundable security deposit to acquire ten additional Boeing 737-800 aircraft with CFM56-7B24
engines. The expected date of delivery of such aircraft is between January 2006 and October 2007. Definitive
purchase agreements will need to be negotiated and entered into on or prior to January 31, 2005, unless otherwise
extended. If the purchase agreements are entered into, then closer to the delivery dates of each aircraft we will
determine the financing arrangements under which these aircraft will be obtained. The entry into such purchase
agreement and financial arrangements in connection therewith is also subject to the Company obtaining board approval
and such necessary regulatory approvals as may be required.
As of November 30, 2004 we have flown over 48 million revenue passengers (defined as fare paying passengers flown
on all flight segments) since beginning operations in 1993. We flew approximately 5.82 million revenue passengers in
fiscal 2002, 6.41 million revenue passengers in fiscal 2003, 6.91 million revenue passengers in fiscal 2004 and 3.78
million revenue passengers in the six months ended September 30, 2004.
We have steadily increased our fleet size and flight frequencies and the following table demonstrates the growth of our
operations since fiscal 2002:
As of and for period ended Cities Served
(3)
Number of epartures
(4)
Operating Aircraft
(3)
March 31, 2002 44 80,031 38
March 31, 2003 40 87,114 41
March 31, 2004 41 +1
(1)
90,649 41
September 30, 2004 42 +2
(1)
47,326 41
(2)
(1) International destinations.
(2) We have taken delivery of one Boeing 737-800 aircraft subsequent to September 30, 2004.
(3) As of March 31, 2002, 2003 and 2004 and September 30, 2004, respectively.
(4) For the year ended March 31, 2002, 2003 and 2004 and for the six months ended September 30, 2004.
We believe that our focus on providing high-quality reliable air transport services has enabled us to become a preferred
airline for travelers in India which is demonstrated by the growth in the number of our revenue passengers and our
leading market share in India.
The following table sets forth certain information relating to the number of revenue passengers and our domestic
market share for the periods indicated:
Revenue Passengers
(in millions)
Percentage Growth over Prior
Period in Revenue Passengers (%)
Domestic Market Share
(%)
Year ended
March 31, 2002 5.82 - 45.3%
March 31, 2003 6.41 10.1% 45.9%
60
March 31, 2004 6.91 7.8% 45.3%
Six months ended
September 30, 2003 3.27 - -
September 30, 2004 3.78 15.6% 42.3%
Source: Derived from DGCA data, based on revenue passengers carried by scheduled airlines on domestic routes in India.
It is our strategy to assess and exploit growth opportunities by increasing the frequency of flights to our existing high-
demand markets and adding new routes. We also intend to pursue opportunities to operate additional international
services, once there is a change in the existing policy of the Government of India and necessary Government approvals
are received.
Factors Affecting Our Results of Operations
Our financial condition and results of operations are affected by numerous factors and the following are of particular
importance:
• General economic and business conditions. As a company with its principal operations in India, we are
affected by general economic conditions in the country and in particular economic factors that affect business
travel and travel of international passengers to India. India’s gross domestic product, or GDP, has been and
will continue to be of importance in determining our operating results and future growth.
• Ability to sustain Passenger Load Factors and maximize revenues: Our business depends on passenger traffic
and the fares we charge our passengers. Through our Yield Management System, we endeavor to maximize
seat occupancy and revenue per flight. However, trends in passenger fares and demand for air travel will affect
the results of our operations.
The airline industry is characterized generally by low profit margins and high fixed cost obligations, primarily
for hire purchase charges, engineering and maintenance charges, aircraft fuel, interest and debt service and
rent. The expenses of an aircraft flight do not vary significantly with the number of passengers and tonnage of
cargo carried and, as a result, a relatively small change in the number of passengers or in pricing could have a
disproportionate effect on an airline’s operating and financial results. Accordingly, a minor shortfall in
expected revenue levels could harm our business.
• Price of Aviation Turbine Fuel. Our operating results are affected by changes in the price of ATF, which
constitutes a significant portion of our expenses.
Historically, our fuel expenditure has been subject to wide price fluctuations in ATF, which is based primarily
on the international price of crude oil, which in turn is influenced by geopolitical issues, government
regulation and various supply and demand factors. The price of ATF in India is also dependent on other
factors which include the following:
o Limited competition in India: ATF is currently available at airports from only three Government-
controlled companies, IOC, BPCL and HPCL;
o Periodic variations in the ex-refinery price of ATF: ATF prices are fixed every month and are based
on the Arab Persian Gulf Platt ATF prices and the cost of crude oil;
o Fluctuations in the exchange rate: Since India imports a major part of its crude oil, which is paid for
in foreign currency, the U.S. Dollar to Rupee exchange parity will influence these prices;
o Indirect taxes: Sales tax on ATF is levied at all stations we currently operate to in India (except for
Diu, Leh and Port Blair), and is currently between 4% and 30.55%; during the six months ended
September 30, 2004, the average sales tax paid by us was 22.1%. Excise duty payable on ATF is
currently 8% (in addition, applicable education cess is also required to be paid).
o Inability to enter into hedging arrangements relating to fuel price: Government regulations do not
permit domestic airlines such as us to enter into hedging arrangements relating to the price of ATF.
• Competition. Our results of operations are affected by competition in the airline industry in India. We expect
competition to intensify due to possible new entrants in the market, existing competitors further expanding
their operations and our entry into new markets where we may compete with well established airlines.
Increased competition could affect our market share and/or the Yield (which is defined as Net Passenger
Revenues earned per kilometer flown).
61
At present, our principal competitors are Indian Airlines (including its wholly-owned subsidiary, Alliance
Air), a Government-owned company, and Air Sahara, a privately owned company. Air Deccan, a privately-
owned company which started operations in August 2003 as a “no frills” airline, and other potential new
entrants, could become increasingly significant competitors in the future. There is significant price
competition with these airlines and we expect this to continue, especially as new competitors enter the market.
According to published reports, additional new private carriers are contemplating entering the domestic
aviation market.
• Composition of our fleet. The size, age and composition of our fleet have a significant impact on our financial
condition and results of operations. We currently have 42 aircraft, and expect to take delivery of seven Boeing
737 aircraft in 2005. We believe that these additions to our fleet are required to meet the estimated growth in
passenger traffic and to service additional routes where we propose to operate. An increase in the size of our
fleet without commensurate increase in passenger traffic can adversely affect our results of operations. We
have a relatively young fleet with a current average age of 4.5 years, and have therefore experienced lower
maintenance costs and higher reliability in our operations. We rely on limited types of aircraft and equipment,
and the availability of these aircraft and equipment is important to our business operations.
In fiscal 2006 and 2007, nine and eight Boeing 737 aircraft of our existing fleet, respectively, are scheduled
for D Checks. These are heavy maintenance checks that result in non-availability of aircraft for a period of
approximately 45 days. One of the Boeing 737-800 aircraft that will be delivered to us in the first half of
calendar 2005 will be utilized primarily as a replacement aircraft in fiscal 2006 and 2007. Each D Check is
currently estimated to cost approximately U.S.$1.2 million (Rs.55.2 million). However, a substantial portion
of such maintenance cost has already been provided for in our financial statements.
If we expand our international operations, we will be required to lease or acquire wide-bodied aircraft or refit
existing aircraft, depending upon the destinations we are permitted to operate in.
• Airport infrastructure. There are currently 127 airports in India, comprising 12 international airports, 89
domestic airports and 26 civil enclaves. Most of the airports are under the administration of the Airports
Authority of India, or AAI. The international airport at Cochin has been privatized, and two other
international airports, at Bangalore and Hyderabad, are currently being developed with private sector
participation. The Government has also announced plans in February 2004 to restructure and modernize the
New Delhi and Mumbai airports.
We are dependent on airport infrastructure to meet expected growth in the number of passengers and to
continue to provide high-quality reliable service. Although the Government is taking steps to improve the
condition of airports in India, there may be constraints relating to availability and cost of terminal space, slots
and aircraft parking, and adequacy of ground and maintenance facilities.
• Fluctuations in currency exchange rates. The results of our operations are affected by currency fluctuations,
since expenses such as aircraft and engine maintenance services, aircraft lease payments, CRS costs and
aircraft insurance are paid for or based on U.S. Dollars. As discussed earlier, the price of ATF is linked to
fluctuations in global crude prices and is also affected by fluctuations in currency exchange rates. In addition,
32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004 is foreign currency
denominated.
Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our exchange
rate risks. In fiscal 2004 and the six months ended September 30, 2004, we derived 13.4% and 11.7%,
respectively, of our revenues in U.S. Dollars. Additionally, we enter into forward contracts from time to time
to protect against adverse fluctuations in currency exchange rates.
• Seasonality. Seasonal variations in traffic affect our results of operations. We generally experience lower
Passenger Load Factors (defined as the percentage of Revenue Passenger Kilometers to Available Seat
Kilometers) during the first half of each fiscal in comparison to that experienced during the remainder of the
year. In addition, some of our areas of operations in North and East India experience bad weather conditions
in winter, resulting in additional expenditure caused by delayed and cancelled flights and providing
accommodation to passengers. Given our high proportion of fixed cost obligations, these seasonal factors are
likely to cause our results of operations to vary from quarter to quarter during a particular financial year.
• Extensive laws and regulations. We are extensively regulated by the Government through the MoCA, the
DGCA and the AAI as well as through the Ministry of Finance (“MoF”), the RBI and the Central Board of
Direct Taxes (“CBDT”). The MoCA is the approving authority for the lease or acquisition of additional
aircraft by private airlines in India. The DGCA also requires domestic airlines in India to compulsorily fly on
62
certain designated routes, typically to remote regions in India, pursuant to its Route Dispersal Guidelines. We
are required to fly certain designated capacity on these routes. The AICs, CARs and other guidelines issued
by the DGCA stipulate various restrictions and conditions that are applicable to our business operations. See
“Risk Factors – External Risk Factors – The airline industry in India is subject to extensive regulation” on
page xxi of this Draft Red Herring Prospectus.
We are required to obtain approvals from Indian regulatory and fiscal authorities to incur certain foreign
currency indebtedness and for the remittance outside India of aircraft lease rentals and hire purchase
payments.
In addition, the industrial policy of the Government of India limits foreign direct investment in domestic
airlines to 49% and prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. Also, foreign financial institutions and other entities that invest in us are not permitted to
have any foreign airline as a shareholder. This limits our access to foreign equity capital.
• International Operations. The Government of India announced on December 29, 2004 that the Union Cabinet
has approved a change in the aviation policy, allowing Indian scheduled carriers with a minimum of five years
continous operations and at least 20 aircraft to provide services to other international destinations. These
destinations exclude the Gulf countries of UAE, Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which
would be reserved for Air India and Indian Airlines for three years. We are accordingly considering the
feasibility of flying to other international destinations, although it is uncertain when this policy change will
become effective and which destinations we may be permitted to service.
If we commence services to additional international destinations, we will be required to operate bigger, wide-
bodied aircraft than the types that we currently operate. We will also need to acquire flight slots from local
airport authorities or carriers. These expanded activities would require us to make significant capital
expenditure and/or incur substantial indebtedness. In addition, the operation of such larger aircraft over long
routes would involve additional complexities, including securing the services of qualified pilots, flight staff
and engineers with international experience.
We have made a preliminary assessment of the expenditures that we may incur for creating the required
operational capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases,
acquisition of slot positions at foreign airports, hiring of additional and suitably qualified personnel for the
new aircraft types, handling and catering agreements and acquisition of equipment before we can commence
operations on such routes, if permitted by the Government of India. Based on our preliminary assessment, we
anticipate an outlay of Rs.3,000 million for such purposes.
• Others. We believe that the following developments may also impact our financial condition and results of
operations:
(i) Billing Settlement Plan for ticketing. We are considering joining the Billing Settlement Plan System,
or BSP, an IATA sponsored standardized ticketing and collection system for airlines and agents that
provide standard traffic documentation common to all airlines on the BSP system and centralized
reporting, billing and analysis of sales for our domestic operations. Under the BSP system, we will
not incur any credit risk for default in payment by a travel agent that is accredited by IATA. While
we already are a part of BSP systems in certain countries outside India, there cannot be any assurance
that we will join the BSP system in India.
(ii) Employee Costs.
Approximately 11% of our workforce as of September 30, 2004 was unionized, consisting of certain
categories of our employees at Mumbai, Delhi and Kolkata. We have entered into memoranda of
settlements with the respective unions at Mumbai, Delhi and Kolkata, which are valid from periods
between 2005 and 2008. For certain of our non-unionized staff such as pilots, cabin attendants and
engineers, we have in consultation with such staff agreed to certain annual compensation levels until
2007. These contemplate annual increases in fiscal years 2006 and 2007.
After the listing of our Equity Shares in this Offer, we intend to adopt either an ESPS scheme or an
ESOP scheme in which eligible employees and directors of the Company and any other person
permitted under applicable law or regulation can participate, subject to such approvals as may be
necessary. The criterion for selection will be determined by our Board and approved by our
shareholders. The ESPS or ESOP will comply with the SEBI (Employee Stock Option and Employee
Stock Purchase Scheme) Guidelines, 1999 and the issuance of Equity Shares pursuant thereto will be
63
subject to compliance with all applicable laws and regulations. We propose to issue a maximum of
0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes
The issue of Equity Shares pursuant to the ESPS or the issue of options under ESOP is likely to occur
in fiscal 2006, although there can be no assurance as to the timing of adoption of any such scheme,
which may occur in fiscal 2006 or thereafter.
Any issuance of Equity Shares pursuant to the ESPS will result in a charge to our profit and loss
account equal to the product of such number of Equity Shares issued and the difference between the
applicable market price of our Equity Shares and the price at which our employees and directors will
purchase the Equity Shares. We have not as yet determined the issue price at which Equity Shares
will be sold, the number of Equity Shares proposed to be issued, the identity of such eligible
personsnd the timing of adoption of the ESPS scheme or the date of issue of Equity Shares
thereunder.
The ESOP scheme will also result in a charge to our profit and loss account equal to the product of
the number of Equity Shares proposed to be issued in accordance with the accounting principles used
for determining such charge using the fair value method or applicable market price of our Equity
Shares. Such charge will be amortized over the vesting period of the stock option. We have not as
yet determined the number of stock options to be granted, the exercise price or the number of Equity
Shares to be issued, the identity of the eligible persons and the timing of the ESOP scheme.
Our Significant Accounting Policies
Our financial statements prepared in accordance with Indian GAAP and the accompanying notes thereto included in
this Draft Red Herring Prospectus include information that is relevant to this discussion and analysis of our financial
condition and results of operations. The preparation of our financial statements in conformity with Indian GAAP
requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenditures, and the related disclosure of cash flows and contingent liabilities, among others. Certain
key accounting policies relevant to our business and operations have been described below. For a detailed description
of our significant accounting policies, see Annexure IV of the restated financial statements under Indian GAAP
included in this Draft Red Herring Prospectus.
(i) Passenger Revenue. Passenger ticket sales (net of refunds) are initially credited to a forward sales account.
Revenue is recognized when transportation is provided or when no claim for refund has been made on an
unused ticket for a period of two years from the date of issuance of such ticket. Such revenue recognition
reduces the balance in the forward sales account and the remaining amount is shown in our balance sheet
under current liabilities at the end of each accounting period.
(ii) Commission. The basic commission on sales is normally directly deducted by a travel agent when a ticket is
sold. However the commission is recognized in our financial statements only when the transportation is
provided to a passenger or when no claim for refund has been made by a passenger on an unused ticket for a
period of two years from the date of issuance of such ticket. Commission payable to a general sales agent, or
GSA, is recognized on a similar basis.
(iii) Fixed Assets. Fixed assets are stated at cost, and include amounts added on revaluation, less accumulated
depreciation and impairment loss, if any. All costs relating to acquisition and installation of fixed assets up to
the time the assets are ready for their intended use, costs of improvements to leased properties and customs
duties and modifications costs incurred on aircraft taken on lease are capitalized.
(iv) Hire Purchase and Finance Lease Agreements. We currently have 23 hire purchase agreements and one
finance lease agreement relating to our existing fleet of aircraft. The remaining aircraft are under operating
leases. The lower of the fair value of the assets and the present value of the principal repayments under our
hire purchase and finance lease arrangements is capitalized as fixed assets with corresponding amount shown
as lease liability under “Outstanding Hire Purchase Installments”. The principal amounts of the hire purchase
and finance lease payments are adjusted against this lease liability and interest payable thereon is charged to
the profit and loss account.
(v) Operating Lease Rentals. These are expensed with reference to the lease term and other considerations.
(vi) Depreciation. Depreciation is provided on fixed assets using the written down value method at the rates and
in the manner prescribed under Schedule XIV to the Companies Act. In the case of improvements to and
64
expenditure incurred on assets acquired on operating lease, depreciation is written off evenly over the balance
period of the lease.
(vii) Inventories. Inventories include tickets and airway bills stock, unutilized in flight service amenities,
expendable aircraft spares, aircraft fuel in the aircraft and rotables, galley equipment and tooling. Inventories
are valued at cost or net realizable value, whichever is lower. Cost of inventories includes customs duties,
taxes, freight and other charges as applicable and is determined using the weighted average formula. With
respect to reusable items such as rotables, galley equipment and tooling, net realizable value takes into
consideration provision for obsolescence and wear and tear based on the estimated useful life of aircraft
derived from Schedule XIV to the Companies Act, and also includes provisioning for non-moving or slow
moving items.
(viii) Redelivery Expenses. Aircraft redelivery expenses under our operating leases are provided for in proportion to
the expired lease period.
(ix) Aircraft Maintenance Costs. Aircraft maintenance, Auxiliary Power Unit (APU) and engine maintenance and repair
costs are expensed as incurred except where such overhaul cost in respect of engines/ APU are covered by third party
maintenance agreements and accounted in accordance therewith. Commencing fiscal 2005, we have been required
to follow Accounting Standard 29 (“AS-29”) for the treatment of contingent liabilities and estimates, which
specifies standards for Provisions, Contingent Liabilities and Contingent Assets. Under AS-29:
• a “provision” is a liability which can be measured only by using a substantial degree of estimation; and
• a “liability” is a present obligation of the enterprise arising from past events, the settlement of which is
expected to result in an outflow from the enterprise of resources embodying economic benefits.
As a result, all the costs associated with aircraft heavy maintenance checks, for example, D Checks, and
engines not covered by any third party maintenance contracts which prior to April 1, 2004 were provided for
in our financial statements at a predetermined rate are being expensed when incurred.
(x) Frequent Flyer Expenses. The cost of allowing free travel to members of our frequent flyer program is
accounted on the basis of the members’ accumulated mileage.
(xi) Foreign Exchange Transactions.
• Sales and other transactions in foreign currency are recorded at the current rate of exchange in force at
the time the transaction is effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that relating to fixed assets, is adjusted in the profit and loss account.
• Monetary assets and liabilities relating to foreign exchange transactions not settled as at the year end are
translated at the rates prevalent on that date, and profits or losses, if any, on such transactions are
recognized in the profit and loss account.
• Exchange difference on settlement or translation of long term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
• Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in the
carrying amount of fixed assets over the life of the contract.
(xii) Derivatives Transactions. Gain or loss on derivative contracts entered into to hedge exposures to interest rate
and currency fluctuations are recognized when the underlying transactions are settled. Accordingly,
proportionate amounts are accrued or provided for the period between the last settlement date and the year
end.
(xiii) Taxation: Provision for current tax is made after taking into consideration benefits admissible under the
provisions of the Income Tax Act, 1961 (“I.T. Act”).
Deferred tax arises from timing differences between accounting profits and taxable profits that originates in
one period and is capable of reversal in one or more subsequent periods, and is measured using tax rates and
laws that have been enacted or substantively enacted as on the date of the balance sheet. The deferred tax is
recognized and carried forward only to the extent that there is a reasonable/virtual certainty that the asset will
be realized in the future.
65
Contingent Liabilities
Our contingent liabilities, as of September 30, 2004, were Rs.4,039 million. These comprised the following:
(Rs. millions)
Unprovided income tax demands which are disputed in appeals 37
Unprovided claims against the Company, pending civil and consumer suits 79
Unprovided claims for octroi duty on aircraft by the Municipal Corporation of Greater Mumbai not accepted by the
Company
290
Disputed claims against the Company towards landing and navigation charges made by the AAI 197
Disputed claims against the Company towards ground handling charges levied at Cochin International Airport. 235
Letters of credit outstanding 1,629
Bank guarantees outstanding 1,572
Total 4,039
Note: In addition to the aforesaid contingent liabilities, we will be required to pay arrears of cumulative dividends aggregating Rs.88 million in
respect of the CCRPS issued to IFC.
Revenues
We derive our revenues primarily from transportation of passengers on our aircraft. In addition we also earn revenues
from carriage of cargo which consists of courier, postal mail and commercial cargo. Passenger Revenues are dependant
on Passenger Load Factors and fare levels and are measured by the following:
• Capacity measured in terms of Available Seat Kilometers, or ASKMs (defined as the aircraft seating capacity
multiplied by the number of kilometers the seats are flown);
• Utilization measured in terms of Revenue Passenger Kilometers, or RPKMs (defined as the number of
kilometers flown by revenue passengers);
• Passenger Load Factor, or the percentage of our capacity that is actually used by revenue customers, (defined
as Revenue Passenger Kilometers expressed as a percentage of Available Seat Kilometers).
• Net Passenger Revenues, representing Passenger Revenues less commissions paid to GSAs and travel agents;
• Yield, derived by dividing Net Passenger Revenues by Revenue Passenger Kilometers; and
• Break Even Load Factor (defined as the Passenger Load Factor that will result in Net Passenger Revenues
being equal to Total Expenses less cargo and Non-operating Revenues).
The following table sets forth certain information relating to our Passenger Revenues:
Year ended March 31,
Six months ended September 30,
2002
2003
2004
2003
2004
Capacity ASKMs (millions) 7,780 8,496 9,162 4,542 4,796
Utilization RPKMs
(millions)
4,777 5,291 5,852 2,771 3,245
Passenger Load Factor (%) 61.4% 62.3% 63.9% 61.0% 67.7%
No. of passengers (Millions) 5.82 6.41 6.91 3.27 3.78
Gross average revenue per
passenger (Rs.)
4,057 4,173 4,655 4,650 4,785
Growth in average revenue
per passenger (%)
- 2.8% 11.5% - 2.9%
Yield (Rs.)
4.36 4.52 5.01 5.02 5.05
Growth in yield (%)
- 3.7 % 10.8 % - 0.6 %
The following table sets forth certain information relating to our Operating Revenues and Non-operating Revenues for
the periods indicated:
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating Revenues
Passenger 23,622,474 26,748,979 32,155,701 15,208,634 18,068,701
Excess Baggage 251,116 292,736 286,674 118,534 173,753
Cargo 1,190,326 1,454,345 1,720,288 849,374 886,128
Other 198,949 260,748 311,548 167,944 135,599
66
Operating Revenues 25,262,865 28,756,808 34,474,211 16,344,486 19,264,181
Non-operating Revenues 1,234,156 664,184 1,183,183 457,026 402,545
Total Revenues 26,497,021 29,420,992 35,657,394 16,801,512 19,666,726
___________
Our Passenger Revenues have increased as a result of increases in our capacity (in terms of fleet size and number of
flights), our high aircraft utilization, as well as higher Passenger Load factors and Yield.
We also derive revenue from carriage of cargo by optimizing the use of available cargo space on our passenger flights.
Other revenues consist of handling charges on account of collection of passenger service fees and cancellation charges
on tickets. We also derive Non-operating Revenue from interest income gains due to currency exchange fluctuations
and the sale of assets.
The following table sets forth our revenue composition (as a percentage of Total Revenues) for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002
(%)
2003
(%)
2004
(%)
2003
(%)
2004
(%)
Income
Operating Revenues
Passenger
89.2 90.9 90.2 90.5 91.9
Excess Baggage
0.9 1.0 0.8 0.7 0.9
Cargo
4.5 4.9 4.8 5.1 4.5
Other
0.8 0.9 0.9 1.0 0.7
Operating Revenues
95.3 97.7 96.7 97.3 98.0
Non-operating Revenues
4.7 2.3 3.3 2.7 2.0
Total Revenues
100.0 100.0 100.0 100.0 100.0
Expenses
The main components of our expenses include employee remuneration and benefits, aircraft fuel, maintenance and
repair, landing, navigation and other airport charges, insurance and general and administrative expenses, selling and
distribution costs (which include commissions), aircraft rentals, depreciation and interest.
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Expenses
Aircraft fuel 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Other Operating Expenses (including
maintenance and airport charges)
7,152,294
8,514,217
9,062,341
4,700,001
4,575,707
Employees remuneration and benefits
2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Selling and Distribution Expenses
3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Aircraft rentals
2,965,100 2,780,264 2,266,428 1,205,254 1,006,666
Depreciation
3,488,334 4,732,715 5,151,543 2,545,562 2,290,861
Interest
1,708,712 2,561,344 2,891,401 1,568,238 1,232,231
Total Expenses
26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
The following table sets forth our expenses (as a percentage of our Total Revenues) for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002
(%)
2003
(%)
2004
(%)
2003
(%)
2004
(%)
Expenses (as a percentage of our Total
Revenues)
Aircraft fuel 20.0 22.1 20.8 21.2 24.0
Other Operating Expenses (including
maintenance and airport charges etc) 27.0 28.9 25.4 28.0 23.3
Employees remuneration and benefits 8.7 9.0 7.9 8.3 8.8
Selling and Distribution Expenses 14.1 14.1 12.0 11.8 12.9
Aircraft rentals 11.2 9.4 6.4 7.2 5.1
Depreciation 13.2 16.1 14.4 15.2 11.6
67
Interest 6.4 8.7 8.1 9.3 6.3
Total Expenses (as a percentage of our
Total Revenues) 100.5 108.3 95.0 100.9 92.0
Aircraft fuel
Aircraft fuel is the single largest component of our expenditure. Aircraft fuel costs are derived on the basis of
consumption and fuel prices. As discussed earlier, fluctuations in aircraft fuel prices are beyond our control. The
historical relationship of aircraft fuel costs to revenues has, however, remained relatively consistent, demonstrating that
fare revisions have largely succeeded in offsetting increases in aircraft fuel prices.
Other Operating Expenses
Other Operating Expenses include the following:
• Maintenance and repairs
As an operator of aircraft we are required to and are responsible for maintaining and repairing the aircraft.
Our maintenance and repair expenses consist of scheduled and unscheduled maintenance for our aircraft,
engines and other parts. In order to optimize and control maintenance costs, we have entered into long-term
and medium-term maintenance contracts, including “PBTH” contracts for components, APUs and engines for
our Boeing aircraft and a global maintenance contract with ATR for components for our ATR72-500 aircraft.
Our aircraft currently require a lower level of maintenance relative to airlines with older fleets of aircraft
because the average age of the aircraft in our fleet is currently 4.5 years, and many of the parts on our aircraft
are under multi-year warranties. If the age of our fleet increases and our warranties expire, our maintenance
expenses will increase.
• Variable rentals
We have acquired 18 aircraft on operating lease arrangements, and are required to pay certain fixed and
variable lease rentals under such arrangements. The variable operating lease rentals are required to be paid at
a pre-determined rate on the basis of actual hours flown by the relevant aircraft. In certain cases such pre-
determined rates are subject to annual escalation.
The fixed operating lease rentals payable under our operating lease arrangements are separately reflected in
our financial statements as “Aircraft rentals”.
• Landing, navigation and other airport charges
These costs include landing charges, route navigation facility charges, terminal navigation landing charges,
parking charges and X-ray charges. These are generally payable to the AAI. In At certain civil enclaves that
are operated by the defense services, we pay certain of these charges to the defense services. At Cochin
International Airport we pay certain of these charges to CIAL the private sector operator of the airport.
Landing charges vary depending upon the aircraft weight and the type of airport (international, domestic or
civil enclave); navigation charges vary depending upon the distance traveled to the landing destination and the
maximum take off weight, or MTOW, of the aircraft; terminal navigation landing charges vary depending
upon the MTOW and the type of the airport; parking charges vary depending upon the type of airport and
whether or not the aircraft is parked overnight or beyond three hours; and X-ray charges are currently fixed at
approximately Rs.700 per flight for our Boeing 737 aircraft and Rs.450 per flight for our ATR aircraft.
• Insurance
We insure our aircraft against various risks and exigencies. In addition we also procure various third party
liability covers and related insurance covers for our operations. This insurance cover is provided by various
Indian insurance companies with reinsurance placements outside India.
• General and administrative
These expenses include communication costs, including payments to SITA, travel, rent, repair and
maintenance of office premises, utilities and other miscellaneous expenses.
Employees Remuneration and Benefits
68
The employee remuneration and benefits consists of salaries, statutory contributions, retirement benefits and the cost of
training provided to employees.
Increase in employee costs are due to additions in manpower and revisions in salaries made from time to time. We
have wage settlement agreements in force with the unions that represent certain of our employees.
Our employee remuneration and benefits are presented net of applicable charge back to Jetair pursuant to our GSA
agreement. For more information, see “Business – Marketing, Sales and Distribution” on page 44 of this Draft Red
Herring Prospectus.
Selling and Distribution Expenses
Our selling and distribution expenses include commissions paid to travel agents and GSAs, payments to our GDS and
CRS service providers, fees paid to credit card companies and expenses relating to advertising and sales promotion
activities.
We operate substantially through our GSA network in India. Jetair, a Promoter group company, is our exclusive GSA
in India.
Our commission structure is as follows:
• A sales commission of 5% on Rupee fares and cargo and 7% on foreign exchange fares is payable either to the
travel agents or to Jetair for tickets issued by them;
• Jetair receives an overriding commission of 3% for all passenger sales in India (irrespective of whether the
tickets have been sold through a travel agent, the internet or by Jetair itself) and 2.5% for all cargo sales in
India.
In fiscal 2004 and the six months ended September 30, 2004, commissions to Jetair constituted 2.5% and 3.1%,
respectively, of our Total Expenses for such periods, and commissions to the other GSAs that are Promoter group
companies constituted 0.5% and 0.4% of the Total Expenses for such periods.
Jetair provides us with GSA services including ticketing, reconciliation of billing statements and issuance of tickets at
the airport and at various city locations. In this connection, pursuant to the terms of our GSA agreement with Jetair, we
are entitled to charge back certain expenses, including remuneration of certain employees, CRS costs (up to a
maximum of 25% of such CRS costs) and SITA communication charges, in amounts as determined by us.
We have various GSAs in other countries. These include Jet Airways LLC, Dubai, UAE and its two subsidiaries Jet
Airways of India Inc., for USA and Canada, and India Jet Airways (Pty) Ltd. for South Africa, all of which are
Promoter group companies.
Aircraft rentals
We have 18 aircraft in our fleet on operating lease arrangements. The key features of which are:
• Monthly rent is paid in the form of fixed rent and variable rents;
• Variable lease rents are paid on a pre-determined rate payable on the basis of actual flying hours. In certain
cases such pre-determined rate is subject to annual escalation;
• We do not have an option to buy back nor do we generally have an option to renew the lease;
• The leases are not cancelable; if we terminate the lease prior to the expiry of the lease term, we may be liable
to pay the rental amounts for the unexpired period of the lease;
• In the event of a default, the lessor is entitled to repossession of the aircraft , and we may be liable for
damages, including liquidated damages.
• We are responsible for maintaining and insuring the aircraft; and
• In the event of delayed payment, we may be liable to pay penal charges.
The fixed operating lease rentals payable under our operating lease arrangements are reflected in our financial
statements as aircraft rentals, while the variable operating lease rentals payable under these arrangements is included in
our “Other Operating Expenses”.
69
In addition to the above 18 aircraft, we have leased two aircraft which have been further sub-leased to Skynet Asia
Airways. The lease rentals paid by us in respect of these two aircraft are reflected in our financial statements as net of
the lease rentals received from Skynet Asia Airways.
Depreciation
We have a policy of providing for depreciation on the basis of the written down value of assets. The rates of
depreciation are as per Schedule XIV of the Companies Act.
Interest
Interest includes the rentals we pay under our hire purchase and finance lease. We have in our fleet 23 aircraft on hire
purchase agreements and one on a finance lease. Certain key features of our hire purchase arrangements and finance
lease are:
• We have an option to purchase the aircraft either during the term of the hire purchase on payment of the
outstanding principal amount or at the end of the hire purchase term on payment of a nominal option price;
• In the event of a default, we are liable for payment of all costs of the owner including financing cost and other
associated costs. Further, the owner/ lessor has a right of repossession; and
• We are responsible for maintaining and insuring the aircraft.
Our other interest bearing liabilities include, among others, certain subordinated debt, a fixed term loan with regard to
our flight simulator and certain bank overdrafts.
Our aircraft rent expenses and hire purchase finance charges with regard to part of our fleet are incurred in U.S.
Dollars. Our exposure to the U.S. Dollar has increased as we have expanded our operations. We enter into forward
contracts to hedge against currency rate risks relating to our lease and hire purchase finance payment obligations. In
addition, payment obligations under nine of our aircraft on hire purchase agreements and one aircraft under a finance
lease are based on floating rates (LIBOR). We use derivative contracts to hedge against adverse variations in LIBOR.
Taxes
Corporate Tax
In fiscal 2004, we were liable to pay taxes under the Minimum Alternate Tax (“MAT”) provisions (as defined under
Section 115JB of the I.T. Act) primarily because of certain unabsorbed depreciation. MAT is a tax on book profits that
was introduced by the Government starting in fiscal 1997. MAT is applicable only if the tax payable under the MAT
provisions is greater than the tax on taxable income calculated at the normal rates. The provision for tax is therefore
calculated at the rate of 7.5% plus applicable surcharge on our book profits.
Deferred Tax
Deferred tax arises from timing differences between book profits and taxable (accounting) profits that originates in one
period and is capable of reversal in one or more subsequent periods, and is measured using tax rates and laws that have
been enacted or substantively enacted as on the date of the balance sheet.
We provide for deferred tax liability on such timing differences, subject to prudent considerations in respect of deferred
tax assets. The significant timing differences include the difference in depreciation charged to the profit and loss
account and the depreciation claimed under the I.T. Act, and the items of expenditure covered under section 43B of the
I.T. Act.
Results of Operations
The following tables set forth certain information with respect to our results of operations for the periods indicated:
Year ended March 31,
Six months ended September 30,
2002 2003 2004 2003 2004
(Rs. thousands)
Income
Operating revenue:
Passenger 23,622,474 26,748,979 32,155,701
15,208,634 18,068,701
70
Excess baggage 251,116 292,736 286,674
118,534 173,753
Cargo 1,190,326 1,454,345 1,720,288
849,374 886,128
Other revenue 198,949 260,748 311,548
167,944 135,599
Total operating revenue 25,262,865 28,756,808 34,474,211
16,344,486 19,264,181
Non-operating Revenue 1,234,156 664,184 1,183,183
457,026 402,545
Total revenue 26,497,021 29,420,992 35,657,394
16,801,512 19,666,726
Expenditure
Aircraft fuel 5,289,985 6,504,024 7,417,838 3,554,376 4,713,116
Maintenance and repairs 1,400,143 2,414,530 3,063,626 1,668,434 1,391,828
Variable rentals 1,093,185 1,060,108 1,023,475 550,799 334,924
Landing, navigation and other airport
charges 2,185,779 2,226,292 2,084,838 1,036,243 1,091,812
Insurance 242,159 371,373 352,133 179,129 199,409
General and administrative 2,231,028 2,441,914 2,538,269 1,265,396 1,557,734
Employees remuneration and benefits 2,299,294 2,634,482 2,822,436 1,399,394 1,738,827
Selling & Distribution Expenses
3,727,195 4,150,324 4,263,982 1,983,440 2,527,210
Aircraft rentals 2,965,100 2,780,264 2,266,428
1,205,254
1,006,666
Depreciation 3,488,334 4,732,715 5,151,543
2,545,562
2,290,861
Interest 1,708,712 2,561,344 2,891,401
1,568,238
1,232,231
Total expenses 26,630,914 31,877,370 33,875,969 16,956,265 18,084,618
Profit / (loss) before taxation (133,893) (2,456,378) 1,781,425 (154,753) 1,582,108
Provision for Taxation:
Current tax 420 500 150,330 270 122,410
Deferred tax - 12,377 - - 166,101
Profit/(loss) after taxation as per statutory
accounts
(134,313) (2,444,501) 1,631,095
(155,023)
1,293,597
Year ended March 31,
Six months ended
September 30
2002 2003 2004 2004
(Rs. thousands)
Profit / (Loss) after taxation as per audited
accounts (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in
accounting policies
Capitalization of Software Purchased 1,081 2,285 - -
Depreciation (14,764) (7,371) (2,181) (577)
Frequent flyer expenses (19,815) (58,896) - -
Reversal of Provisions as per AS-29 (Net) 27,489 393,512 511,631 -
Deferred Tax 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior Period
Items 61,100 70,147 (60,201) (9,179)
Other adjustments (318,163) (3,642) 13,509 -
Total of adjustments (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments - - 21,257 2,184
Net Profit/ (Loss), as restated (311,048) (1,195,463) 1,491,865 683,915
Adjustments
The financial information for fiscal 2002, 2003 and 2004 and the six months ended September 30, 2004 has been
restated in compliance with SEBI Guidelines. In accordance with Indian GAAP, the effects of restatement are shown
as a cumulative effect on our adjusted profit after tax rather than as restatements of individual line items in our income
statement. Consistent with this presentation, in the comparison of our results of operations from fiscal period to fiscal
period, we have provided a discussion of the effects of the restatement on our adjusted profit at the end of each such
fiscal period to fiscal period comparison. The financial information for the six months ended September 30, 2003 has
not been restated.
71
The principal adjustments to our financial statements, including on account of changes in accounting policies and
estimates, are described below:
• Accounting Standard 26 (AS-26) on Intangible Assets issued by the Institute of Chartered Accountants of India
(“ICAI”) to capitalize software, which results in future benefits to be amortized over a 36-month period on a
straight line basis. We have accordingly followed AS-26 with effect from April 1, 2003, and our restated financial
statements have given effect to AS-26 for financial years prior to fiscal 2004, where such expenditure was treated
as revenue expenditure.
• We have computed frequent flyer expenses on the basis of incremental cost as set out in the Airline Accounting
Guidelines issued by IATA with effect from April 1, 2002. In prior fiscal years, the cost was computed on the
basis of the average cost for a free seat. Our restated financial statements have given effect to these guidelines
followed from fiscal 2003 for the previous financial years.
• AS-29 on “Provisions, Contingent Liabilities and Contingent Assets” issued by ICAI came into effect from April
1, 2004. Under AS-29:
– a “provision” is a liability which can be measured only by using a substantial degree of estimation; and
– a “liability” is a present obligation of the enterprise arising from past events, the settlement of which is
expected as a result of an outflow from the enterprise of resources embodying economic benefits.
We have followed AS-29 with effect from April 1, 2004 and accordingly certain aircraft maintenance expenditure
(not covered by any third party maintenance contract) are being accounted for an “as incurred basis”. In prior
years such expenditure was being provided for on pre-determined rates, and in the case of engines, on the basis of
hours flown. Our restated (adjusted) financial statements give effect to AS-29 for financial years prior to fiscal
2004.
• We adopted Accounting Standard 22 (AS-22) on “Accounting for Taxes and Income” issued by the ICAI in
preparing financial statements for fiscal 2003 onwards. Accordingly, the deferred tax/asset liability has been
recognized in the respective years of origination, considering the adjustment on account of changes in accounting
policy and other changes with the corresponding effect to the statement of profit, as restated.
• In our financial statements for fiscal 2004 and for the six months ended September 30, 2004, we had recognized /
charged off certain amounts of our income and expenditure for prior periods. In our restated financial statements,
such income and expenditure amounts have been appropriately adjusted in the years that these relate to.
o During fiscal 2004, we have revised the estimated useful life of our galley equipment, which form a
part of our engineering inventory. In our related financial statements, provision for obsolescence on
such inventory has been adjusted on the straight line method basis over its balance useful life as
estimated by our management. Accordingly, the provision for obsolescence on such inventory has
been adjusted against the profits in our restated financial statements for fiscal years up to fiscal 2003.
o Following the terrorist attacks in New York on September 11, 2001, we renegotiated certain aircraft
maintenance contracts in fiscal 2002 with retrospective effect. In our restated financials, the impact
has been adjusted against profits for fiscal years up to fiscal 2001.
Six Months Ended September 30, 2004 Compared to Six Months Ended September 30, 2003
An overview of trends and developments and a comparison of significant items of income and expenditure for the six
months ended September 30, 2003 and the six months ended September 30, 2004 are provided as follows:
• In the six months ended September 30, 2004, while revenues were significantly higher than the period ending
September 30, 2003 we incurred a substantial increase in fuel costs as compared to the previous period;
• In May 2004, we commenced scheduled operations to Kathmandu, Nepal;
• The first six months of each fiscal is generally lower in terms of traffic volumes as compared to the second six
months and this trend continued in fiscal 2004; and
• In August 2003, Air Deccan, a no frills airline, commenced operations, thereby increasing competition in the
domestic market.
72
Revenues
Our total revenues increased by 17.1% from Rs.16,802 million in the six months ended September 30, 2003 to
Rs.19,667 million in six months ended September 30, 2004. This increase was primarily due to an increase in
Passenger Revenues.
Passenger Revenues
Passenger revenues increased by 18.8% from Rs.15,209 million in the six months ended September 30, 2003 to
Rs.18,069 million in the six months ended September 30, 2004. This increase was due to a 15.6% increase in revenue
passengers as well as increased yield due to a fare revision effective June 21, 2004.
Revenues from Excess Baggage
Revenues from excess baggage increased by 46.2% from Rs.119 million in the six months ended September 30, 2003
to Rs.174 million in the six months ended September 30, 2004, primarily due to an increase in the number of revenue
passengers.
Revenues from Cargo
Revenues from carriage of cargo increased by 4.4% from Rs.849 million in the six months ended September 30, 2003
to Rs.886 million in the six months ended September 30, 2004. This increase was primarily due to increased tonnage
carried in the six months ended September 30, 2004 compared to the prior period. During the six months ended
September 30, 2004, we improved infrastructure including the addition of bonded cargo warehouses that enabled us to
carry more cargo for imports and exports on domestic routes.
Other Revenues
Other revenues decreased by 19.0% from Rs.168 million in the six months ended September 30, 2003 to Rs.136 million
in the six months ended September 30, 2004. This decrease was primarily on account of the discontinuation of the
Inland Air Travel Tax with effect from January 2004, resulting in our losing revenues from the 5% handling charges
that we were entitled to retain as compensation for the collection of tax on behalf of the Government.
Non-Operating Revenues
Non-operating Revenues decreased by 11.8 % from Rs.457 million in the six months ended September 30, 2003 to
Rs.403 million in the six months ended September 30, 2004. The variation in Non-operating Revenues for the two
periods is primarily due to the following:
• Gain from foreign exchange of Rs.157 million in the six months ended September 30, 2003;
• Profit on sale and hire purchase of engines of Rs.85 million in the six months ended September 30, 2003; and
• Write back of certain provisions in an amount of Rs.182 million in the six months ended September 30, 2004.
Expenses
Aircraft Fuel
Fuel costs increased by 32.6% from Rs.3,554 million in the six months ended September 30, 2003 to Rs.4,713 million
in the six months ended September 30, 2004. This increase was due to a 4.8% increase in block hours from 70,429
hours to 73,814 hours and an increase in the weighted average cost of fuel from Rs.19.67 per liter in the six months
ended September 30, 2003 to Rs.24.51 per liter in the six months ended September 30, 2004 viz. an increase of 24.6%.
Other Operating Expenses
Variations in Other Operating Expenses for the six months ended September 30, 2003 and 2004 were:
Six months ended Six months ended
Increase/
(Decrease)
September 30, 2003 September 30, 2004
(Rs. thousands) (Rs. thousands)
(%)
Maintenance and repairs 1,668,434 1,391,828 (16.6)
73
Variable rentals 550,799 334,924 (39.2)
Landing, navigation and other airport charges 1,036,243 1,091,812 5.4
Insurance 179,129 199,409 11.3
General and administrative 1,265,396 1,557,734 23.1
Total
4,700,001
4,575,707 (2.6)
Other Operating Expenses decreased by 2.6% from Rs.4,700 million in the six months ended September 30, 2003 to
Rs.4,576 million in the six months ended September 30, 2004 due to various factors as discussed below:
• Maintenance and repair costs decreased by 16.6% from Rs.1,668 million in the six months ended September 30,
2003 to Rs.1,391 million in the six months ended September 30, 2004. This decrease in maintenance and repair
costs was primarily due to the introduction of the new accounting standard, AS-29 and the discontinuation of the
accrual of certain provisions effective April 1, 2004. Under AS-29, certain maintenance costs which were
previously accrued on the basis of hours flown are now accounted for on an as incurred basis. For more
information on AS-29, please see paragraph (ix) of “Our Significant Accounting Policies” on page 64 of this Draft
Red Herring Prospectus.
• Variable rentals decreased by 39.2% from Rs.551 million in the six months ended September 30, 2003 to Rs.335
million in the six months ended September 30, 2004. This reduction was principally because of the
discontinuation of the accrual of certain provisions in accordance with AS-29, effective April 1, 2004.
• Landing, navigation and other airport charges increased by 5.4% from Rs.1,036 million in the six months ended
September 30, 2003 to Rs.1,092 million in the six months ended September 30, 2004. This increase was primarily
due to an increase in the number of flights operated during the six months ended September 30, 2004 as compared
to the number of flights operated during the six months ended September 30, 2003.
• Insurance costs increased by 11.3% from Rs.179 million in the six months ended September 30, 2003 to Rs.199
million in the six months ended September 30, 2004. This increase was due to an increase in the fleet value
because of the induction of two new Boeing 737-900 aircraft and one Boeing 737-400 aircraft as replacement for
two Boeing 737-400 aircraft in fiscal 2004 (resulting in an increase in fleet size by one aircraft).
• General and administrative costs increased by 23.1% from Rs.1,265 million in the six months ended September 30,
2003 to Rs.1,558 million in the six months ended September 30, 2004. This increase was primarily due to
exchange rate differences as a result of weakening of the Rupee compared to the U.S. Dollar amounting to Rs.149
million and a loss on scrapping of fixed assets amounting to Rs.31 million in the six months ended September 30,
2004.
Employee Remuneration and Benefits
Employee remuneration and benefits expenses increased by 24.3% from Rs.1,399 million in the six months ended
September 30, 2003 to Rs.1,739 million in the six months ended September 30, 2004 due to a significant increase in
salaries with effect from April 1, 2004 and due to an increase in the net number of employees (viz. excluding
employees whose remuneration and benefits are charged back to Jetair pursuant to our GSA agreement with Jetair)
from 5,307 as of September 30, 2003 to 5,595 as of September 30, 2004.
Selling and Distribution Costs
Selling and distribution costs increased by 27.4% from Rs.1,983 million for the six months ended September 30, 2003
to Rs 2,527 million for the six months ended September 30, 2004. This increase in selling and distribution costs
resulted from:
• An increase of 17.2% in CRS and GDS costs from Rs.438 million in the six months ended September 30,
2003 to Rs.513 million in the six months ended September 30, 2004 due to an increase in number of
passengers;
• An increase of 28.7% in commission costs payable to our GSAs and travel agents from Rs.1,426 million in the
six months ended September 30, 2003 to Rs.1,835 million in the six months ended September 30, 2004 due to
an increase in Passenger Revenues; and
• An increase in advertisement expenses incurred in the six months ended September 30, 2004, which was in
part due to the launch of our international operations to Kathmandu, Nepal.
74
Aircraft Rentals
Aircraft rentals decreased by 16.4% from Rs.1,205 million in the six months ended September 30, 2003 to Rs.1,007
million in the six months ended September 30, 2004, primarily due to a reduction in aircraft lease rentals that we
negotiated with the lessors of two of our Boeing 737 aircraft and five of our ATR72-500 aircraft which were effective
from the second half of fiscal 2003.
Depreciation
We recorded a decrease in depreciation costs of 10% from Rs.2,546 million in the six months ended September 30,
2003 to Rs.2,291 million in the six months ended September 30, 2004 due to a reduction in the written down value of
aircraft and other assets being depreciated.
Interest Expense
Interest expenses decreased by 21.4% from Rs.1,568 million in the six months ended September 30, 2003 to Rs.1,232
million in the six months ended September 30, 2004 due to a reduction in effective interest rates and a decrease in our
indebtedness.
Profit/(Loss) before Taxation
We incurred loss before taxation of Rs.155 million in the six months ended September 30, 2003 as compared to profit
before taxation of Rs.1,582 million in the six months ended September 30, 2004 primarily. due to a 17.1% increase in
Total Revenues in comparison to a 6.7% increase in our Total Expenses.
Profit/(Loss) after Taxation
For the reasons stated above, we had a loss of Rs.155 million in the six months ended September 30, 2003 as compared
to a profit of Rs.1,294 million in the six months ended September 30, 2004.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated profit for the six months ended
September 30, 2004 was Rs.684 million. The main adjustment for the six months ended September 30, 2004 was due to
an additional charge of Rs.598 million for deferred taxation, arising as a result of adoption of AS-22 for the prior fiscal
year periods.
We have not restated the profit after tax for the six months ended September 30, 2003 for purposes of comparison.
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Fiscal 2004 Compared to Fiscal 2003
An overview of trends and developments and a comparison of significant items of income and expenditure for fiscal
2004 compared to fiscal 2003 are provided as follows:
• Buoyant economic trends resulted in significant traffic growth in fiscal 2004 over fiscal 2003;
• The extension of the APEX fare schemes, first introduced in fiscal 2003, and the introduction of other pricing
schemes in fiscal 2004 also contributed to increased passenger traffic in fiscal 2004 compared to 2003;
• In August 2003, Air Deccan, a no frills airline, commenced operations, thereby increasing competition in the
domestic market;
• In November 2003, the first part of the Naresh Chandra Committee Report was presented to the Government
of India. The report made recommendations for development of the Indian civil aviation sector. Certain of
these recommendations have been implemented by the Government of India.
• During fiscal 2004, we increased our seat capacity by adding two Boeing 737-900 aircraft (each with a 170
seat capacity) to our fleet on hire purchase arrangements and one Boeing 737-400 on an operating lease.
However, there were no net additions to our fleet as we subleased two Boeing 737-400 aircraft (each with a
136 seat capacity) to Skynet Asia Airways and we sold one Boeing 737-400.
75
Revenues
Our total revenues increased by 21.2% from Rs.29,421 million in fiscal 2003 to Rs.35,657 million in fiscal 2004. This
increase was primarily due to increased Passenger Revenues.
Passenger Revenues
Passenger Revenues increased by 20.2% from Rs.26,749 million in fiscal 2003 to Rs. 32,156 million in fiscal 2004
primarily due to:
• An increase in ASKMs from 8,496 million in fiscal 2003 to 9,162 in fiscal 2004 and;
• An increase of 7.8% in the total number of revenue passengers in fiscal 2004 as compared to fiscal 2003,
resulting in an improvement in Passenger Load Factors from 62.3% in fiscal 2003 to 63.9% in fiscal 2004;
and
• An increase in Rupee passenger fares of 10% in November 2002 and 15% in March 2003, the full impact of
which was reflected in fiscal 2004.
We experienced a significant increase in passenger revenue earnings in foreign currency and from passengers traveling
on APEX fares. We also experienced an overall improvement in Yield in spite of a marginal decline in the number of
full fare paying passengers.
Revenues from Excess Baggage
Revenues from excess baggage decreased by 2% from Rs.293 million in fiscal 2003 to Rs.287 million in fiscal 2004.
Revenues from Cargo
Revenues from carriage of cargo increased by 18.3% from Rs.1,454 million in fiscal 2003 to Rs.1,720 million in fiscal
2004. Increased revenue from carriage of cargo resulted from a 16.2% increase in cargo volumes from 74,657 tons in
fiscal 2003 to 86,749 tons in fiscal 2004.
Other Revenues
Other revenues increased by 19.5% from Rs.261 million in fiscal 2003 to Rs.312 million in fiscal 2004, primarily due
to an increase in the number of passengers.
Non-Operating Revenues
Non-operating revenues increased by 78.2% from Rs.664 million in fiscal 2003 to Rs.1,183 million in fiscal 2004,
primarily due to:
• Gains on foreign exchange because of the appreciation of the Rupee against the U.S. Dollar in fiscal 2004,
amounting to Rs.335 million;
• Profit on the sale of one Boeing 737-400 aircraft in October 2003, amounting to Rs.266 million.
Expenses
Aircraft Fuel
Expenditure on fuel increased by 14.1% from Rs.6,504 million in fiscal 2003 to Rs.7,418 million in fiscal 2004. This
increase was primarily due to a 5.4% increase in block hours from 133,686 hours in fiscal 2003 to 140,908 hours in
fiscal 2004, and an increase of 5.5% in the weighted average cost per liter of ATF from Rs.19.32 per liter in fiscal 2003
to Rs.20.38 per liter in fiscal 2004.
Other Operating Expenses
Variations in Other Operating Expenses for such periods are indicated below:
Year Ended March 31, Increase / (Decrease)
76
2003 2004
%
(Rs. thousands)
Maintenance and repairs 2,414,530 3,063,626 26.9%
Variable rentals 1,060,108 1,023,475 (3.5%)
Landing, navigation and other airport charges 2,226,292 2,084,838 (6.4%)
Insurance 371,373 352,133 (5.2%)
General and administrative 2,441,914 2,538,269
3.9%
Total 8,514,217 9,062,341 6.4%
• Maintenance and repairs costs increased by 26.9% from Rs.2,415 million in fiscal 2003 to Rs.3,064 million in
fiscal 2004 primarily due to a 5.4% increase in Block hours and an increase in the age of certain aircraft in our
fleet, which resulted in increased maintenance costs relating to certain of our older aircraft and an increased
frequency of higher maintenance checks for such aircraft to meet contractual redelivery obligations. In fiscal 2004,
we conducted three C Checks at facilities outside India (which are substantially more expensive than C Checks that
we typically conduct in India on our own) to meet redelivery conditions, which contributed to increased
maintenance costs. Changes to the rates of obsolescence of certain rotables also contributed to an increase in
maintenance costs.
• Variable rentals decreased by 3.5% from Rs.1,060 million in fiscal 2003 to Rs.1,023 million in fiscal 2004 because
the full impact of the reduction in the number of leased aircraft.
• Landing, navigation and other airport charges decreased by 6.4% from Rs.2,226 million in fiscal 2003 to Rs.2,085
million in fiscal 2004 primarily due to the following:
o a 25% reduction in landing and terminal navigation landing charges for the Northeastern region;
o the application of domestic airport rates to Goa, Hyderabad, Ahmedabad and Guwahati (which are
international airports and where international airport charges earlier applied);
o a 15% reduction in landing charges at all airports (excluding civil enclaves, and Cochin airport)
effective February 12, 2004 ; and
o Exemption on landing charges applicable for aircraft with less than 80 seats, except at civil enclaves
and at the Cochin airport, which resulted in reduced costs for our ATR operations.
• Insurance costs decreased by 5.2% from Rs.371 million in fiscal 2003 to Rs.352 million in fiscal 2004, because of
lower insurance premium rates negotiated by us.
• General and administrative costs increased by 3.9% from Rs.2,442 million in fiscal 2003 to Rs.2,538 million in
fiscal 2004 primarily due to a high level of operations viz. an increase in the number of flights flown, increase in
block hours and an increase in the number of passengers.
Employee Remuneration and Benefits
Employee remuneration and benefits increased by 7.1% from Rs.2,634 million in fiscal 2003 to Rs.2,822 million in
fiscal 2004 primarily due to salary increases given to our employees in fiscal 2004. The total number of net employees
as of March 31, 2003 was 5,467, as compared to 5,307 employees as of March 31, 2004.
Selling and Distribution Costs
Selling and distribution costs increased by 2.7% from Rs.4,150 million in fiscal 2003 to Rs.4,264 million in fiscal 2004.
This increase resulted from:
• An increase in CRS and GDS costs of 3.8 % from Rs.859 million in fiscal 2003 to Rs.892 million in fiscal
2004 primarily due to an increase in number of passengers;
• This was partly offset by a decrease in commissions of 1.3% from Rs.3,104 million in fiscal 2003 to Rs.3,063
million in fiscal 2004 due to a reduction in the commission rates paid to travel agents for Rupee fares, which
decreased from 6% on the gross fare to 5% on the basic fare (excluding taxes and insurance charges) effective
July 15, 2002. This reduction was achieved in spite of an increase in Passenger Revenues and revenues from
carriage of cargo.
77
Aircraft Rentals
Aircraft lease rentals decreased by 18.5% from Rs.2,780 million in fiscal 2003 to Rs.2,266 million in fiscal 2004
primarily due to;
• Reduction in net charge of lease rentals on two Boeing 737-400 aircraft since these aircraft were subleased to
Skynet Asia Airways; and
• Reduction in aircraft lease rentals that we negotiated with the lessors of two of our Boeing 737 aircraft and
five of our ATR72-500 aircraft.
Depreciation
Depreciation increased by 8.9% from Rs.4,733 million in fiscal 2003 to Rs.5,152 million in fiscal 2004 primarily due to
the increased proportion of owned aircraft in our fleet. The increase in depreciation was also due to the full year impact
of the four and two Boeing 737 aircraft acquired in fiscal 2003 and fiscal 2004, respectively, under hire purchase
agreements.
Interest Expense
Interest expense increased by 12.9 % from Rs.2,561 million in fiscal 2003 to Rs.2,891 million in fiscal 2004 primarily
due to the increased indebtedness to finance the new aircraft acquired in fiscal 2004 under hire purchase agreements.
Profit/(Loss) before Taxation
We recorded profit before taxation of Rs.1,781 million in fiscal 2004 compared to a loss before taxation of Rs.2,456
million in fiscal 2003.
Profit/(Loss) after Taxation
Profit after taxation was Rs.1,631 million in fiscal 2004 compared to a loss of Rs.2,445 million in fiscal 2003.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated loss for fiscal 2003 was
Rs.1,195 million, as compared to our restated profit for fiscal 2004 of Rs.1,492 million. The main adjustments for
fiscal 2004 are described below:
• Reversal of maintenance provisions as per AS-29 in an amount of Rs.512 million;
• Deferred tax charge as a result of application of AS-22 in an amount of Rs.581 million; and
• Charge on account of prior period items in an amount of Rs.60 million.
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Fiscal 2003 Compared to Fiscal 2002
An overview of trends and developments and a comparison of significant items of income and expenditure for fiscal
2003 in comparison to fiscal 2002 are provided as follows:
• Our revenues in fiscal 2002 and fiscal 2003 were affected by general economic and other conditions affecting
travel in India, including a slowdown following the terrorist strikes in the United States on September 11,
2001, the sectarian violence in Gujarat in fiscal 2003 and an economic slowdown affecting India and other
countries during such periods;
• There were significant capacity additions in fiscal 2002 and fiscal 2003:
• In fiscal 2002, we leased three ATR 72-500s and entered into hire purchase arrangements for
four Boeing-737 NG aircraft; we also returned one Boeing 737-400 upon expiry of the lease.
78
• In fiscal 2003, we added four Boeing 737-NG on hire purchase and returned one Boeing 737-400
upon the expiry of the lease;
• In fiscal 2003, we entered into hire purchase agreements for four Boeing 737-700 aircraft which
were earlier on leases from another party;
• In June 2002, we introduced the advanced purchase excursion fares, or APEX fares, on select routes in India in
order to encourage increases in passenger traffic on these routes.
Revenues
Our revenues increased by 11.0% from Rs.26,497 million in fiscal 2002 to Rs.29,421 million in fiscal 2003. This
increase was primarily due to increased Passenger Revenues.
Passenger Revenues
Passenger Revenues increased by 13.2% from Rs.23,622 million in fiscal 2002 to Rs.26,749 million in fiscal 2003 due
to:
• An increase in ASKMs by 9.2% from 7,780 million in fiscal 2002 to 8,496 million in fiscal 2003;
• An increase in RPKMs by 10.8% from 4,777 million in fiscal 2002 to 5,291 million in fiscal 2003 and an
increase in Passenger Load Factors from 61.4% to 62.3%;
• An increase in the number of revenue passengers by 10.1% in fiscal 2003 as compared to fiscal 2002;
• An increase in passenger fares by 10.0% effective November 2002, the full year impact of which was reflected
in a 2.9% increase in the average revenue per passenger in fiscal 2003 compared to that in fiscal 2002;
• An increase in the number of passengers, which was partly due to the introduction of APEX fares on certain
routes;
• Following the terrorist attacks in the United States on September 11, 2001, insurance costs increased
significantly. To meet this increase, we and other airlines in India introduced a surcharge of US$5.00 and
Rs.250 for foreign exchange fare passengers and Rupee fare passengers, respectively.
Revenues from Excess Baggage
Revenues from excess baggage increased by 16.7% from Rs.251 million in fiscal 2002 to Rs.293 million in fiscal 2003.
This increase resulted from an increase in the number of revenue passengers flown.
Revenues from Cargo
Revenues from carriage of cargo increased by 22.2% from Rs.1,190 million in fiscal 2002 to Rs.1,454 million in fiscal
2003. This increased resulted from a 14.2% increase in cargo tonnage from 65,385 tons in fiscal 2002 to 74,657 tons in
fiscal 2003 due to the aggressive marketing of our cargo services.
Other Revenues
Other revenues increased by 31.1% from Rs.199 million in fiscal 2002 to Rs.261 million in fiscal 2003. This increase
was primarily due to an increase in the amount of handling fees retained by us for collection of IATT, due to an
increase in Passenger Revenue and from the corresponding amount of PSF collected, due to an increase in the number
of passengers. In addition, we introduced cancellation charges on tickets purchased on APEX fares (which are
significantly higher than cancellation charges on normal fare tickets).
Non-operating Revenues
Non-operating Revenues decreased by 46.2% from Rs.1,235 million in fiscal 2002 to Rs.664 million in fiscal 2003.
This decrease was primarily due to a Rs.846 million profit on the sale of two aircraft in fiscal 2002 and there being no
comparable profit in fiscal 2003. These aircraft were simultaneously leased back by us.
Expenses
79
Aircraft Fuel
Fuel expenditure increased by 23% from Rs.5,290 million in fiscal 2002 to Rs.6,504 million in fiscal 2003 due to an
increase of 8.4% in block hours from 123,340 to 133,686 and an increase of 14.3% in the weighted average cost of fuel
from Rs.16.98 per liter in fiscal 2002 to Rs.19.32 per liter in fiscal 2003. After September 2001, the price of ATF
increased significantly and we experienced the full year effect of such increase in fiscal 2003. This was offset in part
by the introduction of new aircraft in our fleet which were more fuel-efficient than the aircraft they replaced.
Other Operating Expenses
Other Operating Expenses increased by 19% from Rs.7,152 million in fiscal 2002 to Rs.8,514 million in fiscal 2003.
The variations in our Other Operating Expenses for such periods were as follows:
Year ended March 31,
Increase (Decrease)
2002 2003
%
Maintenance and repairs 1,400,143 2,414,530 72.4%
Variable rentals 1,093,185 1,060,108 (3.0%)
Landing, navigation and other airport charges 2,185,779 2,226,292 1.9%
Insurance 242,159 371,373 53.4%
General and administrative 2,231,028 2,441,914 9.5%
Total 7,152,294 8,514,217 19.0%
• Maintenance and repairs costs increased by 72.4% from Rs.1,400 million in fiscal 2002 to Rs.2,415 million in
fiscal 2003 primarily due to an increase of 8.4% in block hours. A negotiated credit of Rs.759 million given to
us by an engine maintenance service provider also lowered our maintenance costs for fiscal 2002.
• Variable rentals under our operating leases decreased by 3% from Rs.1,093 million in fiscal 2002 to Rs.1,060
million in fiscal 2003. This decrease was because of the lower number of leased aircraft in our fleet in fiscal
2003 compared to that in fiscal 2002.
• Landing, navigation and other airport charges increased marginally by 1.9% from Rs.2,186 million in fiscal
2002 to Rs.2,226 million in fiscal 2003. Although there was an increase of 8.9% in the number of flights
from 80,031 in fiscal 2002 to 87,114 in fiscal 2003, this was substantially offset by significant reductions in
the route navigation charges with effect from October 2002, as a result of which such charges were levied on
the basis of the MTOW of the aircraft as well as the distance flown, as compared to the earlier method of
determining such charges based only on the MTOW of the aircraft.
• Insurance costs increased significantly by 53.4% from Rs.242 million in fiscal 2002 to Rs.371 million in fiscal
2003 as a result of the increase in insurance premiums following the terrorist attacks in the United States in
September 2001 as well as an increase in the fleet value because of the induction of four new Boeing 737
aircraft in fiscal 2003. In addition, in fiscal 2003 we experienced the full year impact of the induction of seven
new aircraft in fiscal 2002.
• General and administrative costs increased by 9.5% from Rs.2,231 million in fiscal 2002 to Rs.2,442 million
in fiscal 2003 due to the increased scale of our operations.
Employee Remuneration and Benefits
Employee remuneration and benefits increased by 14.6% from Rs.2,299 million in fiscal 2002 to Rs.2,634 million in
fiscal 2003 mainly due to an increase in the average number of employees during fiscal 2003 as compared to that in
fiscal 2002; however, the net number of employees (viz. excluding employees whose salaries are charged back to Jetair
pursuant to our GSA agreement with Jetair) as of March 31, 2003 of 5,467 was lower than the net number of employees
as of March 31, 2002 of 5,537. In addition, due to the increase in our fleet size, we were required to recruit more pilots
and in-flight crew, which resulted in an increase in the mix of employees with higher remuneration packages. Further,
marginal salary increases were given to employees in fiscal 2003.
Selling and Distribution Costs
80
Selling and distribution costs increased by 11.4% from Rs.3,727 million in fiscal 2002 to Rs.4,150 million in fiscal
2003. The increase in costs can be attributed to:
• An increase in CRS and GDS costs by 20.1% from Rs.715 million to Rs.859 million due to an increase in
passenger numbers and an increase in GDS rates levied by certain of our GDS service providers; and
• An increase in commission payments to GSAs and travel agents by 8.8% from Rs.2,852 million to Rs.3,104
million due to increased Passenger Revenues and revenues from carriage of cargo.
Aircraft Rentals
Aircraft lease rentals decreased by 6.2% from Rs.2,965 million in fiscal 2002 to Rs.2,780 million in fiscal 2003
primarily due to the reduction in the number of leased aircraft in our fleet as compared to fiscal 2003. During fiscal
2003, we reduced the number of aircraft under lease arrangements in our fleet by five.
Depreciation
Depreciation increased by 35.7% from Rs.3,488 million in fiscal 2002 to Rs.4,733 million in fiscal 2003 primarily due
to the addition of eight aircraft under hire purchase agreements in fiscal 2003.
Interest Expense
Interest expense increased by 49.8% from Rs.1,709 million in fiscal 2002 to 2,561 million in fiscal 2003 primarily due
to the addition of eight aircraft under hire purchase agreements in fiscal 2003.
Profit/(Loss) before Taxation
We had a loss before taxation of Rs.2,456 million in fiscal 2003 compared to a loss before taxation of Rs.134 million in
fiscal 2002.
Profit/(Loss) after Taxation
Loss after taxation in fiscal 2003 was Rs.2,445 million compared to a loss after taxation of Rs.134 million in fiscal
2002.
Net Profit/(Loss), as Restated
Our profit after tax has been restated on account of, among other things, changes in accounting policies as well as
certain items attributable to prior periods. As a result of these adjustments, our restated loss for fiscal 2002 was Rs.311
million, as compared to our restated loss for fiscal 2003 of Rs.1,195 million.
The main adjustments for fiscal 2003 are described below:
• Charge to our frequent flyer expenses due to computation on incremental cost basis pursuant to the Airline
Accounting Guidelines issued by IATA with effect from April 1, 2002 in an amount of Rs.58.90 million;
• Reversal of provisions as per AS 29 in an amount of Rs 393.51 million;
• Deferred tax credit as a result of application of AS-22 in an amount of Rs 853 million; and
• Credit on account of prior period items in an amount of Rs.70.15 million.
The main adjustments for fiscal 2002 are described below:
• Charge to our frequent flyer expenses due to computation on incremental cost basis pursuant to the Airline
Accounting Guidelines issued by IATA with effect from April 1, 2002 in an amount of Rs.19.81 million;
• Reversal of provisions as per AS-29 in an amount of Rs 27.49 million;
• Deferred tax credit as a result of application of AS-22 in an amount of Rs.86.34 million;
• Credit on account of prior period items in an amount of Rs.61.10 million; and
• Other adjustments (debits) in an amount of Rs.318.16 million relating to:
• revision of the estimated useful life of certain equipment and related provisions for obsolesence; and
• the retrospective effect of renegotiation of a maintenance contract in fiscal 2002.
81
For further discussion on the adjustments to our financial statements, please see the section entitled “Results of
Operations – Adjustments” on page 70 of this Draft Red Herring Prospectus.
Liquidity and Capital Resources
Liquidity
Historically, our primary liquidity requirements have been to finance our working capital requirements for our
operations and our capital expenditures. We have met these requirements from cash flows from operations as well as
from borrowings. We seek to maintain at least two months of operating expenses as cash and cash equivalents, and we
also have working capital facilities extended by various banks.
Cash flows
The table below summarizes our cash flows, as restated, for the periods indicated:
Fiscal 2002
Fiscal 2003
Fiscal 2004
Six months ended
September 30, 2004
(Rs. thousands)
Net cash from
operating activities 2,572,665 4,294,029 10,371,166 6,220,385
Net cash from (used)
investing activities (6,917,206) (12,920,421) (3,973,465) (3,472,207)
Net cash from (used)
financing activities 5,132,445 8,096,688 (6,709,517) (2,033,874)
Net increase (decrease)
in cash and cash equivalents 787,904 (529,704) (311,816) 714,303
Operating Activities
Our cash flow from operating activities depends essentially on our net profits. We have in fiscal 2002, 2003, 2004 and
the six months ended September 30, 2004, generated sufficient cash flow from our operations to meet employee
remuneration and benefits, aircraft fuel, aircraft rentals, interest and Other Operating Expenses.
Our net cash flow from operating activities increased by 141.5% from Rs.4,294 million in fiscal 2003 to Rs.10,371
million in fiscal 2004, primarily due to robust growth in Operating Revenues and net profit.
Investing Activities
Our net cash flow used in investing activities is determined by our aircraft and other capital asset acquisition program.
Beginning fiscal 2001, we had scheduled deliveries of ten Boeing 737 aircraft through May 2003. Of these ten aircraft,
four each were delivered in fiscal 2002 and fiscal 2003 and one aircraft was delivered in fiscal 2004. All of these
aircraft have been acquired on a hire purchase basis and have been financed to the extent of 85% of the aircraft value
through term loans guaranteed by the US EXIM Bank. In each case, we were required to arrange financing for the
remaining 15% of the aircraft value.
In fiscal 2003, the Company also took 4 aircraft on hire purchase from GE Capital Services India Limited. These
aircraft were previously available to us on an operating lease from another lessor. In such cases, we were required to
arrange financing for 10% of the aircraft value.
In addition, we took delivery of two Boeing 737-900s in fiscal 2004 – one in May 2003 (on hire purchase) and one in
October 2003 (on finance lease). These were also supported by US Exim Bank guarantees and we were required to
arrange financing for 15% of the aircraft value. We also sold one of our Boeing 737-400 aircraft in fiscal 2004, after
terminating the hire purchase agreement for this aircraft.
Our net cash used in investing activities decreased from Rs.12,920 million in fiscal 2003 to Rs.3,973 million in fiscal
2004, primarily due to a higher number of aircraft that we acquired in fiscal 2003 as compared to fiscal 2004 and
because of the termination of the hire purchase agreement relating to one Boeing 737 aircraft.
Financing Activities
82
Our net cash flow from financing activities is determined by the level of principal and interest payments on our
outstanding debt, the incurrence of new indebtedness and the issuance of new capital stock, interest and dividend
payments thereon and currency exchange rates. There has been no issuance of any class of shares since February 2001,
when we issued 69,828,750 cumulative convertible redeemable preference shares to International Finance Corporation,
or IFC.
Our net cash from financing activities in fiscal 2003 was Rs.8,097 million, our net cash used in financing activities was
Rs.6,710 million in fiscal 2004.
Historical and Planned Capital Expenditures
The following table sets forth, for the periods indicated, certain information related to our capital expenditures:
Year ended March 31,
Six months ended September 30,
2002
(Rs. thousands)
2003
(Rs. thousands)
2004
(Rs. thousands)
2003
(Rs. thousands)
2004
(Rs. thousands)
Ground support equipment and vehicles 146,390 38,060 15,724 6,627 28,920
Aircraft and engines 16,419,488
(1)
13,423,697 3,501,909 1,868,299 688,561
Simulator 513,755 - - - -
IT and office equipment(including software) 116,185 35,192 110,426 30,172 106,256
Others 149,267 35,026 21,673 13,166 19,875
Total 17,345,085 13,531,975 3,649,732 1,918,264 843,612
Note: Work in progress for fiscal 2002, 2003 and 2004 was Rs.13,015.46 million, Rs.3,007.87 million and Rs.151.90 million, respectively.
(1) In fiscal 2002 aircraft owned by us were revalued and the revaluation reserve on 31 March, 2002 was Rs.7,299.67 million.
We procure our aircraft under operating leases, hire purchase agreements and finance leases. Although we believe that
operating lease financings and/or hire purchase finance will be available for our future aircraft deliveries, we cannot
assure you that we will be able to secure financings on terms attractive to us, if at all. To the extent we cannot secure
financing, we may be required to modify our aircraft acquisition plans or incur higher than anticipated financing costs.
However, we expect to meet our operating obligations as they become due through available cash and internally
generated funds, supplemented as necessary by short-term credit lines.
We currently operate 42 aircraft. We have entered into agreements to lease seven additional Boeing 737-800 aircraft
which are expected to be delivered in 2005. In December 2004 we paid Boeing a refundable security deposit to acquire
ten additional Boeing 737-800 aircraft with CFM56-7B24 engines. The expected date of delivery of such aircraft is
between January 2006 and October 2007. Definitive purchase agreements will need to be negotiated and entered into
on or prior to January 31, 2005, unless otherwise extended. If the purchase agreements are entered into, then closer to
the delivery dates of each aircraft we will determine the financing arrangements under which these aircraft will be
obtained. The entry into such purchase agreement and financial arrangements in connection therewith is also subject to
the Company obtaining board approval and such necessary regulatory approvals as may be required.
Our expected capital expenditures for fiscal 2005 and for fiscal 2006 are as follows:
Fiscal 2005
(Rs. thousands)
Fiscal 2006
(Rs. thousands)
Aircraft Engines 1,150,000*
Simulator 690,000*
Ground Support Equipment & Vehicles 198,797 690,000*
IT & Office Equipment 227,522 200,000
Maintenance Hangar related workshops 690,000*
Training Centre 460,000*
Others (including furniture, fixtures and electrical fittings) 541,181 300,000
Total 967,500 4,180,000
* from the proceeds of the Offer
The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20
aircraft to provide services to other international destinations. These destinations exclude the Gulf countries of UAE,
Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three
years. We are accordingly considering the feasibility of flying to other international destinations, although it is
uncertain when this policy change will become effective and which destinations we may be permitted to serviceWe
have made a preliminary assessment of the expenditures that we may incur for creating the required operational
capabilities and supporting infrastructure such as the conclusion of contracts for aircraft leases, acquisition of slot
positions at foreign airports, hiring of additional and suitably qualified personnel for the new aircraft types, handling
83
and catering agreements and acquisition of equipment before we can commence operations on such routes, if permitted
by the Government of India. Based on our preliminary assessment, we anticipate an outlay of Rs.3,000 million to
acquire equipment, create necessary infrastructure and recruit and train personnel.
We expect to meet the above capital expenditures through a combination of means, including the net proceeds of the
Fresh Issue, funds generated from operations, bank financing and credit arrangements with export credit agencies, debt
or other securities offerings and/or vendor financings.
Contractual Obligations
The following table summarizes our significant contractual obligations as of September 30, 2004:
As of September
30, 2004
Less than One Year
One to Five Years
More than Five Years
(Rs. thousands) (Rs. thousands) (Rs. thousands) (Rs. thousands)
Aircraft and engine operating leases 5,562,277 1,968,518 3,593,759 -
Hire purchase and finance obligations
Aircraft 27,523,603 2,781,812 11,960,993 12,780,798
Vehicles 16,187 7,740 8,447 -
Secured Loans 600,000 200,000 400,000 -
Indebtedness
The following table summarizes our secured and unsecured long-term indebtedness and subordinated debt obligations
as of September 30, 2004. We had no short-term indebtedness as of September 30, 2004.
As of September 30, 2004
Secured
HDFC Limited
(Secured by hypothecation of simulator and other accessories
thereto)
600
Unsecured
Hire Purchase/Finance Lease installments for aircraft 27,524
Hire Purchase/Finance Lease installments for vehicles 16
Subordinated Debt from IDFC
(collateral in the form of a bank guarantee to the extent of 35% of
the outstanding loan)
3,341
Total 31,481
Under the U.S. Exim-guaranteed hire purchase finance agreements relating to 19 of our aircraft, we are required to
comply with certain financial covenants. Pursuant to agreements relating to nine of the aircraft, at the end of each fiscal
quarter our ratio of EBITDAR to fixed charges must be at least 1.1:1 and we may not pay cash dividends in excess of
US$1.70 million. The covenants relating to the other 10 aircraft require that, at the end of each fiscal year, we have a
fixed charge ratio of at least 1.1:1 and a ratio of total liabilities to tangible net worth of not more than 3:1. In all cases,
financial ratios are calculated on the basis of particular terms defined in the agreements, and not on the basis of Indian
GAAP or IFRS.
The subordinated debt facility has been availed from IDFC and is subordinated to all present and future indebtedness of
our Company whether secured or unsecured. Under our IDFC subordinated debt agreement, we are required to
maintain a certain EBITDA to debt ratio, debt to equity ratio, net profit margin and closing cash balance for each fiscal
year. Our inability to comply with any of the required financial covenants could result in default under our hire
purchase or debt agreements. As of November 30, 2004, we were in compliance with the covenants of all of our hire
purchase and debt agreements.
Off-Balance Sheet Arrangements
None of our operating lease obligations are reflected on our balance sheet. We are responsible for all maintenance,
insurance and other costs associated with operating these aircraft; however, we have not made any residual value or
other guarantees to our lessors.
Quantitative and Qualitative Disclosures about Market Risk
Aircraft Fuel
84
Under existing policies of the Government, domestic airlines such as us are not permitted to enter into hedging
transactions to mitigate increases in the price of ATF. Accordingly, we are dependent upon three Government-
controlled companies for our fuel requirements and are subject to variations in the price of ATF at rates fixed by such
companies. For a discussion on various factors that may affect the price of ATF, see “Factors affecting our Results of
Operations - Price of Aviation Turbine Fuel” on page 60 of this Draft Red Herring Prospectus.
Exchange Rate Risk
We face exchange rate risk to the extent that our expenses and debt repayments are denominated in currencies other
than Indian rupees. Since we derive certain revenues in U.S. Dollars, we have a natural hedge to mitigate a part of our
exchange rate risk.
In fiscal 2004, approximately 15% of our Total Revenues, which are derived from tickets sold in foreign currencies and
25% of our Total Expenses, such as aircraft and engine maintenance services, aircraft lease payments, computer
reservation systems costs and aircraft insurance, were in currencies other than Indian Rupees, predominantly U.S.
Dollars. In addition, 32.2% of our total indebtedness (including subordinated debt) as of September 30, 2004 is foreign
currency denominated.
To manage exchange rate risk, we enter into derivative contracts with various counterparties to protect ourselves
against a depreciation of the Rupee in relation to the U.S. Dollar. As of September 30, 2004, there were no foreign
currency forward contracts outstanding.
While we believe that our forward contracts, together with our U.S. dollar denominated revenue, protect us against
certain short-term swings in the Rupee and U.S. Dollar exchange rate, there can be no assurance that they will fully
mitigate any adverse changes in exchange rates.
Interest Rate Risk
Our financial results are subject to changes in interest rates, which may affect our debt service obligations and our
access to funds. As of September 30, 2004, an outstanding amount of Rs.10,134 million, or approximately 32.2% of our
total indebtedness (including subordinated debt) is on a floating rate basis and linked to LIBOR.
Our floating rate loans are linked to three month and six month LIBOR. Any increase in LIBOR could increase our
interest costs on these loans. For example, a 1% increase in LIBOR will result in an additional interest cost of
approximately Rs.100 million in fiscal 2005, based on our existing debt as of September 30, 2004, not considering our
derivative contracts. We use derivative instruments to hedge against adverse movements in interest rates with the
objective of reducing the cost of debt. The underlying notional amounts covered as of September 30, 2004 was
Rs.21,267 million, which represents approximately 75% of the total exposure (excluding subordinated debt). The value
of these derivative instruments are subject to movements in the interest rates and may result in a negative carry from
time to time.
Inflation
In recent years, India has not experienced significant inflation, and accordingly inflation has not had any material
impact on our business and results of operations. According to CMIE inflation in India was approximately 3.7%, 3.4%,
5.4% in fiscal 2002, 2003 and 2004, respectively. However, over the past few months, inflation rates have increased
significantly. According to the Office of the Economic Advisor, Department of Industrial Policy and Promotion, the
annual rate of inflation, calculated on a point to point basis, was provisionally 6.73% for the week ended December 11,
2004 compared to an inflation rate of 5.80% for the corresponding week in 2003. Although the Government has
initiated several economic measures to curb the rise in inflation rates, it is unclear at this stage whether these measures
will have the desired effect. This sharp rise in inflation rates in recent months may adversely affect growth in the
Indian economy and our results of operations.
Unusual or Infrequent Events or Transactions
Except as described elsewhere in this Draft Red Herring Prospectus, there have been no events or transactions to our
knowledge which may be described as “unusual” or “infrequent”.
Significant economic/regulatory changes
Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by persons
resident outside India requires the prior approval of the FIPB. However, the Ministry of Civil Aviation, Government of
India, pursuant to a Notification No. AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette
85
of India on November 13, 2004) has permitted foreign direct investment in the “Air Transport Services (Domestic
Airlines)” sector up to 49% through the “automatic route” (i.e. without the prior approval of the FIPB). The November
10, 2004 notification also permits investment by an NRI up to 100% in an Indian domestic airline company under the
“automatic route”. The notification also clarifies that no direct or indirect equity participation by foreign airlines is
permitted in a domestic airline. Amendments to the FEMA Regulations to reflect the policy changes notified in the
November 10, 2004 notification are awaited.
The Government of India has recently announced that the Union Cabinet has approved a policy change to allow private
domestic air carriers to fly to additional international destinations. This policy is not yet effective. Any delay or
inability to obtain permissions and approvals from relevant regulatory authorities could have a material adverse effect
on our international expansion strategy and results of operations.
The Indian aviation regulatory framework is undergoing changes. We cannot yet assess how the evolving regulatory
framework will affect our business and results of operations. No assurance can be given that these or other changes in
the Indian airline industry regulations will not have a material adverse effect on our business and results of operations.
Known trends or uncertainties
Other than as described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, to our knowledge
there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on
revenues or income of our Company from continuing operations.
Future relationship between costs and income
Other than as described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, to our knowledge
there are no known factors which will have a material adverse impact on the operation and finances of our Company.
New product or business segment
Other than as described in this Draft Red Herring Prospectus, to our knowledge, there are no new products or business
segments.
Seasonality of business
Seasonal variations in traffic affect our results of operations. We generally experience lower Passenger Load Factors
(defined as the percentage of aircraft seating capacity that is actually utilized) during the first half of each fiscal in
comparison to that experienced during the remainder of the year. In addition, some of our areas of operations in North
and East India experience bad weather conditions in winter, resulting in additional expenditure caused by delayed and
cancelled flights and providing accommodation to passengers. Given our high proportion of fixed cost obligations,
these seasonal factors are likely to cause our results of operations to vary from quarter to quarter during a particular
financial year.
Competitive conditions
The Company expects competition to intensify from existing and potential airlines in India. For further details please
refer to the discussions of our competition in the sections entitled “Risk Factors” and “Business” beginning on pages xi
and 36 in this Draft Red Herring Prospectus.
Significant developments after September 30, 2004 that may affect our future results of operations
Except as stated elsewhere in this Draft Red Herring Prospectus, to our knowledge no circumstances have arisen since
the date of the last financial statements as disclosed in this Draft Red Herring Prospectus which materially and
adversely affects or is likely to affect, the operations or profitability of our Company, or the value of our assets or our
ability to pay our material liabilities within the next twelve months.
Except as stated elsewhere in this Draft Red Herring Prospectus, there is no subsequent development after the date of
the Auditor’s Report which we believe is expected to have a material impact on the reserves, profits, earnings per share
and book value of our Company.
86
New Accounting Standards
Other than the impact of AS-29, as discussed elsewhere in this Draft Red Herring Prospectus, our management does not
believe that there will be a material impact on our financial statements on account of changes in accounting policies
under Indian Accounting Standards as announced by Institute of Chartered Accountants of India.
87
MANAGEMENT
Board of Directors
As per our Articles of Association, we cannot have less than 3 nor more than 15 Directors. We currently have 12
Directors.
The following table sets forth details regarding our Board of Directors as of the date of this Draft Red Herring
Prospectus:
Name, Designation, Father’s Name,
Address, Occupation and Term
National of
Age
(years)
Other Directorships
Mr. Naresh Goyal
Chairman
(S/o Mr. Jagdish Rai Goyal)
72, Jupiter Apartment, Anstey Road
Off Altamount Road
Mumbai 400 026, India
Term: Non-retiring Director
India 55 Jetair Private Limited (Chairman)
Tail Winds Limited
International Cargo Carriers Private Limited
Jet Enterprises Private Limited
Vimpal Holdings Private Limited
Jetair Tours Private Limited
Jet Aviation Private Limited
UPS Jetair Express Private Limited
UPS Jetair Logistics Private Limited
Jet Airways LLC
Jetair Worldwide AG
Mr. Ali Ismail Ghandour
Director
(S/o Mr. Ismail Ghandour)
PO Box 3371
Amman 11181
Jordan
Term: Until next Annual General Meeting
Jordan 73 Aram International Investments (Chairman)
Jordan Tourism Investments (Chairman)
Tail Winds Limited
Annhar Media
New TV
Mr. J.R. Gagrat
Director
(S/o Mr. Rustam Ardeshir Gagrat)
Buena Vista, Pochkhanwala Road
New Worli
Mumbai 400 025, India
Term: Until next Annual General Meeting
India 72 Phil Corporation Limited
Hindustan Thompson Associates Private Limited
Tail Winds Limited
Indo-Aden Salt Manufacturing and Trading Company Private
Limited
Potash Fertilisers (India) Private Limited
Bombay Incorporated Law Society
The Cricket Club of India Limited
Mr. Victoriano P. Dungca
Director
(S/o Placido P. Dungca)
27675 Vista Bahia Way
Hayward, California 94542
USA
Term: Until next Annual General Meeting
USA 68 Aviorealco LLC
UPS Jetair Express Private Limited
Tail Winds Limited
UPS Jetair Logistics Private Limited
Jet Airways of India, Inc.
Jetair Business Solutions Private Limited
Mr. Javed Akhtar
Independent Director
(S/o Mr. Jannisar Akhtar)
702, Sagar Samrat, Green Field
Near Juhu Post Office
Mumbai 400 049, India
Term: Until next Annual General Meeting
India 59
Mr. I.M. Kadri
Director
(S/o Mr. Mustafa Hasan B. Kadri)
4A, Shiv Sagar Estates
Dr. AB Road, Worli
Mumbai 400 018, India
Term: Until next Annual General Meeting
India 74 Indian Resort Hotels Limited
Kadri Consultants Private Limited
Kadri Consultants LLC
The Cricket Club of India Limited
Mr. Charles A. Adams
Director
(S/o Mr. Charles Harold Adams)
115, Nayatt Road
Barrington, Rhode Island 02806
USA
Term: Until next Annual General Meeting
USA 64 Jetair Business Solutions Private Limited
88
Mr. P.R.S. Oberoi
Director
(S/o Rai Bahadur M.S. Oberoi)
Villa Ashiana, Kapashera
Bijwasan
New Delhi – 110 037
Term: Until next Annual General Meeting
India 75 EIH Limited (Chairman)
Oberoi Hotels Private Limited (Chairman)
EIH Associated Hotels Limited (Chairman)
Island Resort Limited
Indus Hotels Corporation Limited
Nandi Hills Hotels & Resorts Limited
Mashobra Resort Limited
Mercury Car Rentals Limited
Mercury Travels Limited
Mumtaz Hotels Limited
Island Hotel Maharaj Limited
Oberoi Camarco Limited
Oberoi Kerala Hotels & Resorts Limited
Rajgarh Palace Hotels & Resorts Limited
Aravali Polymers Private Limited
Balamurie Island Resorts Private Limited
Bombay Plaza Private Limited
ETA Engineering Private Limited
Oberoi Buildings & Investments Private Limited
Oberoi Holdings Private Limited
Oberoi Investments Private Limited
Oberoi Properties Private Limited
Oberoi Plaza Private Limited
Oberoi Leasing & Finance Company Private Limited
CCA Leisure Services Private Limited
Mercury Himalayan Explorations Private Limited
EIH Holdings Limited
EIH International Limited
Hungaria Oberoi Rt.
Oberoi Corporation Limited
Oberoi Holdings Hong Kong Limited
Oberoi Investment Limited
Oberoi Mauritius Limited
Oberoi Services Pte. Ltd.
Saudi Oberoi Company Limited
EIH Marrakesh Limited
Mr. Aman Mehta
Independent Director
(S/o Mr. Som Raj Mehta)
4/7, Shanti Niketan
New Delhi 110 021, India
Term: Until next Annual General Meeting
India 58 PCCW Limited
Raffles Holdings Limited
Wockhardt Limited
Tata Consultancy Services Limited
Vedanta Resources Plc.
Dr. Vijay Laxman Kelkar
Independent Director
(S/o Mr. Laxman Vishnu Kelkar)
CI/11, South End Road
Lodhi Gardens
New Delhi 110 003
Term: Until next Annual General Meeting
India 62 IDFC Asset Management Company Limited
Tata Chemicals Limited
Mr. Satyan G. Pitroda
Independent Director
(S/o Mr. Gangaram T. Pitroda)
301, Trinity Lane, Oak Brook
Illinois 60523, USA
Term: Until next Annual General Meeting
India 62 WorldTel Limited (Chairman)
M.T.I. International
C- Sam Inc.
Mr. Saroj K. Datta
Executive Director
(S/o Mr. Sailendra Prasad Datta)
2102, A/B/C, Odyssey
Hiranandani Gardens, Powai
Mumbai 400 076, India
Term: Until next Annual General Meeting
India 68 Jetair Private Limited
International Cargo Carriers Private Limited
Jetair Tours Private Limited
Jet Hotels Private Limited
Jet Aviation Private Limited
France Air Private Limited
World Air Private Limited
India Capitol Resource Services Private Limited
Jet Enterprises Private Limited
Vimpal Holdings Private Limited
Brief Biographies
Mr. Naresh Goyal, 55, a non-resident Indian national, is the chairman of the Company. He is the chairman of the
Board of Directors. Mr. Goyal holds a commerce degree and after completing his education in 1967, joined the travel
89
business and underwent extensive practical training with several foreign airlines. Mr. Goyal has over 37 years of
experience in the civil aviation industry.
In May 1974, Mr. Goyal established Jetair Private Limited, which is a leading GSA in India presently representing 15
international airlines and our Company. Mr. Goyal has been involved in developing studies of traffic patterns, route
structures, operational economies and flight scheduling, all of which have made him an authority in the world of
aviation and travel.
In 1992, as part of the ongoing diversification of his business interests, Mr. Goyal caused to be promoted our Company
for operating scheduled air services in India.
In recognition of his achievements, Mr. Goyal has been the recipient of several national and international awards. In
2000, he received the ‘Entrepreneur of the Year Award’ for Services from Ernst & Young and the ‘Distinguished
Alumni Award’ for distinguished performance as an entrepreneur. Other awards conferred on Mr. Goyal include the
‘Outstanding Asian Indian’ award for leadership and contribution to the global community given by the Indian
American Centre for Political Awareness in 2003, the Qimpro Gold Standard Award in 2002 and the Aerospace
Laurels Award for outstanding achievement in the field of commercial air transport, which has been awarded to him
twice, in April 2000 and February 2004. Mr. Goyal has also been recently elected to the Board of Governors of IATA
in June 2004.
Mr. Ali Ghandour, 73, a Jordanian national, has been a Director of the Company since February 1998. Mr. Ghandour
is a qualified aeronautical engineer from New York University, U.S.A. Mr. Ghandour has over 50 years of experience
in the civil aviation industry. He was an advisor to the late King Hussein of Jordan and was earlier the Chairman of the
Royal Jordanian Airlines. He has also been associated with the development of a number of airlines in the Middle East
Mr. Jehangir R. Gagrat, 72, an Indian national, has been a Director of the Company since March 1994. Mr. Gagrat
holds a law degree from Bombay University and has also qualified as a Solicitor of the Bombay High Court and as a
Solicitor of the Supreme Court of England. He is also an Advocate of the Supreme Court of India and a Notary of the
Union of India. Mr. Gagrat is a Partner in the law firms of Gagrat & Co. in India, and Gagrat & Gardi in Dubai. A
former President of the Bombay Incorporated Law Society, he has also served as a director of various financial
institutions, banks, public and private limited companies and he is also a trustee of various public and private trusts.
Between 1995 and 2002, Mr. Gagrat was a member of the committee constituted to review the SEBI (Substantial
Acquisition of Shares & Takeovers) Regulations, 1994. Mr. Gagrat has also been a member of the Rules Committee of
the Bombay High Court, an Honorary Secretary of the International Law Association (India Branch), Bombay Centre
and the Chairman of the Indirect Taxation Committee of the Indian Merchants Chambers.
Mr. Victoriano P. Dungca, 68, an American national, has been a Director of the Company since January 1999. Mr.
Dungca holds an MBA from Cornell University, U.S.A and is a Certified Public Accountant from the U.S.A. Mr.
Dungca has had a long and distinguished career with Philippine Airlines and retired as its Executive Vice President. He
is currently a financial advisor based in California, USA.
Mr. Javed Akhtar, 59, an Indian national has been a Director of the Company since March 1993. Mr. Akhtar holds a
Bachelor of Arts degree. Mr. Akhtar is a well-known poet, lyricist, screenplay and scriptwriter and is a famous media
personality. Mr. Akhtar has won the Filmfare Award thirteen times, and is a five-time National Award winner for the
best lyricist.
Mr. Iftikar M. Kadri, 74, an Indian national, has been a Director of the Company since February 2000. Mr. Kadri
holds a Bachelors degree in Engineering from Pune University. He is a member of the Council of Architecture, New
Delhi and a Fellow of the Indian Institute of Architects and a fellow of the Indian Institute of Interior Design. Mr.
Kadri set up his practice as an architect in 1960 and is actively involved with the problems relating to rebuilding of
dilapidated buildings in Mumbai and exploring technological solutions for mass housing schemes. He was also a
member of the Steering Committee appointed by the Government of Maharashtra to suggest strategies for solving the
housing problems of Mumbai. Mr. Kadri was awarded a citation in 1993 as an Outstanding Architectural Engineer by
the Institution of Engineers in India. He is also the general secretary of the prestigious Nehru Centre in Mumbai.
Mr. Charles Arthur Adams, 64, an American national, has been a Director of the Company since September 2003.
Mr. Adams hold a Bachelors of Science degree in Marketing from the University of Hartford, U.S.A. and has 40 years
of experience in the aviation industry. After a distinguished career in the United States Army, Mr. Adams joined Trans
World Airlines, or TWA, in 1965 and held numerous management positions with TWA in the USA, Europe and Asia.
He retired from TWA in 1991 and subsequently then joined United Parcel Service, or UPS, as the Executive Vice
President for UPS Yamato Japan. He retired from UPS in 2003 as President, Asia Pacific.
90
Mr. P.R.S. Oberoi, 75, an Indian national, has been a Director of the Company since March 2004. He is a graduate in
Hotel Management from Lausanne, Switzerland. He is the Chairman and Chief Executive Officer of EIH Limited and
he is also the Chairman of Oberoi Hotels Private Limited and the major shareholder of EIH Limited. Besides providing
leadership for the management of Oberoi hotels across six countries, Mr. Oberoi has been instrumental in pioneering
the development of new Oberoi hotels and resorts. Mr. Oberoi is credited with placing India on the international luxury
traveller’s map and redefining architectural and design standards in luxury hospitality.
Mr. Aman Mehta, 58, an Indian national, has been a Director of the Company since September 2004. Mr. Mehta
holds a Bachelors degree in Economics from Delhi University. He joined the HSBC group in 1968. He subsequently
held several senior positions with the HongKong Shanghai Banking Corporation and was appointed Chief Executive
Officer of HSBC Asia Pacific in January 1999, a position he held until his retirement in December 2003. Mr. Mehta is
also a member of the governing board of the Indian School of Business, Hyderabad, and of the Indian Council for
Research and International Economic Relations, New Delhi. Mr. Mehta serves as an independent director on the
boards of several companies in India as well as in the UK, Hong Kong and Singapore.
Dr. Vijay Kelkar, 62, an Indian national, was appointed as a Director of the Company in November 2004. Mr. Kelkar
holds a Ph.D. from the University of California, Berkeley, USA. He was a senior faculty member of the Administrative
Staff College of India at Hyderabad. Dr. Kelkar joined the Planning Commission in 1973 and was Economic Advisor
in the Ministry of Commerce in 1977. He was Secretary to the Economic Advisory Council to the Prime Minister
between 1985 to 1988 and Director-International Trade, UNCTAD, Geneva between 1991 to 1994. He was
subsequently Petroleum Secretary between 1994 to 1997 and Finance Secretary between 1998 to 1999.
Dr. Kelkar has been an Executive Director of the International Monetary Fund, overseeing its operations in India and
South Asia between 1999 to 2002. He was also the Chairman of the Tariff Commission and an Advisor to the Finance
Minister , holding the rank of a Minister of State in the Government of India.
Mr. Satyan G. Pitroda, 62, an Indian national, was appointed a Director of the Company on December 21,2004. Mr.
Pitroda holds a Masters degree in Physics from India and a Masters degree in Electrical Engineering from the Illinois
Institute of Technology, Chicago, USA. Mr. Pitroda began his illustrious career at GTE and formed Wescom Switching
Inc. In 1980 Wescom was acquired by Rockwell International where Mr. Pitroda became Vice President, overseeing
Rockwell’s telecom business worldwide. He held this position until 1983.
In 1984, Mr. Pitroda returned to India and founded the Centre for Development of Telematics. In 1987 he became an
advisor to the Prime Minister of India, with the rank of a Minister, on national technology missions relating to drinking
water, literacy, immunization, oil seeds, milk and telecom. Mr. Pitroda was the founding Chairman of the Telecom
Commission in India, responsible for national and international telecommunication operations, policies and
administration, with over 500,000 employees. As the Chairman of the Commission, Mr. Pitroda revolutionized
telecommunications in India and was successful in getting it accepted as a fundamental component of modernization of
India.
In 2000, Mr. Pitroda was invited by the UN Secretary General to join a special Advisory Committee on Information
and Communications Technology. Mr. Pitroda has recently been appointed a member of the National Advisory
Council, in the Prime Minister’s Office in India under the chairmanship of Ms. Sonia Gandhi. Currently, Mr. Pitroda is
the Chairman of WorldTel Limited. He is also the Chairman and Founder of several high-technology start-up
companies in the US, Europe and India. Mr. Pitroda is also the founding Chairman of a non-profit Foundation for
“Revitalization of Local Health Traditions in India.” Mr. Pitroda holds over 50 worldwide patents.
Mr. Saroj K. Datta, 68, an Indian national, has been a Director of the Company since March 1993. Mr. Datta holds a
Masters degree in Economics from Delhi University. Mr. Datta has over 40 years of experience in civil aviation in
India and abroad. He joined Air India in 1962 and rose to the position of Deputy Director, Planning and International
Relations in 1977. In 1987, he left Air India to join in a senior position in Kuwait Airways. He has been involved with
the Company since its inception and is currently the only Executive Director of the Company. His gross compensation
during fiscal 2004 was Rs.3,713,371.
Shareholding of Our Directors in our Company
Mr. Naresh Goyal holds 9,995 Equity Shares as a nominee of Tail Winds. Mr. Saroj K. Datta holds one (1) Equity
Share of our Company. Our Articles of Association do not require our Directors to hold any qualification shares in our
Company.
Term of Office
91
Mr. Naresh Goyal is currently the only non-retiring Director of the Company and, in accordance with our Articles, Mr.
Goyal is entitled to continue as the non-retiring chairman of the Board for as long as he is willing to continue as a
director and the Chairman of the Company.
All the other Directors currently hold office until the next Annual General Meeting of the Company. Mr. Saroj K.
Datta is an Executive Director of the Company and his appointment is subject to the Articles of Association of the
Company and also governed by a contract between him and the Company.
Mr. Naresh Goyal has the right to appoint one third of our Directors who will be non-retiring Directors under our
Articles. See “Main Provisions of Articles of Association” on page 171 of this Draft Red Herring Prospectus.
Compensation of Our Directors
For details of the compensation of Mr. Saroj K. Datta, our Executive Director, please refer to the section “Statutory and
Other Information” on page 165 of this Draft Red Herring Prospectus. Our other Directors on the Board are entitled to
sitting fees as is permissible under the Companies Act, and actual travel, boarding and lodging expenses for attending
the Board/ Committee meetings. Our other directors may also be paid commission and any other amounts as may be
decided by the Board in accordance with the provisions of our Articles, the Companies Act and any other applicable
Indian laws and regulations.
Interest of Directors
All our directors, including independent directors, may be deemed to be interested to the extent of fees, if any, payable
to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration and
reimbursement of expenses payable to them under our Articles of Association. The Executive Director will be
interested to the extent of remuneration paid to him for services rendered as an officer or employee of the Company.
All our directors, including independent directors, may also be deemed to be interested to the extent of Equity Shares, if
any, already held by them or that may be subscribed for and allotted to them, out of the present Offer in terms of the
Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the said Equity
Shares.
Our directors, including independent directors, may also be regarded as interested in the Equity Shares, if any, held by
or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors,
members, partners or trustees.
Changes in Our Board of Directors during the Last Three Years
Name Date of
Appointment
Date of Cessation Reason
Sir Harry Tirvengadum December 9, 2001 Resigned
Mr. Shatrughan Sinha June 28, 2002 Did not seek reappointment
HH Maharaja Gaj Singh II of Jodhpur July 22, 2002 Resigned
Mr. Gert van der Veer September 20, 2003 Did not seek reappointment
Mr. Dipankar Basu September 29, 2004 Did not seek reappointment
Mr. T.N.V. Ayyar September 29, 2004 Did not seek reappointment
Mr. Charles A. Adams
September 20, 2003 Appointed Director until next Annual
General Meeting
Mr. P.R.S. Oberoi
March 29, 2004 Appointed Director until next Annual
General Meeting
Mr. Aman Mehta
September 29, 2004 Appointed Director until next Annual
General Meeting
Dr. Vijay Kelkar
November 18, 2004 Appointed Director until next Annual
General Meeting
Mr. Satyan G. Pitroda
December 24, 2004 Appointed Director until next Annual
General Meeting
Corporate Governance
The provisions of the listing agreements to be entered into with the Stock Exchanges with respect to corporate
governance become applicable to us at the time of seeking in-principle approval of the Stock Exchanges. We have
complied with such provisions, including with respect to the appointment of independent Directors to our Board and
the constitution of the following committees of the Board: the Audit Committee, the Remuneration Committee and the
Investors’ Grievances Committee. We undertake to take all necessary steps to comply with all the requirements of the
guidelines on corporate governance and adopt the Corporate Governance Code as per Clause 49 of the listing
agreement to be entered into with the Stock Exchanges, as would be applicable to the Company upon listing of its
Equity Shares.
92
Committees of the Board
Audit Committee
The terms of reference of Audit Committee comply with the requirements of Clause 49 of the listing agreement to be
entered into with the Stock Exchanges. The Committee consists of all non-executive directors, with the majority being
independent directors. The Audit Committee currently comprises of Mr. Aman Mehta as Chairman, Dr. Vijay Kelkar
and Mr. Victoriano P. Dungca.
The Audit Committee provides directions to and reviews functions of the Company’s audit department. The Committee
evaluates internal audit policies, plans, procedures and performance and reviews the other functions through various
internal audit reports and other year-end certificates issued by the statutory auditors. Quarterly and annual accounts will
be placed before the Audit Committee, prior to being presented to the Board along with the recommendations of the
Audit Committee.
Remuneration Committee
The Remuneration Committee consists of non-executive directors, with the Chairman being an independent director.
This committee currently comprises of Dr. Vijay Kelkar as the Chairman, Mr Victoriano P. Dungca and Mr. Charles A.
Adams. The Renumeration Committee performs the functions of a renumeration committee as recommended in the
listing agreement to be entered into with the Stock Exchanges. It will determine the Company’s compensation policy
and other benefits for executive directors.
Investors’ Grievances Committee
The Investors’ Grievances Committee looks into redressal of shareholder and investor complaints, issue of
duplicate/split/consolidated share certificates, allotment and listing of shares and review of cases for refusal of
transfer/transmission of shares and debentures and reference to statutory and regulatory authorities. The Investors’
Grievances Committee currently comprises of Mr. I.M. Kadri as the Chairman, Mr. Charles A. Adams and Mr. Saroj K.
Datta.
Key Managerial Personnel
Mr. Saroj K. Datta, 68, is an Executive Director; please refer to page 90 of this Draft Red Herring Prospectus under
the Section “Brief Biographies” of the Directors.
Mr. Wolfgang Prock-Schauer, 48, an Austrian national, joined the Company as Chief Executive Officer in June 2003,
and is responsible for the operations of the airline. He has Masters Degree in Economics and Business Administration
from the University of Vienna. Mr. Prock-Schauer has been associated with the airline industry for over 23 years.
Prior to joining the Company, he was Executive Vice President, Alliance and Long Term Planning with Austrian
Airlines. He has also served as Chairman of the Star Alliance Management Board. Within the Company, air safety,
finance, financial controls, planning, network and alliances and all staff functions report to him. His gross
compensation after his appointment during fiscal 2004 was Rs.13,888,207.
Mr. Peter Luethi, 60, a Swiss national, joined the Company as its Chief Operating Officer in May 2003. He has a
Diploma in Commerce and has completed a Senior Management program at Harvard University. He has also
participated in various international aviation courses and seminars. Mr. Luethi has over 35 years experience in the
airline industry. His last position as Chief Operating Officer was with Swissair, Zurich, Switzerland. During these
years, he has held senior positions in marketing, sales, operations, external relations and general administration, both in
and outside Switzerland. He is directly responsible for all the operating departments of the Company, including
engineering and maintenance, in-flight, airport services, support services, service and product quality, information
technology, sales, marketing and customer care. His gross compensation after his appointment during fiscal 2004 was
Rs.13,063,259.
Lt. Gen. (Retd.) Inder Kumar Varma, 63, an Indian national, joined the Company in March 2002 as Executive Vice
President. Lt. Gen. Varma has served in the Indian Army for 40 years. He has completed his Masters in Science in
Defense Studies from Madras University. He held various positions in the Indian Army, including Military Secretary -
Army Headquarters, General Officer – Commanding, Director - General Military Operations and Commandant, Indian
Military Academy. He has headed delegations on matters relating to national security and provided support in key
areas such as training, human resource development and relief management in the Indian Army. Lt. Gen. Varma has
been presented with the country’s highest military awards in recognition of his services, including the PVSM. Within
93
the Company, he is directly responsible for the functions of human resources, flight operations, security and corporate
affairs. His gross compensation in fiscal 2004 was Rs.3,456,149.
Mr. Carl Saldanha, 53, an Indian national, joined the Company in January 2004 as Executive Vice President in charge
of Finance, Treasury and Strategy. Mr. Saldanha holds a Bachelor of Technology degree from the Indian Institute of
Technology in Mumbai and a Master’s degree in Business Administration from the Asian Institute of Management in
the Philippines. Mr. Saldanha worked for 15 years with the Chase Manhattan Bank in Hong Kong and Mumbai, and
was the Country Head for South Asia. Before joining the Company, Mr. Saldanha was the Director in charge of
corporate banking for Deutsche Bank in India for five years. His gross compensation after his appointment during
fiscal 2004 was Rs. 1,069,358.
Mr. Purushotham Baliga, Vice President - Support Services, 71, an Indian national, is a qualified aircraft
maintenance engineer from the Civil Aviation Training Centre, Allahabad and was associated with Air India for 37
years. At the time of his retirement from Air India, he held the position of Director, Engineering. As a member of the
start up team, Mr. Baliga has been with Jet Airways since 1992 and carries with him over 50 years of experience in
aviation. He is responsible for the Property and Facilities Department and also for providing support services to
various departments in obtaining regulatory clearances. He is also a fellow of the Aeronautical Society of India. His
gross compensation in fiscal 2004 was Rs.3,256,800.
Mr. Sitham Nadarajah, Vice President – Technical, 58, a Malaysian national, has over 35 years experience in the
aviation industry. Mr. Nadarajah completed his mechanical engineering from Singapore Polytechnic and had undergone
various executive management programs and has attended a large number of aviation courses overseas. He also holds
UK and Malaysian aircraft maintenance engineer’s licenses. He started his career as a Line Engineer with Malaysia
Singapore Airlines in 1969 and was with Malaysia Airlines from 1972. His last position with Malaysian Airline
Systems was as Vice President, Aerospace Division. He joined Jet Airways in January 2001 and is responsible for the
overall engineering and maintenance activities of the Company. His gross compensation in fiscal 2004 was Rs.
11,064,595.
Capt. K. Mohan, Vice President - Flight Operations, 63, an Indian national, joined the Company in September 2002,
after a long and distinguished period of service with the Indian Air Force and with Air India. He is responsible for the
overall co-ordination of Pilots activities and the Flight Despatch Department. He retired from Air India as Director
Operations. He is a qualified examiner on B737-400/B747-200 and B707 airplanes with 18,000 hours of flying
experience. He has been a member of the IATA regional coordinating group, Asia-Pacific region. He has graduated
from the Air Force Academy, Hyderabad. His gross compensation in fiscal 2004 was Rs.1,865,000.
Mr. P. K. Sinha, Vice President – Passenger & Cargo Sales, 57, an Indian national, joined the Company in January
2004. He has an Honors Degree from Patna University. He comes to Jet Airways from Air India with a wealth of
experience of nearly 34 years. He has worked both in India and abroad in various capacities with Air India. His last
position with Air India was as its resident director - Delhi. His areas of expertise are sales and marketing. He is
currently in charge of passenger and cargo sales. His gross compensation after his appointment during the fiscal 2004
was Rs.696,260.
Dato K. Jeyakanthan, Vice President - Engineering and Maintenance, 57, a Malaysian national, is an Honors
graduate in Aeronautical Engineering from Hatfield University, London. He joined Malaysian Airline Systems in 1971
in the Technical Services department. In a career spanning over 27 years, he has had wide ranging experience in quality
assurance and sales and marketing with Malaysian Airlines. He is a Fellow of the Royal Aeronautical Society of the
U.K. and a chartered engineer of U.K. His last position with Malaysian Airlines System before joining the Company in
March 1998 was Manager - Engineering Marketing and Sales. He is in charge of the aircraft projects and engineering
support services department. He was bestowed the title of Dato by his Royal Highness Sultan of Pahang, Malaysia in
2001. His gross compensation in fiscal 2004 was Rs.12,525,034.
Capt. N. Malkani, Vice President - Flight Operations, Training & Line Support Services, 56, an Indian national,
has been with the Company since its inception. He has a general certificate of education “A” level from Cambridge
University, England. He joined Jet Airways as a Senior Commander for the Boeing 737s. Prior to joining Jet Airways,
he was with Indian Airlines as a flight instructor. He has been promoted in the Company to the position of an examiner
and to the post of Vice President. He is responsible for the training and development of pilots. His gross compensation
in fiscal 2004 was Rs.5,802,428.
Mr. Prasun Sengupta, Vice President - Corporate Administration, 52, an Indian national, started his career with
the Tata Administrative Service in 1972 after finishing his MBA from The Indian Institute of Management, Kolkatta.
He was seconded to the Indian Hotels Co. Ltd. in 1973. His areas of work included corporate strategy, acquisitions,
international administration and structured finance. Mr. Sengupta was closely associated with the growth of the Taj
Group into one of the largest hotel and hospitality chains in Asia (outside Japan) and he has served on the board of
94
directors of Taj Group companies in India and abroad. He joined Jet Airways in May 1998 and is incharge of Corporate
Administration besides providing assistance and support to the Chairman’s office. His gross compensation in fiscal
2004 was Rs.2,472,228.
Ms. Nandini Verma, Vice President - Corporate Communications and Public Relations, 50, an Indian national,
has 30 years of work experience of which 15 years have been in the hotel industry with international hotel chains such
as Hyatt and Intercontinental. She has received her Bachelor of Honors degree in Arts from Delhi University. She has
specialization in the areas of marketing and sales, marketing communications including advertising, corporate
communications and public relations and corporate affairs. She joined Jetair Limited to start its tourism and travel
division and after 11 years she joined Jet Airways in her present capacity. She is in charge of corporate communication
and public relations function of the organization. She represents Jet Airways on the tourism and aviation committees of
various chambers of commerce and industry and also the World Travel and Tourism Council. Her gross compensation
in fiscal 2004 was Rs.2,145,379.
Mr. Rajesh Verma, Vice President – Customer Services & Inflight, 46, an Indian national, was with the ITC
Welcome Group for 13 years where the last position he held was Resident Manager - Windsor Manor, Bangalore. He
joined the Company in March 1996 and is in charge of the airport services, inflight functions of the Company. He has a
graduate degree in Economics and a Diploma in Business Management. His gross compensation in fiscal 2004 was
Rs.3,548,634.
Mr. Rajesh Sharma, Vice President – Controller, 42, an Indian national, is a qualified Chartered Accountant and
joined the company in August 1995 as Head of Internal Audit. During his association he has also been in charge of
purchase and financial control functions of the Company. In May 2004, he has been appointed as the Vice President –
Controller and is directly responsible for commercial and revenue accounting, MIS and budgeting as well as financial
control functions and administration. Mr. Sharma has wide experience in various functional areas and is more focused
on cost controls and cost reduction measures in the Company. Prior to joining the Company, he worked with M/s.
Bayer (India) Ltd., a German multinational company for a period of 8 years as head of its internal audit. He has also
been associated as a qualified examiner with the Indian Merchant of Chambers for the Ramkrishna Bajaj National
Quality Awards. His gross compensation in fiscal 2004 was Rs.2,398,816.
Mr. Ashok Barimar, General Counsel & Vice President – Legal, 53, an Indian national, joined the Company in June
1999. He is totally responsible for all legal matters and litigation cases involving the Company. He holds a LLB
Degree as also a Diploma in Business Management. He has been a practicing advocate and has worked with several
reputed business houses such as the Birlas and the Hindujas. His last assignment was with Satyam Computers. His
gross compensation in fiscal 2004 was Rs.2,753,133.
Ms. Ragini Chopra, Vice President – North India, 51, an Indian national, is a management graduate from the Oberoi
School of Hotel Management. Ms. Chopra has spent 28 years with the Oberoi Hotels and Resorts in various functions
ranging from operations, sales and marketing, business development and corporate communications. She has wide
exposure in the fields of travel hospitality and tourism. She joined the Company in June 2004 as its Vice President –
North India. In her current assignment she oversees all major activities of the Company in North India and is part of the
senior management team involved with the organizations constant quest to services and revenues. Her remuneration
after her appointment upto November 2004 is Rs.1,140,333.
Mr. Gaurang Shetty, Vice President – Marketing, 48, an Indian national, has been with the Company since 1996. He
is a Science Graduate from Bombay University. Prior to joining the Company, he was with British Airways, as its
Marketing Manager-South Asia. He has had over 16 years experience with British Airways in the areas of customer
service, cargo and marketing. In the Company, he is responsible for marketing including the Yield Management
Systems, and Jet Privilege program, distribution, advertising and product/web initiatives. His gross compensation in
fiscal 2004 was Rs.1,475,198.
Ms. Sonu Kripalani, Vice President – Passenger Sales, India, 45, a graduate in Psychology from Elphinstone
College in Mumbai. She completed a Diploma in Travel and Tourism Management from KC College of Management
Studies, Mumbai. She has over 23 years experience in the travel field in domestic and international sales, reservation
and ticketing gained through reputed travel agencies. She gathered wide experience in airline sales with Jetair. She
joined the Company in February 1993 and currently heads the Passenger Sales department in the capacity of Vice
President – Passenger Sales, India. The position entails monitoring and delivering passenger, yield and revenue
performance, initiating pricing policies, setting up procedures for the sales department. Her role involves close co-
ordination with service delivery departments like airport services, in-flight, catering in order to ensure maintenance of
standards of customer service. She is also actively involved in the development of the strategic vision of the company,
ensuring growth and profitability of the organisation. Her gross compensation in fiscal 2004 was Rs.979,535.
95
Mr. Sarat Chandran, Vice President – Human Resources, 37, an Indian national, joined Jet Airways in October
2003. He has a Post Graduate Diploma in Management from National Institute of Personnel Management, Kolkata. He
comes to Jet Airways from the Oberoi group of hotels with whom he worked for a span of 10 years. His areas of
expertise are in setting up progressive Human Resources processes and systems, compensation management,
performance management systems, recruitment and selection, training and development, oversee legal compliances and
facilitate the building of a work culture which enhances employee engagement to deliver business results. He is
responsible for human resources functions in the organization. His gross compensation after his appointment during
fiscal 2004 was Rs.1,291,871.
Mr. A. R. Rajaram, Company Secretary, 46, an Indian national, joined the Company in July 2004. He is a Fellow of
the Institute of Company Secretaries of India, received his LLB degree from Bangalore University and has over 25
years of experience in the legal and corporate secretarial field. Prior to joining Jet Airways he was Corporate Legal
Counsel and Company Secretary of BPL Ltd. His remuneration after his appointment up to November 30, 2004 is
Rs.825,602.
All our key management personnel are permanent employees of our Company.
Shareholding of Key Managerial Personnel
As of the date of this Draft Red Herring Prospectus, Mr. Saroj K. Datta, Mr. Carl Saldanha and Mr. Prasun Sengupta
each holds one Equity Share.
None of our other key managerial personnel hold any Equity Shares as of the date of this Draft Red Herring Prospectus
Bonus or Profit Sharing Plan for Key Managerial Personnel
There is no bonus or profit sharing plan for Key Managerial Personnel as of date of this Draft Red Herring Prospectus.
We intend to reward our employees for their contributions to us and create employee ownership in us. After the listing
of our Equity Shares in this Offer, we intend to adopt either an ESPS scheme or an ESOP scheme in which employees
and directors of the Company and Tail Winds can participate, subject to such approvals as may be necessary. The
criterion for selection will be determined by our Board and approved by our shareholders. The ESPS or ESOP scheme
will comply with the SEBI (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 and the
issuance of Equity Shares pursuant thereto will be subject to compliance with all applicable laws and regulations. We
propose to issue a maximum of 0.5% of our post-Offer paid-up equity capital for the ESPS or ESOP schemes. The
issue of Equity Shares pursuant to the ESPS or the adoption of the ESOP is likely to occur in fiscal 2006, although
there can be no assurance as to the timing of adoption of any such scheme which may occur in fiscal 2006 or thereafter.
Changes in our Key Managerial Personnel during the Last Three Years
Changes in our key managerial personnel in the last three years have been given below:
Name of Employee Designation Date of Appointment Date of Cessation Reason
Mrs. Anita Goyal Vice President – Sales and Marketing May 4, 1998 October 31, 2004 Resigned
Mr. Raman Kaicker Vice President – Finance December 1, 2003 April 30, 2004 Resigned
Mr. Bram Steller Executive Vice President – Commercial January 28, 2002 October 9, 2003 Resigned
Mr. Ananth Iyer Vice President – Finance April 1, 1995 August 31, 2003 Resigned
Capt. Roland Thomas Vice President – Operations January 1, 1998 June 30, 2003 Resigned
Mr. Vijay Wadagbalkar Company Secretary March 16, 1998 June 30, 2003 Resigned
Mr. N. Hariharan Vice President – Resource Management &
Development
April 1, 1999 January 2, 2003 Resigned
Mr. Stefano Forte Chief Executive Officer February 1, 2000 November 30, 2002 Resigned
Mr. Stephen Jaganathan Vice President – Technical Services September 16, 1999 October 31, 2001 Resigned
Mr. A.R. Rajaram Company Secretary July 5, 2004 Appointed
Ms. Ragini Chopra Vice President – North India June 15, 2004 Appointed
Mr. P.K. Sinha Vice President – Passenger & Cargo Sales January 15, 2004 Appointed
Mr. Carl Saldanha Executive Vice President – Finance January 12, 2004 Appointed
Mr. Sarat Chandran Vice President – Human Resources October 22, 2003 Appointed
Mr. Wolfgang Prock-Schauer Chief Executive Officer June 5, 2003 Appointed
Mr. Peter Luethi Chief Operating Officer May 1, 2003 Appointed
Capt. Krishna Mohan Vice President – Flight Operations September 25, 2002 Appointed
Lt. Gen. (Retd.) Inder K
Varma
Executive Vice President March 19, 2002 Appointed
96
OUR PROMOTERS AND GROUP COMPANIES
The Company was incorporated in 1992, by Mr. P.V.Venkatachalam and Mrs. Anita Goyal. The present promoters of
the Company are Tail Winds Limited and Mr. Naresh Goyal.
Mr. Naresh Goyal, 55 years, (Voter I.D. No.: Not available; Driving License No.:
Not applicable) a non-resident Indian national, is the chairman of the Company.
He is the chairman of our Board of Directors. Mr. Goyal holds a Bachelors of
Commerce degree and after completing his education in 1967, Mr. Goyal joined the
travel business and underwent extensive practical training with several foreign
airlines. Mr. Goyal has over 37 years of experience in the civil aviation industry.
In May, 1974, Mr. Goyal established Jetair Private Limited, which is a leading GSA
in India. Jetair Private Limited represents 15 international airlines and our Company.
Mr. Goyal has been involved in developing studies of traffic patterns, route
structures, operational economies and flight scheduling, all of which have made him
an authority in the world of aviation and travel.
In 1992, as part of the ongoing diversification of his business interests, Mr. Goyal caused to be promoted our Company
for operating scheduled air services in India.
In recognition of his achievements, Mr. Goyal has been the recipient of several national and international awards. In
2000, he received the ‘Entrepreneur of the Year Award’ for Services from Ernst & Young and the ‘Distinguished
Alumni Award’ for distinguished performance as an entrepreneur. Other awards conferred on Mr. Goyal include the
‘Outstanding Asian Indian’ award for leadership and contribution to the global community given by the Indian
American Centre for Political Awareness in 2003, the Qimpro Gold Standard Award in 2002 and the Aerospace
Laurels Award for outstanding achievement in the field of commercial air transport, which has been awarded to him
twice, in April 2000 and February 2004. Mr. Goyal has also been recently elected to the Board of Governors of IATA
in June 2004.
We confirm that the Permanent Account Number, Bank Account Number and Passport Number of Mr. Naresh Goyal
will be submitted to the NSE and the BSE at the time of filing of this Draft Red Herring Prospectus with them.
Tail Winds Limited
Tail Winds Limited is a private company limited by shares, incorporated in the Isle of Man on November 13, 1991
under the Companies Act 1931 to 1986 of the Isle of Man with registered number 56352C.
Tail Winds owns more than 99.99% of our Company. Tail Winds has its registered office at 1
st
Floor, 28 Victoria
Street, Douglas, Isle of Man, JM1 2LE. The total authorized share capital of Tail Winds is US$30 million and British
Pounds 100 (£100), comprising of 300,000 ordinary shares of U.S.$100 each and 1,000 “A” shares of British Pounds
one (£1.00) each. The total issued and paid-up capital of Tail Winds is US$20 million, consisting of 200,000 ordinary
shares of US$100 each and 100 non-voting deferred shares of British Pounds one (£1.00) each. The principal business
of Tail Winds is that of investment in our Company.
Shareholding Pattern
Mr. Naresh Goyal owns 100% of the share capital of Tail Winds Limited.
Board of Directors
The Board of Directors of Tail Winds Limited as of November 30, 2004 consists of Mr. Naresh Goyal, Mr. Peter Lai,
Mr. Ali Ghandour, Mr. J.R. Gagrat and Mr. Victoriano P. Dungca.
Financial Performance
The unconsolidated financial results of Tail Winds Limited for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
97
( in thousands, except share data)
Year ended March 31,
2002 2002
(1)
2003 2003
(1)
2004 2004
(1)
US$ Rs. US$ Rs. US$ Rs.
Total income 1,393.18 64,100.40 50.84 2,339.29 1.34 61.61
Profit/ (Loss) after tax 480.67 22,115.40 (615.86) (28,335.90) (984.42) (45,293.16)
Equity capital 20,000.15 920,207.04 20,000.15 920,207.04 20,000.15 920,207.04
Reserves and Surplus
(2)
896.82 41,262.60 (719.05) (33,083.31) (1,703.47) (78,376.47)
Earnings per share
(3)
2.40 110.58 (3.08) (141.68) (4.92) (226.47)
Book value per share
(3)
108.57 4,995.01 102.99 4,738.51 100.57 4,627.13
________________
(1) Solely for convenience translation, at an exchange rate of Rs.46.01 = U.S.$1.00 (the Interbank market mid rates as taken from Bloomberg rate as
of September 29, 2004).
(2) Net of miscellaneous expenditure not written off
(3) Face value of each equity share is U.S.$ 100.00, except for 1,000 ‘A’ shares of £1 each.
Promoter Group Companies and other Entities in India
• Jetair Private Limited
• International Cargo Carriers Private Limited
• France Air Private Limited
• Jet Hotels Private Limited
• Jetair Tours Private Limited
• Jet Enterprises Private Limited
• India Capitol Resource Services Private Limited
• Vimpal Holdings Private Limited
• Jet Aviation Private Limited
• Transmodal Services Private Limited
• SILO Trading Company Private Limited
• UPS Jetair Express Private Limited
• UPS Jetair Logistics Private Limited
• National Travel Service (partnership firm)
Jetair Private Limited
Jetair Private Limited was incorporated on July 19, 1974. The registered office is at Jetair House, 13, Community
Centre, Yusuf Sarai, New Delhi 110 049. The company is a GSA for 15 international airlines in India and for Jet
Airways.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mrs. Kumkum Singh
Mr. Naresh Goyal
Mr. Surinder Goyal
Mrs. Nirmala Goyal
International Cargo Carriers Private Limited
France Air Private Limited
Jet Enterprises Private Limited
Mr. Naresh Goyal as partner of National Travel Service
Mr. Surinder Goyal as partner of National Travel Service
20
18,000
10,200
200
50,200
50,000
26,200
133,180
10,800
0.01
6.02
3.41
0.07
16.80
16.73
8.77
44.58
3.61
98
Board of Directors
The board of directors of Jetair Private Limited consists of Mr. Naresh Goyal, Mr. Surinder Goyal and Mr. Saroj K.
Datta.
Financial Performance
The financial results of Jetair Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set forth
below:
(Rs. million, except share data)
Year ended March 31,
2002 2003 2004
Total income 1,032.24 977.81 1,128.70
Profit after tax 18.34 38.49 33.20
Equity capital 29.88 29.88 29.88
Reserves and Surplus
(1)
175.43 196.85 246.22
Earnings per share (Rs.)
(2)
59.57 125.04 110.27
Book value per share (Rs.)
(2)
687.12 758.82 924.04
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
International Cargo Carriers Private Limited
International Cargo Carriers Private Limited was incorporated on August 22, 1974. It is a GSA for Kuwait Airways
with regard to cargo services for Mumbai. The registered office is at Jetair House 13, Community Centre, Yusuf Sarai,
New Delhi 110 049.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mrs. Kumkum Singh
Mr. Naresh Goyal
Mr. Surinder Goyal
Jetair Private Limited
Jet Enterprises Private Limited
1
350
150
399
100
0.01
35.0
15.0
40.0
10.0
Board of Directors
The board of directors of International Cargo Carriers Private Limited consists of Mr. Naresh Goyal, Mr. Surinder
Goyal and Mr. Saroj K. Datta.
Financial Performance
The financial results of International Cargo Carriers Private Limited as at and for the years ended March 31, 2002, 2003
and 2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 6.04 7.02 6.45
Profit/ (Loss) after tax (3.52) (1.37) 0.43
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(5.38) (6.75) (6.32)
Earnings/ (Loss) per share (Rs.)
(2)
(3,521.0) (1,365.0) 428.0
Book value per share (Rs.)
(2)
(5,280.0) (6,645.0) (6,217.0)
________________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
99
France Air Private Limited
France Air Private Limited was incorporated on February 2, 1985. It is the GSA for Air France for passenger services.
The registered office is at Jetair House 13, Community Centre, Yusuf Sarai, New Delhi 110 049.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Surinder Goyal
Jetair Private Limited
International Cargo Carriers Private Limited
150
400
450
15.00
40.00
45.00
Board of Directors
The board of directors of France Air Private Limited consists of Mr. Surinder Goyal, Mr. Mahiyar Sadri and Mr. Saroj
K. Datta.
Financial Performance
The financial results of France Air Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 24.73 22.43 20.33
Profit after tax 0.94 0.20 0.26
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
4.36 5.46 5.73
Earnings per share (Rs.)
(2)
790.36 (140.00) 271.00
Book value per share (Rs.)
(2)
4,457.93 5,557.76 5,828.63
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
Jet Hotels Private Limited
Jet Hotels Private Limited was incorporated on September 29, 1981 as Ras Hotels Private Limited. Subsequently, the
name of the company was changed to Jet Hotels Private Limited. The principal activity of Jet Hotels Private Limited is
to own immovable property located at Mumbai. The registered office is at 26, Telli Galli, Andheri (East), Mumbai 400
069.
Shareholding
Names of Shareholders
No. of Shares
% holding
Jetair Private Limited
Mrs. Anita Goyal
9,900
100
99.00
1.00
Board of Directors
The board of directors of Jet Hotels Private Limited consists of Mrs. Anita Goyal and Mr. Saroj K. Datta.
Financial Performance
The financial results of Jet Hotels Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
100
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 0.00 0.12 0.11
Profit after tax (0.15) 0.01 0.003
Equity capital 1.00 1.00 1.00
Reserves and Surplus
(1)
(2.16) (2.15) (2.15)
Earnings per share (Rs.)
(2)
(15.00) 0.98 0.30
Book value per share (Rs.)
(2)
(116.11) (115.22) (114.91)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
Jetair Tours Private Limited
Jetair Tours Private Limited was incorporated on December 17, 1990 and is an inbound and outbound tour operator.
The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Jetair Private Limited
Mr. Surinder Goyal jointly with Jetair Private Limited
9,999
1
99.99
0.01
Board of Directors
The board of directors of Jetair Tours Private Limited consists of Mr. Surinder Goyal, Mr. Naresh Goyal, Mr. Saroj K.
Datta, Mr. Anupam Kher and Mr. Shekhar Kapoor.
Financial Performance
The financial results of Jetair Tours Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 113.75 99.76 139.19
Profit/ (Loss) after tax (8.43) (7.80) 3.26
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(14.42) (22.22) (18.96)
Earnings/ (Loss) per share (Rs.)
(2)
(864.33) (780.06) 325.81
Book value per share (Rs.)
(2)
(1,431.79) (2,211.84) (1,886.04)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
Jet Enterprises Private Limited
Jet Enterprises Private Limited was incorporated on December 4, 1990 as Jetair Investments Private Limited.
Subsequently, on December 8, 2000, the name of the Company was changed to Jet Enterprises Private Limited. Jet
Enterprises Private Limited owns trademarks and trade names which are licensed to our Company and other group
companies. The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Naresh Goyal
Mr. Hasmukh D. Gardi jointly with Mr. Naresh Goyal
4,90,000
5,10,000
49.00
51.00
101
Board of Directors
The board of directors of Jet Enterprises Private Limited consists of Mr. Naresh Goyal, Mr. Saroj K. Datta and Mr.
Hasmukh D. Gardi.
Financial Performance
The financial results of Jet Enterprises Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 43.63 82.89 70.89
Profit after tax 14.66 20.35 23.85
Equity capital 10.00 10.00 10.00
Reserves and Surplus
(1)
19.67 51.40 74.11
Earnings per share (Rs.)
(2)
174.06 20.30 23.85
Book value per share (Rs.)
(2)
29.67 61.39 84.11
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
India Capitol Resource Services Private Limited
India Capitol Resource Services Private Limited was incorporated on March 6, 1992 for export and import trading
activities. At present, its only source of income is interest from bank deposits. The registered office is at 41/42 Maker
Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Silo Trading Company Private Limited
Mrs. Anita Goyal
Mr. J. R. Gagrat jointly with Mr. Naresh Goyal
4999
1
5000
49.99
0.01
50.00
Board of Directors
The board of directors of India Capitol Resource Services Private Limited consists of Mr. Saroj K. Datta, Mr. S. N.
Sardeshpande and Mr. F. S. Nasarwanji.
Financial Performance
The financial results of India Capitol Resource Services Private Limited as at and for the years ended March 31, 2002,
2003 and 2004 are set forth below:
(Rs. In millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 0.08 0.01 0.35
Profit/ (Loss) after tax 0.03 (0.07) 0.30
Equity capital 0.1 0.1 0.1
Reserves and Surplus
(1)
(12.22) (12.29) (11.99)
Earnings/ (Loss) per share (Rs.)
(2)
2.62 (7.15) 30.48
Book value per share (Rs.)
(2)
(1,212.27) (1,219.41) (1,188.93)
_____________
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
Vimpal Holdings Private Limited
Vimpal Holdings Private Limited was incorporated on July 3, 1986. It is a holding and an investment company. It
earns income as rent from a commercial property it has taken on lease in New Delhi. Its registered office is C-28 Prem
House, Connaught Place, New Delhi 110 001.
102
Shareholding
Names of Shareholders
No. of Shares
% holding
Mr. Naresh Goyal
Mr. Surinder Goyal
Jet Enterprises Private Limited
354
152
508
35.00
15.00
50.00
Board of Directors
The board of directors of Vimpal Holdings Private Limited consists of Mr. Naresh Goyal, Mr. Surinder Goyal and Mr.
Saroj K. Datta.
Financial Performance
The financial results of Vimpal Holdings Private Limited as at and for the years ended March 31, 2002, 2003 and 2004
are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 0.03 0.03 0.03
Profit after tax (0.01) (0.01) (0.002)
Equity capital 0.05 0.10 0.10
Reserves and Surplus
(1)
(0.27) (0.27) (0.27)
Earnings per share (Rs.)
(2)
(18.72) (6.08) (2.35)
Book value per share (Rs.)
(2)
(423.39) (167.79) (170.14)
_____________
(1)
Net of miscellaneous expenditure not written off.
(2)
Face value of each equity share is Rs.100.00.
Jet Aviation Private Limited
Jet Aviation Private Limited was incorporated on April 9, 1992. Currently the company has not commenced any
commercial activity. The registered office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
India Capitol Resource Services Private Limited
Transmodal Services Private Limited
Silo Trading Company Private Limited
Vimpal Holdings Pvt. Ltd.
Mr. Naresh Goyal
Mrs. Anita Goyal
Mr. Mahiyar Sadri
1,990
1,990
1,990
1,990
950
950
140
19.90
19.90
19.90
19.90
9.50
9.50
1.40
Board of Directors
The board of directors of Jet Aviation Private Limited consists of Mr. Naresh Goyal, Mrs. Anita Goyal and Mr. Saroj
K. Datta.
Financial Performance
The financial results of Jet Aviation Private Limited as at and for the years ended March 31, 2002, 2003 and 2004 are
set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income - 0.02 0.02
Profit/ (Loss) after tax (0.001) 0.004 0.005
Equity capital * 0.1 0.1
Reserves and Surplus
(1)
(0.04) (0.03) (0.02)
103
Earnings/ (Loss) per share (Rs.)
(2)
(4,042) 0.49 0.57
Book value per share (Rs.)
(2)
(21,230) 6.40 7.16
_________________
* Rs. 20 only.
(1) Net of miscellaneous expenditure not written off
(2) Face value of each equity share is Rs.10.00
Transmodal Services Private Limited
Transmodal Services Private Limited was incorporated on December 20, 2000. The company provides ground
transportation services, including to our Company. The registered office is located at 2A Stadium House, 82, Veer
Nariman Road, Churchgate, Mumbai 400 020.
Shareholding
Names of Shareholders
No. of Shares
% holding
France Air Private Limited
International Cargo Carriers Private Limited
Silo Trading Company Private Limited
India Capitol Resource Services Private Limited
Vimpal Holdings Pvt. Ltd.
Jet Aviation Private Limited
Mr. S. Narayan
Dr. Suresh C. Nerkar
19,810
19,810
19,810
19,810
9,980
9,980
400
400
19.81
19.81
19.81
19.81
9.98
9.98
0.40
0.40
Board of Directors
The board of directors of Transmodal Services Private Limited consists of Mr. S. Narayan, Dr. Suresh C. Nerkar and
Mr. F. S. Nasarwanji.
Financial Performance
The financial results of Transmodal Services Private Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income 21.47 52.34 91.51
Profit/ (Loss) after tax (0.83) 1.27 0.29
Equity capital. * 0.40 1.00
Reserves and Surplus
(1)
(1.19) 1.09 1.56
Earnings/(Loss) per share (Rs.)
(2)
(398,281.00) 88.31 5.07
Book value per share (Rs.)
(2)
(593,210.00) 37.21 25.64
________________
* - Rs. 20 only
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
SiloTrading Company Private Limited
Silo Trading Company Private Limited was incorporated on April 19, 1994 for the business of trading. The registered
office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
Shareholding
Names of Shareholders
No. of Shares
% holding
Vimpal Holdings Pvt. Ltd.
India Capitol Resource Services Private Limited
Transmodal Services Private Limited
Jet Aviation Private Limited
International Cargo Carriers Private Limited
France Air Private Limited
Mrs. Anita Goyal
Mr. Mahiyar Sadri
1,995
1,996
1,995
1,900
997
997
110
10
19.95
19.96
19.95
19.00
9.97
9.97
1.1
0.1
104
Board of Directors
The board of directors of Silo Trading Company Private Limited consists of Mrs. Anita Goyal and Mr. F.S. Nasarwanji.
Financial Performance
The financial results of Silo Trading Company Private Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002
2003
2004
Total income - 0.03 0.53
Profit/ (Loss) after tax (0.01) 0.01 0.32
Equity capital in Rupees * 0.1 0.1
Reserves and Surplus
(1)
(0.04) (0.03) 0.29
Earnings / (Loss) per share (Rs.)
(2)
(5,261.00) 0.62 32.55
Book value per share (Rs.)
(2)
(23,250.00) 7.27 39.97
_____________
* - Rs. 20 only
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.10.00.
UPS Jetair Express Private Limited
The company was incorporated on September 4, 2000. The company is engaged in the business of courier services and
uses the services of our Company for its operation. The registered office is at Lot 4-P, Nirlon Complex, off Western
Express Highway, Goregaon (E), Mumbai 400 063.
Shareholding
Names of Shareholders
No. of Shares
% holding
UPS International
Forwarding Inc.
Jetair Private Limited
12,60,000
8,40,000
60%
40%
Board of Directors
The board of directors of UPS Jetair Express Private Limited consists of Mr. Naresh Goyal, Mr. Victoriano P. Dungca,
Mr. Mahiyar Sadri, Lt. Gen. (Retd) I. K. Varma, Mr. Thomas Mathew, Mr. Joseph Paul Wilkins, Mr. Kenneth A.
Torok, Mr. Matt McGee, Mr. K. M. Liu and Mr. P. Sarkari.
Financial Performance
The financial results of UPS Jetair Express (Private) Limited as at and for the years ended March 31, 2002, 2003 and
2004 are set forth below:
(Rs. millions, except share data)
Year ended March 31,
2002 2003 2004
Total income 431.90 810.31 1,315.92
Profit/(Loss) after tax (4.00) (20.80) (35.56)
Equity capital 210.00 210.00 210.00
Reserves and Surplus
(1)
(12.38) (33.11) (68.68)
Earnings per share (Rs.)
(2)
(1.91) (9.91) (16.94)
Book value per share (Rs).
(2)
94.10 84.23 67.30
(1)
Net of miscellaneous expenditure not written off.
(2)
Face value of each equity share is Rs.100.00.
UPS Jetair Logistics Private Limited
The company was incorporated on October 6, 2000. The company is engaged in the logistics business. The registered
office is at Lot 4-P Nirlon Complex, off Western Express Highway, Goregaon (E), Mumbai 400 063.
105
Shareholding
Names of Shareholders
No. of Shares
% holding
UPS International
Forwarding Inc.
Jetair Private Limited
1,65,600
1,10,400
60%
40%
Board of Directors
The board of directors of UPS Jetair Logistics Private Limited consists of Mr. Naresh Goyal, Mr. Victoriano P.
Dungca, Mr. Mahiyar Sadri, Lt. Gen. (Retd) I. K. Varma, Mr. Kenneth A. Torok, Mr. Mukesh Shah, Mr. Li Ip Wah,
Mr. Tan Kok Kean, Mr. Danny Yang and Mr. Todd Benson.
Financial Performance
The operating results of UPS Jetair Logistics Private Limited as at and for the years ended December 31, 2001, 2002
and 2003 are set forth below:
(Rs. millions, except share data)
Year ended December 31,
2001 2002 2003
Total income 86.37 146.47 102.00
Profit after tax 0.1 (4.99) (3.05)
Equity capital 27.6 27.6 27.6
Reserves and Surplus
(1)
0.1 (4.89) (6.20)
Earnings per share (Rs.)
(2)
0.36 (18.09) (11.04)
Book value per share (Rs).
(2)
100.36 82.28 77.53
(1) Net of miscellaneous expenditure not written off.
(2) Face value of each equity share is Rs.100.00.
National Travel Service (Partnership Firm)
National Travel Service is a partnership firm, which was set up on October 1, 1974 and reconstituted on January 1,
1991. The firm is a GSA for American Airlines and Kuwait Airways (for passenger and cargo services). Its principal
office is at 41/42 Maker Chambers III, Nariman Point, Mumbai 400 021.
The partners are as follows:
Names of Partners
Interest
Mr. Naresh Goyal
Mr. Surinder Goyal
Jet Enterprises Private Limited
35%
15%
50%
Financial Performance
The financial results of National Travel Service as at and for the years ended March 31, 2002, 2003 and 2004 are set
forth below:
(Rs. Millions)
Year ended March 31,
2002
2003
2004
Total income 59.05 64.98 63.92
Profit after tax 0.01 0.33 1.02
Partners capital 0.005 0.005 0.005
Partners Current Account (7.58) 17.70 18.62
106
Promoter Group Companies outside India
• Jet Airways LLC
• Jet Airways of India Inc.
• India Jet Airways (Pty) Ltd.
• Jetair Worldwide AG
Jet Airways LLC
Jet Airways LLC was incorporated as a limited liability company on 19 September 1995 under UAE Federal Law No. 8
of 1984. The registered office of the company is located at 1901, 19
th
Floor, Arbift Towers, Beniyas Road, Deira,
Dubai, P.O. Box 7218, United Arab Emirates. The company has two wholly owned subsidiaries: Jet Airways of India
Inc., incorporated in the State of California, United States of America and India Jet Airways (Pty) Ltd. incorporated in
the Republic of South Africa, and all three companies provide airline marketing services. Our Company has entered
into agreements with Jet Airways LLC for global marketing co-ordination services, and with Jet Airways of India Inc.
and India Jet Airways (Pty) Ltd. for GSA services in North America and in the Republic of South Africa, respectively.
Shareholding
Names of Shareholders
Number of Shares Held % Holding
Mr. Abdul Rehman Hussain Hassan Tahlak
Mr. Naresh Goyal
153
147
51
49
Board of Directors
The board of directors of Jet Airways LLC comprises of Mr. Naresh Goyal and Mr. Abdul Rehman Hussain Hassan
Tahlak.
Financial Performance
The financial results of Jet Airways LLC for the years ended March 31, 2001, 2002 and 2003 are set forth below
(Rupee translations have been done for convenience purposes only, at a single exchange rate for all periods):
( in thousands, except share data)
Year ended March 31,
2002
2002
(1)
2003
2003
(1)
2004
2004
(1)
AED Rs. AED Rs. AED Rs.
Total income 7,826 97,894 8,071 100,954 12,794 160,034
Profit after tax 3,596 44,979 5,484 68,599 9,827 122,918
Equity capital 300 3,752 300 3,752 300 3,752
Reserves and Surplus
(2)
7,677 96,025 13,161 164,624 3,545 44,337
Earnings per share
(3)
11,987 149,931 18,281 228,662 32,756 409,727
Book value per share
(3)
26,590 332,592 44,871 561,254 12,815 160,299
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.12.51 = AED$1.00 (the Interbank market mid rates as taken from Bloomberg as of
September 30, 2004). These financial statements of Jet Airways LLC have been translated into Rupees for each period presented solely to comply
with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation should
not be considered as a representation that such AED amounts have been, could have been or could be converted into Rupees at any particular rate, the
rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is AED1,000.00.
Jet Airways of India Inc.
It was incorporated as a domestic corporation on October 25, 1999 under the laws of the state of California, USA. Its
business is to provide airline marketing services.
Shareholding
This company is a wholly owned subsidiary of Jet Airways LLC.
107
Board of Directors
The board of directors of Jet Airways of India Inc., comprises of Mr. Victoriano P. Dungca and Ms. Gloria Y. Dungca.
Financial Performance
The financial results of Jet Airways of India Inc. for the years ended March 31, 2002, 2003 and 2004 are set forth
below:
(In thousands except share data)
Year ended March 31,
2002
US$
2002
(1)
Rs.
2003
US$
2003
(1)
Rs.
2004
US$
2004
(1)
Rs.
Total income 286.42 13,178.28 639.51 29,423.76 897.98 41,316.24
Profit after tax (463.82) (21,340.45) (258.00) (11,870.76) (29.44) (1,354.58)
Equity capital 300.00 13,803.00 300.00 13,803.00 300.00 13,803.00
Reserves and Surplus
(2)
(720.21) (33,136.82) (978.21) (45,007.58) (1,007.65) (46,362.16)
Earnings per share
(3)
(1.55) (71.13) (0.86) (39.57) 0.10 4.52
Book value per share
(3)
(1.40) (64.65) (2.26) (104.02) (2.36) (108.53)
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.46.01 = US$1.00 (the Interbank market mid rates as taken from Bloomberg as of
September 29, 2004). These financial statements of Jet Airways of India Inc.have been translated into Rupees for each period presented solely to
comply with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation
should not be considered as a representation that such US$ amounts have been, could have been or could be converted into Rupees at any particular
rate, the rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is US$1.00.
India Jet Airways (Pty) Ltd.
The company was incorporated on September 3, 2003 as Rodene Trading (Pty) Ltd. and subsequently changed its name
to India Jet Airways (Pty) Ltd. on September 12, 2003. It is in the business of servicing of passengers, including
customers of our Company. The registered office is at Ground Floor, C.I.B House, Eastwood Office Park, 11B Riley
Road, Bedford View 2008, S. Africa.
Shareholding
This company is a wholly owned subsidiary of Jet Airways LLC.
Board of Directors
The board of directors of India Jet Airways (Pty) Ltd., comprises of Mr. Van der Veer Gerrit Diric, Mr. H.D. Gardi,
Mr. T.A.H. Hassan and Mr. Anantha Narayanan.
Financial Performance
The financial results of India Jet Airways (Pty) Ltd. for the seven months ended March 31, 2004 are set forth below:
(In thousands except share data)
Year ended March 31,
2004
Rand
2004
(1)
Rs.
Total income 264.46 1,883.63
Profit from operations tax (8.92) (63.54)
Equity capital 1.00 7.12
Reserves and Surplus
(2)
(8.92) (63.54)
Earnings per share
(3)
(8.92) (63.54)
Book value per share
(3)
(7.92) (56.42)
_____________
(1)
Solely for convenience translation, at an exchange rate of Rs.7.12 = S. A. Rand 1.00 (the Interbank market mid rates as taken from Bloomberg as
of September 30, 2004). These financial statements of Jet Airways (Pty) Ltd. have been translated into Rupees for each period presented solely to
comply with the requirements of Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned to not rely on such translated amounts. The translation
should not be considered as a representation that such S.A. Rand amounts have been, could have been or could be converted into Rupees at any
particular rate, the rate stated, or at all.
(2)
Net of miscellaneous expenditure not written off.
(3)
Face value of each equity share is 1 S.A. Rand.
108
Jetair Worldwide AG
Jetair Worldwide AG was incorporated in July 20, 2004. The registered office address is Hinterberg Str – 22, 6330
Cham, Zug, Switzerland. The company has been incorporated to provide services in the tourism sector, in particular,
the purchase and sale of airline tickets.
Shareholding
Jetair Worldwide AG is a privately held company and the shareholders are:
Names of Shareholders
% holding
Mr. Naresh Goyal
Mr. Ali Ghandour
Mr. H.D. Gardi
98
1
1
Board of Directors
The directors of Jetair Worldwide AG are Mr. Naresh Goyal, Mr. Andries B. van Luyk., Mr. Walter H. Boss and Mr.
Zsolt Zsigray.
Financial Performance
The total paid-up equity is CHF 100,000 (Rs.3,690,000 calculated for convenience purposes only, at an exchange rate
of Rs.36.90 = CHF 1.00, the Interbank market mid rates as taken from Bloomberg as on September 30, 2004. As the
company has only been incorporated in July 2004, no annual accounts are available as yet.
Companies from which the promoters have disassociated themselves in the past three years
There are no companies from which the Promoters have disassociated themselves in the past three years.
109
RELATED PARTY TRANSACTIONS
Our Company has various transactions with related parties, including the following:
• Several promoter group companies, namely Jetair Private Limited, Jet Enterprises Private Limited,
Transmodal Services Private Limited, UPS Jetair Express Private Limited, Jet Airways LLC, Jet Airways of
India Inc., and India Jet Airways (Pty) Limited; and
• our directors and employees.
These transactions include the following:
• payments made under GSA agreements with Jetair Private Limited, Jet Airways LLC, Jet Airways of India
Inc. and India Jet Airways (Pty) Limited;
• payments for premises leased;
• payment of license fees to Jet Enterprises Private Limited pursuant to trade mark licensing agreements; and
• payments for ground transportation services.
For more detailed information on our related party transactions, see note 14 to our Interim Audited Financial
Statements under Indian GAAP. See also “Risk Factors – Mr. Naresh Goyal and his affiliates have significant control
over us including as a result of provisions in our Articles of Association, and have the ability to direct our business and
affairs; their interests could conflict with yours” and “Risk Factors – we do not own the “Jet Airways” mark”. See also
disclosure relating to interests of promoters and directors in the section “Statutory and Other Information – Interest of
Promoters and Directors” on page 169 of this Draft Red Herring Prospectus.
110
REGULATIONS AND POLICIES
DGCA
The principal regulatory authority that regulates the civil aviation sector in India is the Director General of Civil
Aviation, or DGCA. The DGCA operates in accordance with the Aircraft Act, 1934, as amended, and the Aircraft
Rules, 1937, as amended.
To operate scheduled services in India, an airline requires an operating permit from the DGCA. The operating permit
can only be granted to:
• A citizen of India; or
• A company or a body corporate that is registered and has its principal place of business within India, its
chairman and at least two-third of its directors are citizens of India, and its substantial ownership and effective
control is vested in Indian nationals.
The eligibility requirements for such operating permit also include certain requirements relating to a minimum
subscribed equity capital, a minimum number of aircraft, adequate number of aircraft maintenance engineers, adequate
maintenance and repair facilities, adequate number of flight crew and cabin crew, and adequate ground handling
facilities and staff.
This permit is required to be renewed on a year-to-year basis. An airline incorporated in India and operating scheduled
services is also required to register all its aircraft with the DGCA, save and except aircraft which are wet leased.
In addition, such an airline is required to comply with Civil Aviation Regulations (“CARs”), and Aeronautical
Information Circulars as issued by the DGCA from time to time. CARs and AICs cover various areas of airline
operations including air safety, airworthiness, engineering and technical aspects, air transport operations, flight crew
standards and training, and licensing of flight crew and aircraft maintenance engineers.
Route Dispersal Guidelines
An airline providing scheduled services on domestic sectors in India is required to comply with Route Dispersal
Guidelines as set forth by the Government in March 1994. These guidelines classify city pairs into the following
categories:
• Category I, which covers 12 city pairs connecting metropolitan cities (Mumbai – Bangalore, Mumbai – Kolkata,
Mumbai – Delhi, Mumbai – Hyderabad, Mumbai – Chennai, Mumbai – Thiruvanathapuram, Kolkata – Delhi,
Kolkata – Bangalore, Kolkata – Chennai, Delhi – Bangalore, Delhi – Hyderabad, Delhi – Chennai);
• Category II, which covers routes connecting the North East, Jammu and Kashmir, Andaman and Nicobar Islands
and Lakshadweep with cities in Category I and Category III routes;
• Category IIA, which covers city pairs within the North east, Jammu and Kashmir, Andaman and Nicobar Islands
and Lakshadweep; and
• Category III, which covers any city pair that does not fall in Categories I, II and IIA.
The Route Dispersal Guidelines require airlines providing scheduled services on domestic sectors in India to operate in
the following manner:
• On Category II routes, 10% of the capacity deployed on Category I routes;
• On Category IIA, 10% of the capacity deployed on Category II routes; and
• On Category III, 50% of the capacity deployed on Category I routes.
The DGCA monitors compliance with the Route Dispersal Guidelines on a monthly basis. Compliance with these
guidelines is a condition for the renewal of our operating permit. Even for occasional non-compliance, the DGCA
requires the airline to make up any shortfall during the subsequent period. Failure to comply with these guidelines on a
consistent basis can lead to cancellation of the scheduled airline status of an airline or the non-approval of its schedules.
Increase in Fleet Size
An airline requires the permission of the Ministry of Civil Aviation, Government of India, to increase its fleet size.
Once such permission is granted, the import of aircraft requires a “no-objection” certificate from the DGCA.
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Permissions from the Ministry of Finance, Government of India, and the Reserve Bank of India are required for foreign
currency financing arrangements with regard to acquisition of aircraft.
Airports
There are three categories of airports in India:
• International airports from where international flights can operate;
• Domestic airports from where only domestic flights can operate; and
• Civil enclaves located in military airports from where civilian aircraft are permitted to operate.
The Airports Authority of India, or the AAI, manages 127 airports in India, of which 101 are civil airports (including
12 international airports) and 26 are civil enclaves at defence airfields. A few of the smaller civil airports are managed
by the State Governments. AAI also administers the use of terminal building facilities at military airports by civilian
aircraft, while Air Traffic Control, or ATC, and scheduled clearances at these airports are the responsibility of the
defense authorities. The only privately owned airport is located at Cochin. Two privately owned international airports
are currently under construction at Bangalore and Hyderabad. In addition, the Government is seeking to modernize and
restructure Mumbai and Delhi airports.
Airlines are required to pay the AAI terminal, landing and navigation charges, and route navigation facility charges.
Airlines are dependent on AAI to lease space for passenger services, parking facilities, engineering and dispatch
facilities and administrative offices.
Foreign Ownership Restrictions
Pursuant to the Industrial Policy and the FEMA Regulations, any investment in an Indian domestic airline by persons
resident outside India requires the prior approval of the FIPB. However, the MoCA, pursuant to a Notification No.
AV-13011/10/96-DT (Vol. II) dated November 10, 2004 (published in the Gazette of India on November 13, 2004) has
permitted foreign direct investment in the “Air Transport Services (Domestic Airlines)” sector up to 49% through the
“automatic route” (i.e. without the prior approval of the FIPB). The November 10, 2004 notification also permits
investment by an NRI up to 100% in an Indian domestic airline company under the “automatic route”. The notification
also clarifies that no direct or indirect equity participation by foreign airlines is permitted in a domestic airline.
Amendments to the FEMA Regulations to reflect the policy changes notified in the November 10, 2004 notification are
awaited.
The RBI, by its A.P. (DIR Series) Circular No. 14 dated September 16, 2003, derecognized OCBs, such as Tail Winds,
as an eligible class of investors under the various investment routes/schemes under the rules and regulations
promulgated under the FEMA. Subsequently, the RBI by its Notification No. FEMA 101/2003-RB dated October 3,
2003, issued the OCB Regulations to this effect. Further, by its A.P. (DIR Series) Circular No.44 dated December 8,
2003, the RBI clarified, among other matters, the following:
• An erstwhile OCB may transfer its shares in an Indian company by way of sale (i) to NRIs in terms of the
OCB Regulations (without any prior regulatory approval) and (ii) to residents in terms of the FEMA
Regulations (i.e., with the prior approval of the RBI).
• In connection with the transfer of its shares in an Indian company to a non-resident entity (other than an NRI),
an erstwhile OCB may seek the prior permission of the FIPB and the RBI.
Subsequently, the RBI by its A.P. (DIR Series) Circular No. 16 dated October 4, 2004 granted general permission for
the transfer of shares of an Indian company by Non-Residents (including erstwhile OCBs, such as Tail Winds), to
residents, subject to the terms and conditions, including pricing guidelines stipulated in such Circular.
Chaturvedi and Shah, Chartered Accountants, by their letter dated November 2, 2004 addressed to the FIPB, requested
the FIPB to confirm/clarify certain regulatory issues. The FIPB was requested, on a no names basis, for certain
clarifications on behalf of an Indian company in the domestic airlines sector which was contemplating an initial public
offering. The FIPB was informed that the company was promoted by an NRI who held the shares of such company
through an OCB in which such NRI had a 100% shareholding. The FIPB was further informed that the initial public
offering by the company would be made to persons within the definition of Indian residents (including FIIs and QIBs
registered with SEBI), and would comprise of a fresh issue of shares by the company and an offer for sale of shares in
the company by the OCB to such Indian residents.
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The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard; and
• a transfer of the shares by an erstwhile OCB in favor of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Accordingly, investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for such Allotment of Equity Shares under this Offer. We
will be required to make certain filings with the RBI after the completion of the Offer.
The Industrial Policy further prohibits foreign airlines from making any direct or indirect equity investment in a
domestic airline. In addition, our permission to operate scheduled services granted by the DGCA and the guidelines
issued by the DGCA from time to time, including the AIC No. 4 specifies the following restrictions:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of companies operating scheduled services must be vested in
Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
No person shall make a Bid in pursuance of this Offer unless such person is eligible to acquire Equity Shares of the
Company in accordance with the AIC No. 4, read with the MoCA notification No. AV.13011/10/96 DT (Vol II) dated
November 10, 2004, and other applicable laws, rules, regulations, guidelines and approvals.
Investors that bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor whether such investor is eligible to acquire
Equity Shares of the Company.
We have obtained an approval dated June 28, 1993 from the FIPB for investment by Tail Winds in the Company. We
have further obtained an approval dated June 14, 2000 from the FIPB for issue of non-voting convertible preference
shares to the International Finance Corporation, or IFC.
International Traffic Rights
The operation of international passenger services depends on traffic rights negotiated between the Government of India
and the government of the other country. These rights are contained in the Air Services Agreement, or ASA, (as
between the two governments) which deals with the capacity deployment of carriers of either country.
As ASAs are negotiated and agreed on a government-to-government basis, the relevant traffic rights contained in these
agreements belong to the Government of India. Depending upon the provisions of an ASA, each state may grant rights
to one or more airlines.
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The Chicago Convention and the contemporaneously drafted treaties (the International Air Services Transit Agreement
and the International Transport Agreement) are, however, silent as to the criteria for determining substantial ownership
and effective control of an airline. In these respects, certain countries and airlines have adopted mechanisms (including
specific legislation) aimed at controlling foreign investment in the airlines. In India, there is as yet no legislation to that
effect, other than what is contained in AIC No. 4.
The Government of India announced on December 29, 2004 that the Union Cabinet has approved a change in the
aviation policy, allowing Indian scheduled carriers with a minimum of five years continous operations and at least 20
aircraft to provide services to other international destinations. These destinations exclude the Gulf countries of UAE,
Qatar, Oman, Bahrain, Kuwait and Saudia Arabia, which would be reserved for Air India and Indian Airlines for three
years. However, these policy changes are not yet effective, and detailed guidelines will need to be notified by the
Ministry of Civil Aviation. As and when the changes in policy become effective, the Government will also need to
negotiate, and allocate to us, entitlements under the applicable bilateral treaties for the respective countries to which we
desire to fly. The Government will also specify the frequency of flights that we will be entitled to operate. There is no
certainty when these policy changes will become effective and whether or when we will be permitted to fly to
destinations of our choice.
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GOVERNMENT APPROVALS
In view of the approvals listed below, we can undertake this Offer and our current business activities and no further
material approvals from any government authority are required to continue such activities.
Approvals for the Offer
The following are the Government approvals and clarifications relating to the Offer:
The FIPB by its letter dated November 5, 2004 bearing No. 9(24)/2004-FIPB clarified that:
• in an initial public offering in Indian capital markets, SEBI registered FIIs and QIBs registered with SEBI are
eligible, and no prior approval of the FIPB is required in this regard.
• a transfer of the shares by an erstwhile OCB in favour of residents, as long as such erstwhile OCB is not on the
“adverse list” of the RBI, is permissible, and no prior approval of the FIPB is required in this regard.
Investors should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs and
QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental financial
institutions or other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and NRIs.
No further approvals of the FIPB or the RBI are required for such allotment of Equity Shares under this Offer.
Approvals for the Business
We require various approvals for us to carry on our business in India and overseas. The approvals that we require
include the following:
Approvals from the Director General of Civil Aviation
• Permission from the DGCA to operate passenger air transport services (Permit S-6).
• Approval from the DGCA to carry by air goods listed in Part II of the Technical Instructions for the Safe
Transport of Dangerous Goods by Air (ICAO doc. 9284-AN/ 905) from/to/across India (Permit No. 461-
06/2003).
• Approval from the DGCA for the method of determination of the Aerodrome Operating Minima (DGCA
Approval No. AV 22029/13/99/FID).
• Certificates of Registration from the DGCA in connection with each of our aircraft.
• Certificates of Airworthiness from the DGCA in connection with each of our aircraft.
• No objection certificates for import of each of our aircraft.
Approvals from tax authorities
• Permanent Account Number and Tax Deduction Account Number under the I.T. Act.
• Registration under the Central Sales Tax Act, 1956 and the Bombay Sales Tax Act, 1959.
• Registration under the sales tax Acts of various states in India for local sales tax.
• CBDT approvals under Section 10(15A) of the I.T. Act.
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• CBDT approvals under Section 10(15)(iv)(c) of the I.T. Act.
• Service tax registrations.
Labor related approvals
• Principal employer registration under the Contract Labor (Regulation and Abolition) Act, 1970
• Registration under the Factories Act, 1948.
• Registration under the Payment of Wages Act, 1936.
• Registration under the Payment of Bonus Act, 1965.
• Registration under the Employees’ State Insurance Act, 1948.
• Registration under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
• Registration under the Payment of Gratuity Act, 1972.
• Registrations under the Shops and Commercial Establishments Acts, where applicable.
Department of Company Affairs approvals
• Approval dated April 10, 2003 of the Government of India under Section 314(1B) of the Companies Act.
• Approval dated August 11, 2004 under the proviso to sub-section (1) to Section 297 of the Companies Act.
Others
• Approvals from the Reserve Bank of India for issue of preference shares and equity shares (on repatriation
and non-repatriation basis), foreign inward remittances and payment of dividends on both equity and
preference shares.
• RBI approvals to remit payments for lease and hire purchase payments for our aircraft.
We have obtained the above approvals and the same are valid as of the date of this Draft Red Herring Prospectus.
We will be required to make the following applications for approvals that are material to our business or this
Offer:
An application will have to be made to the RBI in connection with the redemption of the CCRPS issued to IFC.
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OUTSTANDING LITIGATION
Except as described below and in the notes to the Summary Restated Statements and the Interim Audited Financial
Statements, there are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of
statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues
towards instrument holders like debenture holders, fixed deposits and arrears on cumulative preference shares issued by
the Company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for
economic/civil/any other offences (including past cases where penalties may or may not have been awarded and
irrespective of whether they are specified under paragraph (i) of Part 1 of Schedule XIII of the Companies Act, 1956)
against our Company as on the date of this Draft Red Herring Prospectus.
Cases/Proceedings against Jet Airways
Statutory Defaults
An inspection was carried between December 2001 and May 2002 under Section 209A of the Companies Act. The
Company filed applications under Section 621A of the Companies Act for compounding. Compounding orders were
passed by the Department of Company Affairs relating to Section 211, Section 205, Section 224(8) and Section 292 of
the Companies Act, and compounding fees of Rs.0.22 million have been paid by the Company pursuant to such orders.
Civil Cases
The Company granted exclusive rights to Press Communication Pte. Limited, a Singapore company (“Press
Communication”) in 1995 to publish an in-flight magazine pursuant to an agreement valid for three years. Press
Communication failed to supply the requisite number of copies for each issue of such magazine and also consistently
delayed delivery, thereby breaching the terms of the agreement. In July 1996 the Company terminated the agreement
with Press Communication in accordance with the terms of such agreement. In August 1996, Press Communication
filed a civil suit against the Company in the High Court at Mumbai for a decree of Rs. 39.0 million. Ad-interim relief
has been refused and the main suit not yet been taken up for final hearing.
Three pilots, Captain M. M. Singh, Captain Dadyalla and Captain Puneet Bhalla, left the services of the Company with
effect from July 1, 2002. These pilots have filed Suit Nos. 244/2003, 245/2003 and 246/2003 against the Company
before the Court of the Additional District and Sessions Judge, Tis Hazari Courts at Delhi for recovery of an amount
aggregating to approximately Rs.3.3 million, allegedly towards leave encashment, medical claim, alleged financial loss
due to delay in the start of follow-up training, difference in posting allowance, deductions from salary of certain
amounts and damages for mental harassment. These suits are pending before the Additional District and Sessions
Judge, Tis Hazari Courts, Delhi.
Captain M. M. Singh, Captain Dadyalla and Captain Puneet Bhalla have also filed suits against the Company before the
Court of District Judge at Delhi seeking permanent injunction restraining the Company from invoking the bank
guarantees furnished by them at the time of joining the Company. Interim orders have been passed in these
proceedings. While in two suits the bank guarantees had already been encashed, the third bank guarantee was not
encashed in view of the interim orders of the Court. The Company has filed its written statement and the cases are
currently pending. These pilots have also filed petitions no. CM(M) No. 308/2002, CM(M) No. 309/2002 and CM(M)
No. 310/2002 in the High Court of Delhi against an order of the Additional District Judge refusing the grant of an ex-
parte injunction order. The petition of Captain Dadyalla has been dismissed by the High Court of Delhi, and a review
petition filed by Captain Dadyalla has also been dismissed. The petitions filed by Captain Bhalla and Captain Singh are
currently pending in the High Court of Delhi.
Captain Bhalla and Captain Singh also filed contempt petitions in Suit No.308 of 2002 and Suit No.310 of 2002
against, among others, Captain N.T. Malkani, Vice-President, Flight Operations and Mr. Naresh Goyal, the Chairman
of the Company, alleging contempt of the orders of the High Court of Delhi dated July 5, 2002 and July 8, 2002. In this
case, before such orders were communicated to the Company, two bank guarantees furnished by these former
employees to the Company had been encashed. These contempt petitions are currently pending.
Mr. Mahavir Prasad Kakrania, the proprietor of M/s Takeshwary International, New Delhi, has filed a suit for recovery
of Rs.0.36 million before the Additional District and Sessions Judge, Tis Hazari Courts, Delhi. The suit has been filed
against the Company for a claim for short landing of cargo booked from Chennai to Delhi. The Company has filed its
written statement and the case is currently pending before the Additional District and Sessions Judge.
Carewell Securities Pvt. Ltd., Indore (“Carewell”) has filed a suit for recovery of Rs.0.14 million against the Company.
The Company entered into a contract of service with Carewell in 1996 for availing the services of loaders, drivers, etc.
from them at Indore Airport. The agreement was renewed from time to time and ultimately terminated in 1999.
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Carewell has claimed that under the terms of such agreement, the Company is liable to pay Rs.139,000 which it had not
paid even after termination of such agreement. The case is currently pending before the XXIst Additional District
Judge, Indore.
Kwick Travels (P) Ltd., Delhi (“Kwick Travels”) has filed a suit for recovery of approximately Rs.1.9 million against
the Company in the High Court at Delhi. In May 1993, Kwick Travels was appointed as an authorized travel agent to
hold, stock and sell air tickets against commission in New Delhi. Kwick Travels has alleged that it was assured of an
increase in its incentive inclusive of the special incentive being received by Kwick Travels from other airlines against a
target sale of Rs.4 million per month or Rs.48 million of annual business. Kwick Travels has further alleged that there
was non-cooperation from the Company and that with effect from October, 1996, the Company withheld supply of
tickets under the pretext of short supply of tickets. The case is pending before the Local Commissioner appointed by
the High Court of Delhi for recording of evidence.
Mr. Pawan Kumar Agarwala and Mr. Ashok Kumar Agarwala have filed civil defamation suits against the Company
for an amount of Rs. 0.5 million each before the Civil Judge, Senior Division, Siliguri. One of the plaintiffs was
offloaded from a flight at Kolkata Airport as he was found to be unfit for travel and the other plaintiff consequently did not
take the flight. The suits are currently pending before the Civil Judge, Senior Division, Siliguri.
United India Insurance has filed a suit against the Company for recovery of Rs.0.18 million before the Sub-Court at
Ernakulam. The suit has been filed against the Company for a claim for damaged cargo consignment booked from
Mumbai to Cochin. The Company has filed its written statement and the case is currently pending before the Sub-Court.
Dr. Mala Sur Mitra has filed a suit for recovery of Rs.9,190 before the Small Causes Court at Kolkata against the
Company. The plaintiff was wrongly booked by a travel agent in the Club Premiere class, and the Company’s staff at
Port Blair collected the difference in air fare from the plaintiff. The suit is currently pending before the Small Causes
Court.
Captain Cedric D’silva, an employee of the Company, has filed a declaratory suit against the Company in the Bombay
City Civil Court for an order and declaration that the Company’s action of reverting him from the position of Operation
Manager–Western Region to the position of Senior Commander in 2002 was arbitrary and illegal. The suit is currently
pending in the Bombay City Civil Court.
Mr. N.K. Chawla, a car-parking contractor, has filed a suit in the Civil Court, Bhopal for recovery of approximately
Rs.30,000 towards certain car parking charges that the Company has allegedly failed to pay for the use of the car
parking area at Bhopal Airport. The suit is currently pending before the Civil Court.
Capt. . Jagbir Singh, a pilot formerly employed by the Company, has filed a suit before the Court of the Civil Judge at
Delhi, to restrain the Company from invoking the bank guarantee furnished by him at the time of joining the Company.
Capt, Jagbir Singh left the Company’s employment in December 1999. Immediately upon his resignation, Capt. Jagbir
Singh filed such suit and obtained a stay order against the Company from invoking the bank guarantee amounting to
Rs.0.75 million. The stay order has since been vacated by the Court, and the suit has been dismissed by the Court for
non-appearance by the plaintiff.
Captain Puneet Mehta, a pilot formerly employed by the Company, left the Company’s employment in 2001. He filed
a suit against the Company before the Senior Civil Judge, New Delhi, to restrain the Company from invoking the bank
guarantee furnished by him at the time of his joining the Company. The Company has filed its written statement.
Subsequently, the Court dismissed Captain Mehta’s application for interim stay restraining the Company from invoking
the bank guarantee. Captain Mehta has filed an appeal against this order before the High Court, Delhi. The High Court
has directed the bank to deposit the bank guarantee amount in the Court and this has been complied with. The
proceeding has not yet been posted for hearing.
Captain Deven Kanani, a pilot formerly employed by the Company, left the Company’s employment in 2003. He filed
a suit against the Company in the High Court at Mumbai, to restrain the Company from invoking the bank guarantee
furnished by him at the time of his joining the Company. As an interim measure, he also obtained an order from the
Court directing the Company to issue to him a ‘no objection certificate’ to join Air India, whose employment he had
already joined. This order was challenged by the Company before the Division Bench of the High Court of Mumbai,
and such interim order was set aside. The suit is currently pending.
Mr. Miraj Alam, the proprietor of M/s. Gemex Travel & Cargo Services has filed a suit before the City Civil Court at
Kolkata, seeking to restrain the Company from invoking/encashing the bank guarantee of Rs.0.5 million furnished by
him. However, the bank guarantee had already been encashed by the Company before the Company had received the
summons from the Court. The suit is currently pending before the City Civil Court.
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M/s. Porter Service has filed a suit against the Company before the Civil Court, Varanasi, for the recovery of Rs.0.35
million. The case has been referred to the District Court, Varanasi and is currently pending.
Suit No. 623/1996 has been filed by Mr. Rajeshkumar R. Thekedar, the proprietor of M/s. Speedways Travels, claiming
an amount of approximately Rs.23 million, has been dismissed by the High Court of Mumbai in favor of the Company.
The suit was dismissed for default/want of prosecution by the plaintiff.
Writ Proceedings
The Consumer Education and Research Society Suraksha Sankool and others have filed Special Civil Application No.
11105/2004 against the Secretary, Government of India, Ministry of Civil Aviation and others, including the Company,
before the High Court of Gujarat at Ahmedabad. The writ petition challenges the terms of the concession scheme in
airfare for senior citizens that has been adopted by the main airlines in India, as being in violation of Article 41 of the
Constitution of India. The writ petition is pending hearing and disposal in the High Court.
Writ Petition No. 7162/2004 has been filed before the High Court of Judicature for Rajasthan at Jaipur. The petition is
against the Union of India and the Company is one of the respondents. The writ petition challenges the terms of the
concession scheme in airfare for senior citizens that has been adopted by the main airlines in India, as being in violation
of Article 41 of the Constitution of India. A specific complaint has also been made against the Company in connection
with refund against cancellation of an air ticket. The petition is currently pending.
Ansham Travels and seven other travel agencies have filed Writ Petition No.14771/2001 against the Union of India and
43 airlines, including the Company, before the High Court of Madras, in connection with deduction of tax at source
under section 194H of the I.T. Act. The writ petition is currently pending.
Gay Travels has filed Writ Petition No. 19569/2003 before the Madras High Court, in connection with deduction of tax
at source. An interim order was vacated in the Company’s favor on December 12, 2003. The writ petition is currently
pending.
Around the World Travel and Tours Private Limited and 13 other travel agencies have filed Writ Petition No.
20722/2003 against the Union of India and 21 airlines, including our Company, before the High Court of Madras, in
connection with deduction of tax at source under section 194H of the I.T. Act. The writ petition is currently pending.
The AFT Trust – Sub-1 of USA had filed a writ petition before the High Court of Delhi challenging the orders of the
CBDT dated November 15, 2000 and March 4, 2002, refusing to accord approval under section 10(15A) of the I.T. Act
in connection with aircraft lease agreements for two aircrafts leased to the Company. The Company has been
impleaded as one of the respondents. The Court was pleased to quash the orders of the CBDT and directed AFT Trust-
Sub-1 of USA to approach the Government of India for approval by way of a fresh application.
Mr. S. N. Sharma has filed a writ petition in the High Court of Delhi against The Secretary, Government of India,
Ministry of Civil Aviation and others. The Company and certain of its current and former Directors have been
impleaded as respondents in the proceedings. The writ petition has been filed in relation to the hazardous conditions
under which the Company allegedly allowed flight 9W 312 to take off on December 28, 2001 from New Delhi to
Mumbai. The writ petition is currently pending before the High Court.
Tax related Cases/Proceedings
As a marketing promotional measure, Satyam Infoway Ltd., Chennai (“Satyam”) supplied free compact discs to be
distributed among the Company’s Jet Privilege members. The distribution was effected through GE Capital Business
Process Management Services Pvt. Ltd., Gurgaon (“GE Capital”). One of the consignments despatched by Satyam,
valued at Rs.0.724,600 was detained by the Excise and Taxation Officer, Gurgaon, in connection with the payment of
sales tax. The Excise and Taxation officer served a show cause notice on Satyam, GE Capital and the Company, on the
ground that sales tax was required to be paid on such consignment. The Company has contended before the Assessing
Authority that there had been no incidence of sale and therefore such consignment did not attract sales tax. The
Assessing Authority’s order is currently awaited.
A cargo consignment of cordless handsets was confiscated by the Uttar Pradesh Trade Tax Department, Lucknow for non-
submission of Form No. 31. The owner of the consignment never claimed the goods. The Company was charged as a
dealer/trader of the cordless phones and notices were issued by the authorities. However, these notices were not received
due to a change in address. Two ex-parte orders for assessment and penalty under the Uttar Pradesh Trade Tax Act,
1948, were passed against the Company for a total amount of Rs.148,800. The Company filed two applications before
the Assistant Commissioner (Assessment)-9, Trade Tax, Lucknow for setting aside the orders and reopening the case.
The authority heard the Company’s arguments and set aside the Company’s applications and upheld the ex-parte
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orders. The Company has appealed against these orders before the Joint Commissioner (Appeals), Trade Tax, Lucknow
who has stayed the tax assessed in an amount of Rs.36,000 against a bank guarantee of the said amount. The appeal is
pending.
Corporate Income Tax Assessments
Assessment year 2003-2004
Income tax returns were filed by the Company claiming a refund of Rs.67 million. An order under section 154 of the
Income Tax Act, 1961 was issued by the Deputy Commissioner of Income Tax (DCIT) – 5(1) allowing a refund only
for Rs.66 million. The disallowance was made on account of short credit granted against defective T.D.S. certificates
filed. The Company is in the process of filing the rectified TDS certificates for claiming the balance refund amounts.
Assessment year 2001-2002
The Company has preferred an appeal before the Income Tax Appellate Tribunal (“ITAT”) against the disallowances of
provision for obsolescence, repairs to furniture and fixtures, treatment of interest income as “income from other
sources” and provision for doubtful debts. The tax effect of the disputed amounts involved in such appeal proceeding is
Rs.4.45 million.
Assessment year 2000-2001
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for obsolescence and repairs to furniture and fixtures. The Income Tax department has also
preferred an appeal before the ITAT against the deductions of depreciation on hire purchased aircraft and aircraft heavy
maintenance expenses allowed in favour of the Company. The tax effect of the disputed amounts is Rs.14.61 million.
The Company has also preferred an appeal before the Commissioner of Income Tax (Appeals) (“CIT(A)”) against the
order passed under section 154 of the I.T. Act for recomputation of the book profits under section 115JA of the I.T.
Act, after including therein provision for obsolescence, provision for doubtful debts and provision for gratuity. The tax
effect of the disputed amounts is Rs.7 million.
Assessment year 1999-2000
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for obsolescence and repairs to furniture and fixtures.
The Income Tax Department has also preferred an appeal before the ITAT against the deductions of depreciation on
hire purchased aircraft and aircraft heavy maintenance expenses allowed in favour of the Company. The tax effect of
the disputed amounts is Rs.824.54 million.
The Company has also preferred an appeal before the ITAT against the order passed under section 154 of the I.T. Act
for recomputation of the Book Profits under section 115JA after including therein provision for obsolescence to book
profits which is pending before the ITAT. The tax effect of the disputed amounts cannot be presently quantified.
Assessment year 1998-1999
The Company has preferred an appeal before the ITAT against the order passed under section 143 (3) of the I.T. Act
disallowing provision for obsolescence, repairs to furniture and fixtures, consultancy charges and depreciation claimed
on computers. The Income Tax department has also preferred an appeal before the ITAT against the deductions of
depreciation on hire purchased aircraft and aircraft heavy maintenance expenses allowed in favour of the Company.
The tax effect of the disputed amounts is Rs.786.78 million.
The Company has also preferred an appeal before the ITAT against the order passed under section 154 of the I.T. Act
for recomputation of the book profits under section 115JA after including therein provision for obsolescence to book
profits which is pending before the ITAT. The tax effect of the disputed amounts is Rs.3.44 million.
Assessment year 1997- 1998
The Company has preferred an appeal before the ITAT against the order passed under section 143(3) of the I.T. Act
disallowing provision for leave encashment and repairs to furniture and fixtures. The Income Tax department has also
preferred an appeal before the ITAT against the deductions of depreciation on hire purchased aircraft and aircraft heavy
maintenance expenses allowed in favour of the Company. The tax effect of the disputed amounts is Rs.353.02 million.
120
The Company has preferred an appeal before the ITAT against the order passed under section 148 of the I.T. Act
confirming the disallowance of provision for obsolescence. The tax effect of the disputed amounts is Rs.12.579 million.
Assessment years 1994-1995 and 1995-1996
The Company has preferred an appeal before the ITAT against the order passed under section 148 confirming the
disallowance of provision for obsolescence. The tax effect of the disputed amounts cannot be presently quantified.
Tax Deducted at Source on Salaries
Assessment years 1998-1999, 1997 – 1998,1996-1997, 1995-1996
The Income Tax department has filed an appeal before the ITAT against the order passed by the CIT(A) allowing
deduction of conveyance allowance in favour of the Company.
Assessment year 1994 - 1995
The Income Tax department has filed an appeal before the Bombay High Court, against the order passed by the CIT(A)
allowing deduction of conveyance allowance in favour of the Company.
Tax Deducted at Source on other Payments
Assessment year 2002-2003
The Company has preferred an appeal before the ITAT against the order passed by the CIT(A) regarding applicability
of TDS on route navigation facility charges (RNFC), terminal navigation facility charges (TNLC) and X-ray charges
paid to the AAI. The amount involved in such appeal is Rs.14.19 million.
Sales Tax
Fiscal 2000
The Company has preferred an appeal before the Assistant Commissioner of Sales Tax–(Appeal) V (ACST(A)) against
the assessment order wherein the purchases from unregistered dealers has been taxed. The amount involved is Rs.0.58
million.
Fiscal 1999
The Company has preferred an appeal before the Assistant Commissioner of Sales Tax–(Appeal) V (ACST (A)) against
the assessment order wherein the purchases from unregistered dealers has been taxed. The amount involved is Rs.0.38
million.
Service Tax
Ahmedabad Region
The Company has received a show cause notice from the Deputy Commissioner, Division – V, Ahmedabad I, raising a
demand of Rs.9.6 million on freight and other incidental charges collected from August 16, 2002 to September 9, 2004.
The Company has already made a representation before such authority.
Coimbatore Region
The Company has received a show cause notice from the Assistant Commissioner, Division – II, Coimbatore, raising a
demand of Rs.2.6 million on freight and other incidental charges collected from August 16, 2002 to September 9, 2004.
The Company has already made a representation before such authority.
Consumer Cases
Jet Airways is a service sector company and various consumer cases have been filed and are pending against the
Company. As on date of this Draft Red Herring Prospectus, there are 87 consumer complaints filed and pending
against the Company in various Consumer Forums and State Commissions across the country and in the National
Commission. These consumer complaints have been filed on account of the following reasons:
121
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
Denied Boarding: These are complaints where overbooking by the Company resulted in passengers holding
confirmed bookings and valid tickets being denied boarding. There are 15 cases of denied boarding pending in
different forums across India and names of the complainants, place of litigation and amounts involved are as
follows:
1. Mr. Vishnu Vardan Reddy Hyderabad 105,000
2. Mr. Vinod K. Agarwal Hyderabad 304,000
3. Mr. Ravi Soni Guwahati 1,025,850
4. Mr. Navratan S. Jain New Delhi 500,000
5. Mr. Ajay Jajodia New Delhi 1,500,000
6. Dr. Bhavinbhai Kothari Rajkot 112,815
7. Mr. Karan Nanda Jammu 205,000
8. Mr. Ravinder Saini Jammu 205,000
9. Mr. Muzamil M. Dar Srinagar 3,706,790
10. Mr. Vinay Dwivedi Indore 125,000
11. Mr. Ramesh B. Rander Nagpur 1,658,000
12. Mr. Umesh P. Naik Mumbai 171,453
13. Mr. Dhiren Sheth Mumbai 2,00,000
14. Mr. Navin K. Dargar Udaipur 450,000
15. Mr. A. M. S. G. Ashokan Virudhunagar 450,000
Refused Boarding: These are complaints of passengers who could not board the aircraft for various reasons
such as a mistake on the part of the travel agent, resulting in non-issuance of a valid ticket and other lapses in the
booking of tickets, passengers refusing to buy a fresh ticket against cancellation of a ticket bought by a credit card
that has been blacklisted by the concerned bank, passengers seeking to carry a weapon on our aircraft without
obtaining prior security clearance or flight coupons being misplaced by passengers etc. There are 20 cases of
refused boarding pending in different forums across India and the names of the complainants, place of litigation
and the amounts involved are as follows:
1. M/s. Andhra Bank Hyderabad 5,500
2. Mr. S. K. Agarwal New Delhi 450,000
3. Mr. Surya Buragohain Sivsagar 100,000
4. Mr. Sushil Kumar Jain New Delhi 114,460
5. Mr. Narottam Mittal & Four Ors. New Delhi 68,540
6. Mr. T. R. Mittal New Delhi 500,000
7. Ms. Sonal S. Mehta Surat 495,000
8. Ms. Poojaben V. Mali Surat 495,000
9. Ms. Champaben G. Rathod Surat 495,000
10. Ms. Beroz N. Daruwala Surat 495,000
11. Mrs. Neelam Gupta Jammu 137,960
12. Mr. T. K. Dilip Sukumar & Ors. Kannur 205,030
13. Mrs. Shahida Razak Trivandrum 153,941
14. Mr. D. K. Baser Bhopal 34,800
15. Mr. Nitin Arora Bhopal 60,980
16. Dr. Mahendra N. Kabra Mumbai 120,000
17. Mr. Roop Kumarji Paliwal Udaipur 422,000
122
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
18. Mr. Madanlal Paliwal Udaipur 422,000
19. Mr.Madhusudan Vaishnav & Anr Udaipur 100,082
20. Mr. M. K. Singhal New Delhi 111,811
Off Loading: These are complaints where passengers have been off loaded for various reasons such as Company
staff issuing a boarding card to the passenger although there was no seat, passengers refusing to board the aircraft
because their accompanying relative could not be accommodated on the same flight or a passenger being
accommodated after the economy class counter was closed, and later being off loaded because one of the
Company’s AMEs had to travel on the flight. There are three such cases of off loading pending in different
forums across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. G. R. Vyas Ahmedabad 110,000
2. Mr. Chandulal Gariba & Ors. Mumbai 410,000
3. Mr. Perumal Chennai 300,000
Gate No Show by Passengers: These are complaints by passengers in connection with a gate no show, which
occurs when a checked in, security cleared passenger does not report at the departure gate for boarding the
aircraft. There are three cases in connection with gate no show pending in different forums across India and the
names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. Rajesh Verma Guwahati 86,227
2. Mr. Suben Roy Papumpare 500,000
3. Mr. S. Sukumar Bangalore 16,994
Delay in Departure/Cancellation/Diversion of Flights: There are eight cases pending in different forums
across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Mr. S. P. Nachnolkar Goa 109,000
2. CERS and others Ahmedabad 43,000
3. CERS and others Ahmedabad 58,000
4. Mr. Prakash I. Patel Baroda 113,030
5. Major. Yogesh S. Dani Mumbai 509,794
6. Mrs. Priti Y. Dani Mumbai 509,794
7. Mr. Manmohan Singh and Ors. Mumbai 90,000
8. Mr. S. Visweswara Vizianagaram 18,376
Pilferage/Damage/Loss of Baggage and Cargo: There are 20 cases in connection with pilferage/damage/loss of
baggage and cargo pending in different forums across India and the names of the complainants, place of litigation
and amounts involved are as follows:
1. Mr. Lakshmikar Reddy Hyderabad 341,021
2. Mr. Sankar Patgiri Goalpara 306,500
3. Mr. Asraf Shawl New Delhi 111,500
4. Jagrut Nagrik and Solarson Inds. Baroda 181,836
5. Jagrut Nagrik and Solarson Inds. Baroda 259,170
6. Mr. N. C. Rana Baroda 23,250
7. Ms. Padmaben Patel Baroda 144,882
8. Ms. Lata A. Shah Baroda 512,000
123
Sr.
No.
Complainant's Name
Place of Litigation
Claim Amount
(Rs.)
9. Ms. Kirti Patel Baroda 83,900
10. Mrs. Harpal Kaur Srinagar 114,400
11. High Tech Computers Srinagar 450,000
12.
Ms. Ramadasini (the Company has been impleaded as
a formal party) Mangalore 150,500
13. Mr. Thayyil Aboobacker Malappuram 457,000
14. Mr. Jojo Jameson Ernakulam 50,000
15. Ms. Hiba Fathima Calicut 98,000
16. Mr. Ashok Chatterjee Indore 34,250
17. Transworld Compressor Pune 185,183
18. M/s. Metro Fabrics Chennai 1,959,403
19. Mr. Sadhan Das Agartala 103,280
20. XPS Cargo Services New Delhi 55,500
Miscellaneous Complaints: These include passenger complaints about in-flight meals, air conditioning systems,
claims for senior citizen fares and delay in delivery of baggage, etc. There are 18 such cases pending in different
forums across India and the names of the complainants, place of litigation and amounts involved are as follows:
1. Ms. Anita Hegde and another Port Blair 78,636
2. Mr. S. N. Ghatia Ahmedabad 1,500,000
3. CERS and another Ahmedabad 205,080
4. CERS and another Ahmedabad 534,608
5. Mr. Pradeep Jain Jammu 460,000
6. Mr. Ashvini Ranjan Bangalore 490,000
7. Mr. Chandrakant C. Anandpara Mumbai 26,000
8. Mr. Arvindrao Hukkeri Mumbai 376,284
9. Consumer Unity and Trust Society Jaipur 420,294
10. Mr. A. A. Mohan Chennai 107,795
11. Mr. S. S. Radhakrishnan and others Chennai 1,500,000
12. Mr. C. P. M. Rathnam Coimbatore 105,790
13. Ms. N. Indumathi Chennai 100,000
14. Mr. G. P. Singh Dehradun 91,500
15. Mr. Abdul Moiz Khan Lucknow 1,002,365
16. Mr. Debashis Dutta and others Kolkata 500,000
17. Godfrey Philips India Ltd. Bangalore 32,360
18. Mr. Arora and Ors. Baroda 12,00,000
Employee Related Cases/Proceedings
As on the date of this Draft Red Herring Prospectus, there are 31 labor and employee related cases and proceedings
filed and pending against the Company in various Labor Courts/Central Government Industrial Tribunals/ Civil Courts
across the country.
Sr.No.
Name of the Employee
Matter Before
Grounds
1. Vishnu Rewale ID 28/2001
CGIT–II/MUMBAI
Termination for theft
124
Sr.No.
Name of the Employee
Matter Before
Grounds
2. Ravindra Thombre ID 59/2001
CGIT – II/Mumbai
Termination for theft
3. Pradeep Bhatkar
ID 60/2001
CGIT - II/ Mumbai
Termination for theft
4. Mohd. R. S. Pathan ID 1/30/03/1208/2003
CGIT - II/ Mumbai
Absenteeism
5. Amrit Melant ID 2 2/14/2000
CGIT-II/ Mumbai
Absenteeism
6. Rajendra Wagmare
ID 75/03/48/2004
CGIT – II/ Mumbai
Absenteeism
7. Sanjay Jassoria ID 23/2000
CGIT – II Delhi
Absenteeism
8. Ramakrishna ID 195/99
CGIT – II Delhi
Absenteeism
9. Naresh Kumar ID 84/2001
CGIT – II Delhi
Absenteeism
10. K. N. Suresh Kumar ID 4/02
Calicut Labour Court, Calicut
Riotous behavior
11. Digant Hathi Civil Court-Rajkot Fraud
12. Abhimanyu Rathore ID 23/03
Tribunal Court – Jodhpur
Fraud
13. Chandrashekar Pattan ID 75/03/28/2004
CGIT- Mumbai
Fraud
14. Anil Chaugule
ID 2/28 of 2004
CGIT – Mumbai
Fraud
15. Prakash Gore ULP 271/2001
Labour Court - Mumbai
Ramp accident
16. Prashant Shetye ID22/2003
CGIT – Mumbai
Riotous behavior
17. Santosh B Takke ID 13/1999
CGIT – Mumbai
Termination for theft
18.
Rajeev Sharma ID 11012/45 of 2002
ID 60/2004
CGIT I Delhi – Tis Hazari
Not reporting on duty
19.
G. Victor David 1/8(94)/03
ALC (C) Mumbai
Termination of service
20.
Mukesh Parmar ITC 35/ 2002
CGIT – Ahmedabad
Termination of service
21.
Babubhai P. Solanki 7(9)/ 2004
RLC(C)- Ahmedabad
Termination of service
22.
Bijender Pal ID 11012/49 of 2002
CGIT – II Delhi
Not confirmed after probation
Certain industrial disputes have been raised by terminated workmen who were working for contractors engaged by the
Company. These workmen have sought reliefs such as reinstatement and back wages. These cases are set forth
below:
23. 10 workmen, working for a contractor T.K.
Hassan Koya
ID 29/1997
CGIT-Calicut
Termination by the contractor
24. Six workmen, working for a contractor Take Off
Services
ID CR 50/02, CR 68/01, CR
69/01, CR 70/01, CR 71/01, CR
72/01
CGIT-Bangalore
Termination by the contractor
125
Sr.No.
Name of the Employee
Matter Before
Grounds
Certain cases, as set forth below, have been filed by workers who had fixed term contracts, which were not renewed:
25. 169 workmen belonging to the BKKM Union CGIT –I BOM Termination of fixed term employment
contracts. An industrial dispute has been
raised.
26. 24 workmen belonging to the BKKM Union CGIT –I BOM Termination of fixed term employment
contracts. An industrial dispute has been
raised.
27. 24 workmen belonging to the BKKM Union Labour Court, Pune Claim of permanency
In addition to the matters listed above, the Company is a party in certain prosecutions against the Company under the
Contract Labour (Regulation and Abolition) Act, 1970 (“Contract Labour Act”) which are as under:
In Bangalore, prosecution proceedings (C.C. No. 14558/02) under the Contract Labour (Regulation and Abolition)
Rules (the “Contract Labour Rules”) for procedural irregularities has been challenged by the Company before the 6
th
Additional Court, Bangalore. The proceedings have been stayed by the Karnataka High Court.
In Chennai, prosecution proceedings (STC/149/2004 and STC/467/2004) has been initiated under the Contract Labour
Rules (by the Labor Enforcement Office, Central and Assisstant Labor Commissioner, Central) for contraventions
under the Contract Labour Act has been challenged by the Company before the Court of the Judicial Magistrate at
Alandur, Chennai.
Prosecution proceedings (ST-1757/04) have been initiated by the Labor Enforcement Officer (Central) for alleged
contravention of the Contract Labour Act before the First Class Magistrate, Kunnamangalam, Calicut.
Prosecution proceedings against the Company under the Payment of Wages Act have been initiated by the Enforcement
Officer before the Civil Court (Senior Division) at Vadodara.
Miscellaneous Proceedings/Notices
There are seven applications pending under the Motor Vehicles Act at different stages before the Motor Vehicles
Accident Tribunals across India. The details of these applications are as follows:
Sr. No. Complainant’s Name Place of Litigation Claim Amount
(Rs.)
1. Mr. Nandkumar T. Kadam Baroda 300,000
2. Mrs. Janaki Devi and others New Delhi 4,072,000
3. Mr. Sunil G. Saxena Mumbai 150,000
4. Ms. Seema D. Shinde Mumbai 150,000
5. Mr. A. Ganesan Madurai 100,000
6. Mr. Nilesh J. Shinge Mumbai 125,000
7. Kumari. Rambali Prajapati Mumbai 125,000
The Deputy Commissioner of Customs at Hyderabad has issued a show cause notice (C.No.S/26/Appg/R&I/146/2004-
ACC) levying a penalty of approximately Rs. 0.35 million due to short receipt of cargo under a shipment on the
Bombay-Hyderabad sector. The Company will be submitting its reply and seeking a personal hearing.
Criminal case C.C. No. 884/ P/ 2002 under section 304(A) of the Indian Penal Code has been filed by the State of
Maharashtra against a ramp manager employed by the Company at Mumbai airport for criminal negligence that
allegedly resulted in the death of a passenger, Mr. Manubhai Patel as he was climbing up an aircraft step ladder to
board the aircraft. The trial is currently pending.
A first information report no. 46/04 has been filed against Mr. Sanjay Bhatnagar, a driver employed by our Company
for an accident that occurred on October 21, 2004 at the Delhi airport while such driver was engaged in the services of
the Company.
Litigations/Proceedings by Jet Airways
126
Criminal Cases
The Company has filed six complaints under section 138 of the Negotiable Instruments Act, 1881 (“N.I. Act”) against
two travel agents, Green Channel and Piercy Exim, before the Court of the Chief Metropolitan Magistrate at Kolkata
and another four complaints against D.S.P. Tours at Bangalore, in connection with the dishonor of cheques issued by
such travel agents of an aggregate amount of approximately Rs.1.9 million towards payment of their dues to the
Company.
The Company has filed Criminal Complaint No. 27708/2000 against Mr. Satish Athmanathan, a former employee, in
the Court of the XX Additional Chief Metropolitan Magistrate at Bangalore for criminal misappropriation, criminal
breach of trust and cheating. Due to non-appearance of the accused on a number of occasions before the Court, a non-
bailable arrest warrant has been issued against him.
Restrictive Trade Practices Proceedings
In June 1999 the Company filed a complaint against the Cochin International Airport Limited, or CIAL, before the
Monopolies and Restrictive Trade Practices Commission (“MRTP Commission”) in connection with an exclusive
ground handling services contract entered into between CIAL and Air India. As a result of this contract, the Company
is prevented from providing its own ground handling services for its flights at Cochin International Airport and is
compulsorily required to use Air India’s services. At present, the Company is permitted to provide ground handling
services for its flights at all other airports in India where it operates. Pending the disposal of the proceedings, the
Company has entered into an interim arrangement with Air India for ground handling of its flights at Cochin
International Airport. We are currently making payments of a part of the charges claimed by Air India under protest.
The MRTP Commission by its order dated October 23, 2000, granted interim reliefs in favour of the Company. This
order was challenged before the Supreme Court of India which passed an order of status quo as of November 2, 2000.
However, this would not prevent the MRTP Commission to proceed with the final hearing of the complaint. The
complaint is pending before the MRTP Commission for final disposal.
Winding-up Petitions
The Company has filed two winding-up petitions under the Companies Act against NEPC–MICON Limited and
Quality-Inn Resort and Travels Pvt. Ltd, in the High Courts of Chennai and Kolkata, respectively, for recovery of
outstanding dues amounting to approximately Rs.2.7 million. The petitions are currently pending before the respective
High Courts.
Civil Suits/Arbitration
The Company has filed suits in the High Court, Mumbai, against nine pilots who left the employment of the Company
in 1999, seeking recovery of training costs and for injunctive reliefs. . The Court refused to grant such injunctions. The
Company had filed appeals before the Division Bench of the High Court and these have not yet been taken up for
hearing.
The Company has filed summary suits in the High Court, Mumbai against four pilots, Captain M.M. Singh, Captain
Dadyalla, Captain Puneet Bhalla and Captain B. K. Chaudhary who left the Company’s employment between 2002 and
2003. The suits have been filed against these pilots and their sureties for recovery of a portion of their training costs.
The suits are currently pending before the High Court.
The Company has filed suits against 10 defaulting travel agents for recovery of outstanding dues amounting to
approximately Rs.11.6 million, which includes a counter claim of Rs. 2.3 million against Kwick Travels (Private)
Limited. All these suits, except one suit where an ex-parte decree has been passed in favor of the Company, are
currently pending before various courts across India.
M/s. Destination Tours and Travels (“DTT”) and the Company had entered into three contracts for DTT to handle
ground handling at Jammu, ground handling at Srinagar and to act as principal sales agent for the territory of Jammu &
Kashmir. Pursuant to the termination of these contracts, DTT filed a case against the Company before the Munsif’s
Court to restrain invocation of bank guarantees furnished by DTT. The Company got an ex-parte order vacated and
encashed the guarantees of Rs.5 million. In order to recover the balance amounts, the Company approached the High
Court at Mumbai to initiate arbitration proceedings. Although arbitration proceedings were initiated, DTT failed to
participate in such proceedings, and an award was passed on January 23, 2004 in favor of the Company granting the
balance amount of Rs.4.7 million and Rs.0.18 million as costs of the arbitration. The Company is in the process of
enforcing the award.
127
Taxation related Cases/Proceedings
The Municipal Corporation of Greater Mumbai levied Rs.158 million and Rs.1.8 million as octroi duty (an entry tax)
on the full flight simulator and flight training device of the Company. The Company paid the amount that was levied
and subsequently filed Municipal Appeal Nos. 12/2001 and 350/2002 in the Small Causes Court at Mumbai for refund
of the excess duty paid. Both the appeals were allowed, although the order was stayed until October 31, 2004. By its
order dated October 1, 2004, the Court has rectified the rate of duty imposed from 4% to 4.5%.
We have filed a writ petition in the High Court, Mumbai (Writ Petition No.208 of 2001) challenging the order of the
Municipal Corporation of Greater Mumbai demanding octroi duty (an entry tax) of approximately Rs. 290 million on
certain of the Company’s fleet of aircraft. The matter has not yet been listed for hearing.
The Company had filed an appeal before the CEGAT, Mumbai against an order dated February 11, 2000 issued on
February 15, 2000 by the Commissioner of Customs imposing a penalty of Rs.2.5 million on the Company under
Section 112(a) of the Customs Act, 1962 with regard to reconditioned / second hand spares imported by our Company.
The appeal has been heard in August, 2004 and the CEGAT has reserved its order.
Consumer related Cases
The Company has filed three consumer appeals before the National Commission against orders of the State
Commissions across India for an aggregate amount of Rs.297,216 and eight consumer appeals before State
Commissions against orders of various District Forums across India for an aggregate amount of Rs.291,598. The
details of these cases are set forth below:
Sr. No.
Complainant's Name
Region
Claim Amount
(Rs.)
1. Dr. Prabhakar Chowdhary & Ors. New Delhi 191,716.00
2. Mr. Anil Kumar Sanyal New Delhi 50,000.00
3. Capt. K. S. Bajwa Jammu 90,000.00
4. Mr. Ravi B. Wattamwar Mumbai 50,000.00
5. Mr. Sandeep Arora New Delhi 55,500.00
6. Ms. Ayshabi Trivandrum 11,000.00
7. Ms. Khadeejabi Trivandrum 11,000.00
8. Ms. Soudabi Trivandrum 11,000.00
9. Mr. Hassan Abdulla Trivandrum 11,000.00
10. Mr. P. R. Bharech Kolkata 83,353.00
11. Mr. Swapan Gupta Kolkata 24,245.00
Litigations against our Directors
Except as described below, there are no outstanding litigations, suits or criminal or civil prosecutions or proceedings,
and there are no defaults, non-payment of statutory dues, overdues to banks/ financial institutions or defaults against
banks/ financial institutions by our Directors (including past cases where penalties may or may not have been awarded
and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act,
1956).
The Executive Director and certain other Directors have been impleaded as a party in two writ petitions filed against
the Company, one pending before the Gujarat High Court at Ahmedabad (SCA No. 11105 of 2004) and the other
before the High Court of Delhi (Writ Petition No. 1491 of 2004) and in 15 consumer forum complaints filed against the
Company.
Litigations/Proceedings against our Promoters
Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions or proceedings or
disputes against our promoters and there are no defaults, non-payment of statutory dues, overdues to banks/ financial
institutions or defaults against banks/ financial institutions by our promoters (including past cases where penalties may
128
or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule
XIII of the Companies Act, 1956).
Cases pending against Mr. Naresh Goyal
Two contempt petitions have been filed by Captain Puneet Bhalla and Captain M.M. Singh against Mr. Naresh Goyal
before the High Court of Delhi, alleging contempt of the orders of the High Court of Delhi dated July 5, 2002 and July
8, 2002 in the suits filed against the Company before the Court of the District Judge at Delhi seeking permanent
injunction restraining the Company from invoking the bank guarantees furnished by the petitioners at the time of
joining the employment of the Company. Mr.Goyal has not yet been served with summons.
In addition to these petitions, Mr. Goyal has been impleaded as a party in one writ petition, pending before the High
Court of Delhi being Writ Petition No.1491 of 2004 and in 16 consumer forum complaints filed against the Company,
in a criminal prosecution under the Contract Labour Act pending before 6
th
Additional Court, Bangalore filed against
the Company and in a criminal prosecution under the Payment of Wages Act, 1936 pending before the Court of Civil
Judge (Senior Division), Vadodara.
Cases pending against our Directors in their capacity as Directors of companies other than our Company
There are no cases pending against any of our Directors, in their capacity as directors of companies other than our
Company.
Litigations/Proceedings against our group companies
Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions or proceedings or
tax liabilities against our promoter group companies, and there are no defaults, non-payment of statutory dues, overdues
to banks/ financial institutions, defaults in dues payable to holders of any debentures, bond or fixed deposits and arrears
on preference shares issued by our group companies (including past cases where penalties may or may not have been
awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies
Act, 1956).
Jetair Private Limited
Cases/Proceedings against Jetair Private Limited
Criminal Cases
Eastman Travels has filed an appeal, R.C. No. 89/2002 before the VIth Additional Sessions Judge at Chennai against
the order of the XIIIth M.M. Court, directing Eastman to pay an amount of Rs.0.4 million to Jetair. The appeal is
currently pending.
Criminal Complaint No.308/1993 has been filed by the State of West Bengal against Mr. David Mark Paul, who was
working as counter staff at the Singapore Airlines counter of Jetair at the Kolkata Airport. The case is pending trial
before the court.
Civil Cases
Mr. Ganesh Das Bhatter has filed Suit No.743/1993 before the City Civil Court, Kolkata against Jetair for deficiency in
services and claiming approximately Rs.0.1 million with interest.
Suit No. O.S. 170/1998 before the Principal Civil Judge (Senior Division), Civil Court, Mangalore has been filed by
Mr. Rego, claiming approximately Rs.0.18 million from Jetair.
Asianet Communications has filed Suit No.286/2001 against T. Sukumari Amma in the Principal Sub Court in
Trivandrum for the attachment of certain property at Saran Chambers, where Jetair has offices. Jetair has, in view of
the order, filed a petition before the Court for excluding that portion of the property which it occupies from the scope of
attachment.
Jetair has been impleaded as a respondent in a Contempt Petition No.39/2001 filed by Mrs. Madhuri Dalal against Mr.
Amit Agarwal before the High Court, Mumbai. Jetair is a party to a business service agreement with Mr. Amit
Agarwal. Pursuant to the court’s order, Jetair is paying service charges to the court receiver.
129
Mr. Rangaswamy has filed a suit against Jetair in the City Civil Court, Madras, which Court has ordered compensation
of Rs.11,400. An appeal has been prefered by Jetair against the said order.
Mr. Rominder Juneja had filed a suit for recovery of Rs.1.5 million before the High Court of Delhi against Royal
Jordanian Airlines and Jetair (as the GSA for Royal Jordanian Airlines). The suit has been transferred to the Tis Hazari
courts at Delhi and is currently pending.
Writ Proceedings
Ansham Travels and others have filed Writ Petition No.14771/2001 before the Madras High Court against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Viagai Wings Pvt. Ltd. has filed Writ Petition No.11284/2001 before the High Court of Madras against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Gay Travels Pvt. Ltd and others have filed Writ Petition No.19569/2003 before the High Court of Madras against the
Government of India, Ministry of Finance and various airlines, restraining them from deducting tax at source on the
discounts given by them to customers. Jetair is a party in this matter. The petition is pending.
Taxation related Cases/Proceedings
For assessment years 2004-2005, 2003-2004, 2002-2003, 2001-2002 and 2000-2001, Jetair had proceedings pending at
various stages in connection with corporate income tax assessments. The aggregate of the amounts involved in these
matters is approximately Rs.1.2 million.
Restrictive Trade Practices Cases
A complaint has been filed against Gulf Air and others by Mr. M. B. Kalia before the MRTP Commission for
deficiency in services, claiming compensation/damages of Rs.1.0 million. Jetair being the GSA of Gulf Air in India,
has been made a party to these proceedings.
Consumer Cases
Consumer Complaint No.206/1999 has been filed by Mrs. A.M.V. Batista in the District Consumer Redressal Forum,
Goa against Gulf Air and others, seeking compensation of approximately Rs.0.2 million. The passenger was offloaded
at Mumbai by Gulf Air en route to Abu Dhabi. Jetair, being the GSA of Gulf Air in India has been impleaded as a
party to the proceedings. The complaint is currently pending before the Forum.
Consumer Complaint No.610/1998, has been filed by Father Arokiaswamy before the District Consumer Redressal
Forum, Chennai against the Royal Jordinian Airlines and others, seeking compensation of approximately Rs.0.2 million
towards loss of baggage. Jetair, being the GSA of Royal Jordanian Airlines in India, has been impleaded as a party to
the proceedings. The complaint is pending before the Forum.
Consumer Complaint No.60/2004 has been filed by Mr. Maheshbhai Chimanbhai and others before the District
Consumer Redressal Forum, Surat against Cathay Pacific Airlines for compensation of Rs.0.05 million with interest
towards refund on unutilized air tickets. Jetair, being the GSA of Cathay Pacific Airlines in India, has been made a
party to the proceedings. The complaint is pending before the Forum.
Consumer Complaint No.980/2002 has been filed by Kalyani P. Vyas before the District Consumer Redressal Forum,
Ahmedabad against Royal Jordanian Airlines and others seeking compensation of approximately Rs.0.1 million for
being offloaded at the airport. Jetair, being the GSA of Royal Jordanian Airlines in India, has been made a party to the
proceedings. The complaint is pending before the Forum.
Consumer Complaint No.520/2001, has been filed by Santosh Kumar Mehrotra before the District Consumer Redressal
Forum at Kanpur for an amount of Rs.4,500. The basis of the complaint is that he was not provided with a visa by
Jetair, in spite of having paid consideration for the same to Jetair. The complaint is pending before the Forum.
Consumer Complaint No.77 of 1994 was filed by Hira Lall & Sons (Exports) Pvt. Ltd. before the State Consumer
Disputes Redressal Commission, Delhi against Royal Jordanian Airlines claiming compensation of Rs. 1.8 million
towards loss and damages for wrong delivery of goods. Jetair, being the GSA of Royal Jordanian Airlines in India, has
been made a party to the proceedings. In the same matter, against an order of the State Commission, in which the State
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Commission declined to permit impleadment of Czechoslovakian Airlines (trans-shipper) as a party, Royal Jordanian
has filed a Revision Petition No.1868/2004 before the National Commission. Jetair has also been made a party to the
proceedings. The complaint and appeal are both pending before the respective Commissions.
Jetair has been impleaded as a party to certain appellate proceedings in the National Commission (Appeal No.573 of
1996) initated by Makers and Sellers Union alleging deficiency of service in delivery of cargo without collection of the
original airway bill. The claim amount is Rs.0.7 million and the matter is currently pending before the said
Commission.
Employee related Cases
Mr. Ramesh Kumar has filed Case No.86/2001 before Central Government Industrial Tribunal, Delhi against Jetair for
dismissal of service. The case is pending before the Tribunal
Archana Srivastava has filed case No.128/2001 before the Labour Court (First) Uttar Pradesh Sarvod, Kanpur against
Jetair relating to her resignation from the services of Jetair. The case is pending before the Court.
Cases/Proceedings by Jetair Private Limited
Criminal Cases
Jetair has filed Criminal Complaint No.96/1997 before the Chief Metropolitan Magistrate, Ahmedabad against Mr.
Shailesh Shah, an ex-employee who had misappropriated funds amounting to Rs.10.0 million. Jetair has recovered
approximately Rs.5.3 million till date. The complaint is pending.
Jetair has filed Criminal Complaint No.76/2000 before the Judicial Magistrate First Class, II Court, Mangalore, against
an ex-employee, Mr. K.V. Nayak for criminal misappropriation of Jetair funds amounting to approximately Rs.1.7
million plus interest. The complaint is pending
Jetair has filed ten complaints under Section 138 of the N.I. Act against the following travel agents as set forth below:
Sr. No.
Travel Agent
No. of cases Court
1. Shivam Airways Pvt. Ltd.
3
Chief Metropolitan Magistrate’s Court, Delhi.
2. M/s Multipal Tours & Travels
1
Chief Metropolitan Magistrate’s Court, Delhi.
3. SRK Travels
2
Metropolitan Magistrate’s Court, Indore
4. M/s Jee World Travels
1
Metropolitan Magistrate’s Court, Baroda
5. Mr. Shailesh Shah
2
Metropolitan Magistrate’s Court, Ahmedabad
6. M/s Transworld Tours & Travels 1 Additional Chief Metropolitan Magistrate’s Court,
Bangalore
All the above complaints have been filed against these travel agents for issuance of dishonoured cheques for an
aggregate amount of Rs.10,442,903 towards payment of their dues to Jetair.
Civil Cases
Jetair has filed two recovery suits, Suit No.1044/1998 and Suit No.1160/1998 for approximately Rs.3.7 million and
Rs.4.4 million, respectively, before the City Civil Court at Ahmedabad against Mr. Sailesh Shah, an ex-employee.
These suits are pending.
Jetair has filed two recovery Suits No.2248/2004 and 2249/2004 for approximately Rs.0.15 and Rs.0.42 million
respectively, before the High Court at Lucknow against Avadh Travels and Tourism Bureau Pvt. Ltd. The suits are
pending before the court.
Jetair has filed Suit No.206/2002 at Tis Hazari Court, New Delhi against Skymates India Private Limited, a travel
agent, for the recovery of approximately Rs.0.04 million. The suit is pending.
Jetair has filed Suit No.44/2001 against Classic Courier, a defaulting cargo agent, before the 27
th
Court, Tis Hazari
Court at New Delhi, for the recovery of approximately Rs.0.78 million. The suit is pending.
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Jetair has filed Summary Suit No.366/2003 against M/s. Jee World Travels of Baroda for the recovery of approximately
Rs.0.86 million. The suit is pending.
Jetair has filed recovery Suit N
.S 194/1996 before the Principal Civil Judge, Mangalore against Mr. Rego, an interior decorator, for approximately Rs.0.14 million. The suit is pending.
Jetair has filed Suit No.171/2000 before the Delhi High Court against the Jetair Employees Union, North India seeking
a permanent injunction restraining the union from holding demonstrations and shouting slogans in front of the Jetair
offices in New Delhi. The injunction order has been granted in favor of Jetair and the matter has been transferred to Tis
Hazari Court, New Delhi as Case No.184/2004. This suit is pending.
The Madras High Court has in Appeal No.346/1995 filed by Jetair, stayed the operation of an order passed by the City
Civil Court, Madras ordering compensation of Rs.11,400 in favour of a certain Mr. P. N. Rangaswamy. The original
suit is pending.
Jetair has filed a suit, O.S. No.16653/2004, as the second plaintiff, before the court of the City Civil Judge, Bangalore
against Mer-India Travels Pvt. Ltd. for the recovery of approximately Rs.0.47 million. The suit is pending.
Winding-up Petitions
The Madras High Court has appointed an official liquidator to take charge of all the assets of Eastman Travels Pvt.
Ltd. in Application No.557/2001 under CP No.110/2001, filed by Jetair in relation to an outstanding amount of
approximately Rs.0.8 million.
Writ Proceedings
Jetair has filed Writ Petition No.33879/1990 before the Calcutta High Court against the Employees State Insurance
Corporation (“ESIC”) restraining them from demanding Rs. 0.1 million as per their Certificate of Demand dated
November 7, 1990. However, Jetair has subsequently paid the amount under protest in 1999 to ESIC and the matter is
pending before the court.
Amarchand Mansion Co-operative Housing Society, of which Jetair is a member, filed Writ Petition No.2332/2000
before the Bombay High Court against the Municipal Corporation of Greater Mumbai, restraining them from taking
any action on a certain property as per a notice of attachment dated March 12, 1999. The action of the Municipal
Corporation of Greater Mumbai against the property arises out of arrears towards property tax and repair cess
amounting to approximately Rs.4.0 million. The High Court has stayed the notice of attachment and the petition is
pending hearing.
Jetair has filed Writ Petition No.46610/2003 before the High Court of Karnataka at Bangalore against the award passed
by the Presiding Officer, Labour Court, Mangalore, in Ref. No.9/2000, in relation to one Mr. K.V. Nayak. The award
was stayed by the Karnataka High Court. The Writ Petition is pending.
Jet Enterprises Private Limited
Cases/ Oppositions against Jet Enterprises
There is an opposition case pertaining to Jet Enterprises’ application for registration of the mark ‘JET AIRWAYS THE
JOY OF FLYING (and the device of the rising sun)’ bearing Application No.2307368 in the United Kingdom. The
opposition has been filed by ConocoPhillips on the ground that the Jet Entreprises’ trademark application is similar to
their “JET” trademark and the goods sought to be protected by Jet Enterprises’ application are similar to their goods.
Jet Enterprises has engaged English counsel to represent it against such opposition.
Jet Enterprises has received a notice of “Office Actions” issued by the Trademark Examining Authority in the U.S.A.
against its application for registration of the trademark “Jet Airways –The Joy of Flying” (and the device of the rising
sun) on technical issues and on the ground of likelihood of confusion with an existing service mark registration by Jet
Airways Inc., a Delaware company.
In addition to such “Office Action”, Jet Enterprises has received a notice from the chief executive officer of Jet
Airways Inc., demanding that the Company abandon its application for registration in the United States. No formal
litigation or opposition has, however, been filed against Jet Enterprises. Jet Enterprises intends to contest the claims, if
any, initiated by Jet Airways Inc.
132
There are currently two oppositions to the application made by Jet Enterprises for the registration of the trademark “Jet
Kids” (with a device of a toy aeroplane), being Application No.1068705 in Class 28 in India:
• Opposition No.166183 by Godrej Sara Lee Ltd.; and
• Opposition No.165450 by Hero Cycles Ltd.
Jet Enterprises has provided formal responses to such oppositions, which are pending before the Registrar of Trade
Marks, Mumbai.
Jet Enterprises has received a notice from the New Delhi Municipal Council (“NDMC”) relating to property tax
payable for the periods 2002-2003 and 2003-2004 for an amount of approximately Rs.20 million in connection with
certain premises owned by Jet Enterprises in New Delhi. Jet Enterprises has filed the necessary documents/letters with
NDMC disputing this liability. The matter is pending consideration with the NDMC.
France Air Private Limited (“FAPL”)
Cases/Proceedings against FAPL
Appeal No.32/2000 has been filed by Mr. A.L. Barreto before the State Commission, Goa against the order of the
District Forum awarding Rs.10,000 as compensation against a claim of Rs.0.1 million.
For Assessment Years 2003-2004, 2002-2003, 2001-2002, 2000-2001, 1998-99, 1997-98 and 1996-97, FAPL has
refund claims pending at various stages relating to its corporate income tax assessments. The aggregate of the refund
amounts claimed is approximately Rs.1,145,716.
Cases/Proceedings by FAPL
FAPL has filed recovery cases against Mr. Shailesh Shah, an ex-employee being Suit No.813/1999 and Suit No.
812/1999, for approximately Rs.0.46 million and Rs.1.2 million respectively, before the City Civil Court at Ahmedabad
Vimpal Holdings Private Limited (“Vimpal”)
Vimpal has filed Suit No.425/2003 in the High Court of Delhi seeking to restrain the New Delhi Municipal Corporation
from demolishing the mezzanine floor of certain premises at G-11/12, Connaught Circus, New Delhi.The suit is
pending.
International Cargo Carriers Private Limited (“ICCPL”)
Cases/Proceedings against ICCPL
Consumer Cases
Surendra Engineering Corporation has filed Consumer Complaint No.34/1999 in the Maharashtra State Commission
against ICCPL claiming damages of approximately Rs.1.3 million as compensation towards deficiency in services.
Taxation
For the Assessment Year 2003-2004, a refund of Rs. 17,95,923 was claimed, against which a refund of Rs. 15,56,360
was accorded. A refund is being sought for the balance amount. For the Assessment Years 1996-1997, 1997-1998 and
1998-1999, a refund of an aggregate amount of Rs.0.17 million has been sought and which is pending.
Cases/Proceedings by ICCPL
ICCPL has filed Winding Up Petition No.1225/1999 against M/s. Image before the Bombay High Court for recovery of
approximately Rs.0.17 million towards demurrage charges for a shipment at Kuwait that was not claimed by the
consignee, M/s Aziz & Akram General Trading Company at Kuwait, in spite of various reminders. The petition has
not been listed as yet.
UPS Jetair Express Private Limited (“UPS Jetair Express”)
Cases/Proceedings against UPS Jetair Express
Criminal Cases
133
A prosecution has been filed by the octroi duty inspector of Pimpri Chinchwad Municipal Corporation, Pimpri before
the Judicial Magistrate First Class, Municipal Corporation Court bearing Criminal Case No.158/2003 for evasion of
octroi duty against, among others, UPS Jetair Express. The matter is currently pending.
Civil Cases
UPS Jetair Express has been named as the second respondent in a case filed by KRAVAG before the German Court,
Landgericht Hamburg, Az.: 425 O 121/01, Reference: R/IN 1099/01. The parties to this proceeding are considering
settlement of the dispute.
Consumer Cases
A Consumer case being O.P. No.610/2003 filed by one Jyotsna Ravi before the Consumer Dispute Redressal Forum at
Ernakulam claiming Rs.0.1 million as compensation against UPS Express for delay in delivery of consignment. The
matter is currently pending.
UPS Jetair Express has been made a party in a consumer case being CD No. 116/2002 filed by Dr Aswini Kumar Rath
before District Consumer Redressal Forum Khurdha, Bhubaneshwar claiming Rs.1,38,264/- as compensation for
deficiency in service. The matter is currently pending.
Miscellaneous Cases/Show Cause Notices
UPS Jetair Express has been impleaded as a party in a complaint bearing O.S. No. 16237/2003 filed by the United
Cottage Industry before the City Civil and Sessions Judge, Mayo Hall, Bangalore for recovery of money.
A show cause notice under section 124 of the Customs Act, 1962 has been issued by the Office of the Commissioner of
Customs (Export), Air Cargo Complex, Sahar, Mumbai on July 1, 2003 with regard to the seizure of bone toggles
made out of stag horns. UPS Jetair Express is in the process of responding to the show cause notice.
Cases/Proceedings by UPS Jetair Express
Criminal Cases
UPS Jetair Express has filed following complaints under Section 138 of the N.I. Act for dishonour of cheques issued to
UPS Jetair Express:
Sr. No. Claim against Location Amount Case No.
1. Consolidated Traders & Exporters Mumbai
221,746 1773/S/2002
1774/S/2002
1775/S/2002
2. Vaishali Petrochemicals & Consultants Mumbai 9,972 1235/S/2002
3. International Impex Mumbai 20,543 1877/S/2002
4. Shree Krishna Enterprises Mumbai 5,180 1873/S/2002
5. Royal Trading Company Delhi 56,000 172/S/2003
6. Grand Rio Exports/Mendoza Delhi 11,456 1241/S/2002
7. S. A. Exim Delhi 48,582 1878/S/2002
8. Emego Collection India Pvt Ltd. Delhi 24,724 1378/S/2002
9. Skylark Garments Chennai 23,755 173/S/2003
10. S. S. Buying Services Delhi 91,600 179/S/2003
11. Ramco Super Leather Chennai 99,326 219/S/2003
12. Western Express Chennai 425,000 254/S/2003
255/S/2003
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28/S/2004
13. House of Seassons Delhi 57,528 29/S/2004
14. Somko Overseas Pvt Ltd. Mumbai 120,818 296/S/2004
15. Yogesh Mordani (Pro - Solomio) Mumbai 409,233 427/M/2004
16. Aalishan Creation Mumbai 17,622
297/S/2004
17. Baron Incorporated Mumbai 25,000
1379/S/2002
18. Deepak Parekh (Trade Centre) Mumbai 17,865
428/M/2004
19.
Corporate Identity Tirupur
170,275
Civil Cases
The following recovery suits/summary suits have been filed by UPS Jetair Express before the High Court of Bombay
and are currently pending:
Sr. No. Suit filed against Claim Amount
(Rs.)
1. Solanki Western Express Pvt. Ltd. Rs. 766,422 (including interest payable)
2. Punit Babu Gemor Impex. Rs.1,346,672 (including interest payable)
3. Jagdish Dewan Dee Cee Design Rs. 260,313 (including interest payable)
Tax related Cases/Proceedings
Corporate income tax assessments for fiscal 2003 and 2004 are pending.
Third party summons have been issued by sales tax authorities for submission of particulars relating to a specific
shipment. UPS Jetair Express is in the process of filing a response with the sales tax authorities.
Certain queries have been raised by service tax authorities for September 2003 and UPS Jetair Express is in the process
of filing a response with the said tax authorities.
Miscellaneous Cases
Summons have been issued by the Enforcement Directorate against a director of UPS Jetair Express in connection with
advertising and marketing campaigns done for UPS Group in India and the import of diamond powder by one
consignee belonging to the UPS Jetair Express courier network. Submissions have been made to the Office of
Enforcement Directorate and no further notice in this regard has been received until date.
UPS Jetair Logistics Private Limited (“UPS Logistics”)
Cases/Proceedings against/by UPS Logistics
Civil Cases
UPS Logistics has received a legal notice from its landlord relating to the alleged non-payment of electricity bills in an
amount of Rs.569,500, and has responded to such claim.
Tax related Cases/Proceedings
Corporate income tax assessments for fiscal 2003 and 2004 are pending.
Sales tax assessments for the Delhi, Bangalore and Chennai for fiscal 2004 are pending. Sales tax assessments for the
Mumbai region for fiscal 2002 are pending.
135
UPS Logistics has received a show cause notice from the service tax authorities relating to a dispute on the input credit
of the service tax charged. UPS Logistics has paid an amount of Rs.209,962 under protest on such account, and further
directions of the authorities are awaited.
National Travel Service (“NTS”)
Cases/Proceedings against NTS
The following cases have been filed against Kuwait Airways and NTS in the Consumer Forum at Hyderabad for
mishandling of baggage:
Sr. No. Complaint No. Complainant Claim Amount
(Rs.)
1. CD/O/P No.1283/ 2004 Khatija Banu 78,500
2. CD/O/P No.290/ 2003 Rakala Arjun 1,250,000
3. CD/O/P No.833/ 2003 Farhan Shrath 850,000
Cases/Proceedings by NTS
Criminal Cases
NTS has filed a complaint under section 138 of the N.I. Act in the Metropolitan Magistrate’s Court, Baroda against M/s
Jee World Travels, a travel agent for issuance of dishonoured cheques amounting to approximately Rs.0.18 million
towards payment of the agent’s dues to NTS.
Civil Cases
NTS has filed Summary Suit No.1620/2003 before the Magistrate’s Court at Baroda against M/s Jee World Travels of
Baroda for the recovery of approximately Rs.0.18 million.
NTS has filed Execution Petition No.122/2003 before the Subordinate Judge at Tirupur against Freelook International
for the execution of a decree of approximately Rs.0.19 million passed by the Additional Civil Judge, Bangalore in Suit
No. 15603/1999 in favour of NTS.
An ex parte decree was passed by the High Court of Bombay against M/s. K.R.V. Exporters, in summons for
Judgement No.122/1997 in Summary Suit No.1385/1995. The decree for approximately Rs.1.1 million is being
executed.
Consumer Cases
NTS has filed Appeal No.848/2004 before the Andhra Pradesh State Commission against the order of the District
Forum directing, inter alia, NTS as being jointly and severally responsible for refunding approximately Rs.32,137 to
M/s Alla Sambrajyam and others. An interim stay has been granted in favour of NTS and the appeal is pending.
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MATERIAL DEVELOPMENTS
In the opinion of the Board of Directors of the Company, there have not arisen, since the date of the last financial
statements disclosed in this Draft Red Herring Prospectus, any circumstances that materially or adversely affect or are
likely to affect the profitability of the Company taken as a whole or the value of their consolidated assets or their ability
to pay their material liabilities within the next twelve months.
137
DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and our shareholders, in
their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements
and overall financial condition. The dividends declared by our Company during the last five fiscal years are presented
below.
Class of shares Face Value Year ended March 31,
Rs.
2000 2001 2002 2003 2004
Six months ended
September 30,
2004
(Rs. in million)
Equity Shares 10
- Interim 72.09 72.09 Nil Nil Nil Nil
- Final Nil Nil 82.90 Nil Nil Nil
Total 72.09 72.09 82.90 Nil Nil Nil
CCRPS - 4.37 36.60 - - -
Dividend per share
Equity Shares 10 1.00 1.00 1.15 Nil Nil Nil
CCRPS 10 - 0.06 0.52 Nil Nil Nil
________
The amounts paid as dividend or bonus in the past are not indicative of our dividend policy in the future.
138
OTHER REGULATORY DISCLOSURES
Stock Market Data for our Equity Shares
This being an initial public issue of Jet Airways, the Equity Shares of Jet Airways are not listed on any stock exchange.
Particulars Regarding Public Issues during the Last Five Years
We have not made any public issues during the last five years.
Companies under the Same Management
There are no companies under the same management within the meaning of Section 370(1B) of the Companies Act,
other than the promoter group companies in India (excluding National Travel Services, which is a partnership firm) and
the promoter group companies outside India, details of which companies are provided in the section entitled “Our
Promoters and Group Companies” on page 96 of this Draft Red Herring Prospectus.
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Offer, and us will provide for retention of records with the Registrar to the
Offer for a period of at least one year from the last date of dispatch of the letters of allotment advice or refund orders to
enable the investors to approach the Registrar to the Offer for redressal of their grievances.
All grievances relating to the Offer may be addressed to the Registrar to the Offer, giving full details such as name,
address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or
collection centre where the application was submitted.
We estimate that the average time required by us or the Registrar to the Offer for the redressal of routine investor
grievances will be seven business days from the date of receipt of the complaint. In case of non-routine complaints and
complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible.
We have an Investors Grievance Committee, comprising of Mr. I.M. Kadri as the Chairman, Mr. Charles A. Adams and
Mr. Saroj K. Datta. We have also appointed Mr. A.R. Rajaram as the Compliance Officer for this Offer.
Certain Indebtedness
Please refer to page 226 of this Draft Red Herring Prospectus for details of borrowings in our Company as specified in
our financial statements under Indian GAAP.
The following table summarizes our secured and unsecured long-term indebtedness and subordinated debt obligations
as of September 30, 2004. We had no short-term indebtedness as of September 30, 2004.
As of September 30, 2004
Secured
HDFC Limited
(Secured by hypothecation of simulator and other accessories thereto)
600
Unsecured
Hire Purchase/Finance Lease installments for aircraft 27,524
Hire Purchase/Finance Lease installments for vehicles 16
Subordinated Debt from IDFC
(collateral in the form of a bank guarantee to the extent of 35% of the outstanding loan)
3,341
___________ _______
Total 31,481
Under the U.S. Exim-guaranteed hire purchase finance agreements relating to 19 of our aircraft, we are required to
comply with certain financial covenants. Pursuant to agreements relating to nine of the aircraft, at the end of each fiscal
quarter our ratio of EBITDAR to fixed charges must be at least 1.1:1 and we may not pay cash dividends in excess of
US$1.7 million. The covenants relating to the other 10 aircraft require that, at the end of each fiscal year, we have a
fixed charge ratio of at least 1.1:1 and a ratio of total liabilities to tangible net worth of not more than 3:1. In all cases,
financial ratios are calculated on the basis of particular terms defined in the agreements, and not on the basis of Indian
GAAP or IFRS.
139
The subordinated debt facility has been availed from IDFC and is subordinated to all present and future indebtedness of
our Company whether secured or unsecured. Under our IDFC subordinated debt agreement, we are required to
maintain a certain EBITDA to debt ratio, debt to equity ratio, net profit margin and closing cash balance for each fiscal
year. Our inability to comply with any of the required financial covenants could result in default under our hire
purchase, finance lease or debt agreements. As of November 30, 2004, we were in compliance with the covenants of all
of our hire purchase and debt agreements.
140
TERMS OF THE OFFER
The Equity Shares being offered are subject to the provisions of the Companies Act, the Memorandum and Articles, the
terms and conditions of the FIPB letter dated November 5, 2004, the terms of the Red Herring Prospectus, the
Prospectus, the Bid cum Application Form, the Revision Form and other terms and conditions as may be incorporated
in the CAN, allotment advice and any other document/certificates that may be executed in respect of the Offer. In
addition, the Equity Shares shall also be subject to all applicable laws, guidelines, notifications, rules and regulations
relating to the issue of capital and listing of securities issued from time to time by SEBI, Government of India, Stock
Exchanges, RBI, Registrar of Companies and/or other authorities, as in force on the date of the Offer and to the extent
applicable.
Authority for the Offer
The Fresh Issue of Equity Shares in this Offer by the Company has been authorized by a resolution of its Board of
Directors passed at their meeting held on November 4, 2004, subject to the approval of the shareholders through a
special resolution dated December 28, 2004 pursuant to Section 81(1A) of the Companies Act. The shareholders
approved the Fresh Issue of Equity Shares at an EGM of the shareholders of the Company held on December 28, 2004.
Pursuant to the authority granted by the Board of Directors of the Company at its meeting held on November 4, 2004, a
Committee of the Board approved the Fresh Issue by the Company on January 4, 2005.
The Offer for Sale has been authorized by a resolution of the board of directors of Tail Winds Limited dated December
27, 2004, which has also (i) authorized the Company to take decisions on its behalf in relation to the Offer and (ii)
appointed the Company to act as its attorney with respect to any matter or thing required to be done in connection with
the Offer.
Ranking of Equity Shares
The Equity Shares being offered shall be subject to the provisions of the Companies Act, the Memorandum and
Articles of Association of Jet Airways and shall rank pari passu in all respects with the existing Equity Shares of the
Company including in respect of the rights to receive dividends. See “Main Provisions of the Articles of Association”
beginning on page 171 of this Draft Red Herring Prospectus for a description of the Articles of Association of our
Company. The persons in receipt of Allotment will be entitled to dividends or any other corporate benefits (including
dividends), if any, declared by our Company after the date of Allotment.
Face Value and Offer Price
The Equity Shares having a face value of Rs.10 each are being offered in terms of this Draft Red Herring Prospectus at
a price of Rs.[•] per Equity Share. At any given point of time, there shall be only one denomination for the Equity
Shares.
Rights of the Equity Shareholder
Subject to applicable laws, rules, regulations and guidelines and the Articles of Association, the equity shareholders
shall have the following rights:
• Right to receive dividend, if declared;
• Right to attend general meetings and exercise voting powers, unless prohibited by law;
• Right to vote on a poll either in person or by proxy;
• Right to receive offers for rights shares and be allotted bonus shares, if announced;
• Right to receive surplus on liquidation;
• Right of free transferability; and
• Such other rights, as may be available to a shareholder of a listed public company under the Companies Act
and the Memorandum and Articles of Association of our Company.
For a detailed description of the main provisions of the Articles of Association of the Company relating to voting
rights, dividend, forfeiture and lien and/or consolidation/splitting, see “Main Provisions of the Articles of Association”
beginning on page 171 of this Draft Red Herring Prospectus.
141
Market Lot and Trading Lot
As trading in the Equity Shares is compulsorily in dematerialized form, the tradable lot is one Equity Share. Allotment
of Equity Shares will be done in electronic form, in multiples of one Equity Share, subject to a minimum allotment of
[•] Equity Shares.
Jurisdiction
Exclusive jurisdiction for purposes of this Offer is with the competent courts in Mumbai, India.
Nomination Facility to Investor
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, may
nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death of all the
Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the
Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies
Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of
the Equity Shares. Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed
manner, any person to become entitled to the Equity Shares in the event of his or her death during the minority. A
nomination shall stand rescinded upon a sale of the Equity Shares by the person nominating. A buyer will be entitled to
make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form
available on request at the Registered Office of our Company or to the Registrar and transfer agents of our Company.
In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by
the Board, elect either:
• to register himself or herself as holder of Equity Shares; or
• to make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or
herself or to transfer the Equity Shares, and if the notice is not complied within a period of ninety days, the Board may
thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity Shares, until the
requirements of the notice have been complied with.
Since the allotment/transfer of Equity Shares in the Offer will be made only in dematerialized form, there is no need to
make a separate nomination with our Company. Nominations registered with respective depository participant of the
applicant would prevail. If the investors require a change in the nomination, they are requested to inform their
respective depository participant.
Application by NRIs/FIIs registered with SEBI and FVCIs registered with SEBI
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline.
No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA, and all other applicable
laws, rules, regulations, guidelines and approvals.
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign
Ownership Restrictions” on page 111 of this Draft Red Herring Prospectus.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to
acquire Equity Shares of the Company.
It is to be distinctly understood that there is no reservation for NRIs or FIIs registered with SEBI or FVCIs registered
with SEBI. Such NRIs, FIIs registered with SEBI or FVCIs registered with SEBI, applicants will be treated on the
same basis as other categories for the purpose of allocation.
142
The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended (the
“Securities Act”) or any state securities laws in the United States and may not be offered or sold within the
United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities
Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of
the Securities Act. Accordingly, the Equity Shares will be offered and sold only (i) in the United States to
“qualified institutional buyers”, as defined in Rule 144A of the Securities Act, and (ii) outside the United States
in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur.
Offer Structure
The present Offer of 17,266,801 Equity Shares comprises a Fresh Issue of 14,245,111 Equity Shares of Rs.10 each and
an Offer for Sale of 3,021,690 Equity Shares of Rs.10 each for cash issued at a price of Rs.[•] per Equity Share,
aggregating Rs.[•] million, and is being made through the 100% Book Building Process. 1,200,000 Equity Shares will
be reserved in the Offer for subscription by Employees at the Offer Price.
If at least 60% of the Net Offer cannot be allocated to QIBs, then the entire application money shall be refunded
forthwith.
Employees QIBs Non-Institutional Bidders Retail Individual Bidders
Number of Equity
Shares available for
allocation
1,200,000 Equity Shares At least 9,640,081Equity
Shares
Up to 2,410,020 Equity
Shares
(1)
Up to 4,016,700 Equity
Shares
(1)
Percentage of Offer
Size
[?]%
At least 60% of the Net Offer
(2)
Up to 15% of the Net Offer
to public or Net Offer size
less allocation to QIBs and
Retail Portion
(2)
Up to 25% of the Net Offer
to public or Net Offer size
less allocation to QIBs and
Retail Portion
(2)
Basis of Allocation or
Allotment
Proportionate Discretionary Proportionate Proportionate
Minimum Bid [•] Equity Shares and in
multiples of [•] Equity
Shares thereafter
Such number of Equity Shares
that the Bid Amount exceeds
Rs.50,000 and in multiples of
[?] Equity Shares
Such number of Equity
Shares that the Bid
Amount exceeds Rs.50,000
and in multiples of [?]
Equity Shares
[?] Equity Shares and
thereafter in multiples of
[?] Equity Shares
Maximum Bid Not exceeding the size
of the Offer.
Not exceeding the size of the
Offer subject to regulations as
applicable to the Bidders
Not exceeding the size of
the Offer subject to
regulations applicable to
the Bidders
Such number of Equity
Shares so as to ensure that
the Bid Amount does not
exceed Rs.50,000
Allotment Mode Compulsorily in
dematerialized mode
Compulsorily in dematerialized
mode
Compulsorily in
dematerialized mode
Compulsorily in
dematerialized mode
Trading Lot
One Equity Share One Equity Share One Equity Share One Equity Share
Who can Apply
(3)
Indian Nationals who are
permanent employees
and directors of the
Company and Tail
Winds who are based in
India and are present in
India on the date of
submission of the Bid
cum Application Form.
Public financial institutions, as
defined in section 4A of the
Companies Act, scheduled
commercial banks, mutual
funds, foreign institutional
investors registered with SEBI,
venture capital funds registered
with SEBI, foreign venture
capital investors registered with
SEBI, state industrial
development corporations,
insurance companies registered
with Insurance Regulatory and
Development Authority,
Provident Funds with minimum
corpus of Rs.250 million and
Pension Funds with minimum
corpus of Rs.250 million
Resident Indian
individuals, HUF (in the
name of Karta),
companies, corporate
bodies, NRIs, societies and
trusts
Individuals including NRIs
and HUFs (in the name of
Karta) applying for such
number of Equity Shares
such that the Bid Amount
does not exceed Rs.50,000
Terms of Payment Margin Amount
applicable to Employees
at the time of submission
of Bid cum Application
Form to the Syndicate
Margin Amount applicable to
QIB Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
Margin Amount applicable
to Non Institutional
Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
Margin Amount applicable
to Retail Individual
Bidders at the time of
submission of Bid cum
Application Form to the
Syndicate
143
Employees QIBs Non-Institutional Bidders Retail Individual Bidders
Margin Amount Full Bid Amount on
Bidding
Nil Full Bid Amount on
Bidding
Full Bid Amount on
Bidding
_________
(1)
The unsubscribed portion, if any, out of the Equity Shares under Employee Reservation Portion will be added back to the categories of Non
Institutional Bidders and Retail Individual Bidders in the ratio 50:50..
(2)
Subject to valid bids being received at or above the Offer Price. Undersubscription, if any, in the Non-Institutional Bidder and Retail Individual
Bidder categories, would be allowed to be met with spill over from other categories, at the discretion of the Company in consultation with the
BRLMs.
(3)
In the event that the Bid cum Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the
same joint names and are in the same sequence in which they appear in the Bid cum Application Form.
144
OFFER PROCEDURE
Book Building Procedure
The Offer is being made through the 100% Book Building Process wherein at least 60% of the Net Offer shall be
allocated on a discretionary basis to Qualified Institutional Buyers. Further, up to 15% of the Net Offer shall be
available for allocation on a proportionate basis to Non Institutional Bidders and up to 25% of the Net Offer shall be
available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or
above the Offer Price.
Bidders are required to submit their Bids through the Syndicate. Our Company, in consultation with the BRLMs,
reserves the right to reject any Bid procured by any or all members of the Syndicate without assigning any reasons
therefore in case of QIBs. In case of Non Institutional Bidders, Retail Individual Bidders and bids under Employee
Reservation Portion, our Company would have a right to reject the Bids only on technical grounds.
Investors should note that Equity Shares would be allotted to all successful Bidders only in dematerialized form.
Bidders will not have the option of getting Allotment of the Equity Shares in physical form. The Equity Shares on
Allotment shall be traded only in the dematerialized segment of the Stock Exchanges.
Bid cum Application Form
Bidders shall only use the Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose
of making a Bid in terms of this Draft Red Herring Prospectus. The Bidder shall have the option to make a maximum
of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the
allocation of Equity Shares, dispatch of the CAN and filing of the Prospectus with the RoC, the Bid cum Application
Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to
a member of the Syndicate, the Bidder is deemed to have authorized our Company to make the necessary changes in
this Draft Red Herring Prospectus and the Bid cum Application Form as would be required for filing the Prospectus
with the RoC and as would be required by the RoC after such filing, without prior or subsequent notice of such changes
to the Bidder.
The prescribed color of the Bid cum Application Form for various categories is as follows:
Category Colour of Bid cum Application Form
Indian Public or NRIs applying on a non-repatriation basis White
Non-residents including NRIs or FIIs applying on a repatriation basis Blue
Employees under the Employee Reservation Portion [?]
Who Cannot Bid?
• Foreign airlines, either directly or indirectly;
• Foreign financial institutions and other entities that are subsidiaries of foreign airlines;
• Foreign financial institutions and other entities that have foreign airlines as shareholders;
• OCBs; and
• Multilateral and bilateral developmental financial institutions.
Who Can Bid?
• Persons eligible to invest in an Indian domestic air transport service company under the AIC No. 4 and all
applicable laws, rules, regulations and guidelines;
• Indian Nationals resident in India who are majors, in single or joint names (not more than three);
• Hindu undivided families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid
is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First
Bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by
HUFs would be considered at par with those from individuals;
• Companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest
in Equity Shares;
• Indian mutual funds registered with SEBI;
• Indian financial institutions, scheduled commercial banks, regional rural banks, co-operative banks (subject to
RBI permission, as applicable);
145
• Venture capital funds registered with SEBI;
• Foreign venture capital investors registered with SEBI, subject to compliance with applicable laws, rules,
regulations, guidelines and approvals in the Fresh Issue;
• State Industrial Development Corporations;
• Insurance companies registered with Insurance Regulatory and Development Authority;
• Provident funds with minimum corpus of Rs.250 million and who are authorized under their constitution to
invest in Equity Shares;
• Pension funds with minimum corpus of Rs.250 million and who are authorized under their constitution to invest
in Equity Shares;
• Trusts registered under the Societies Registration Act, 1860, as amended, or under any other law relating to
trusts and who are authorized under their constitution to hold and invest in the Equity Shares;
• Eligible NRIs subject to compliance with applicable laws, rules, regulations, guidelines and approvals in the
Offer for Sale;
• Eligible FIIs and QIBs registered with SEBI, subject to compliance with all applicable laws, rules, regulations,
guidelines and approvals in the Fresh Issue. and
• Scientific and/or industrial research organizations in India authorized under their constitution to invest in Equity
Shares.
Note:
The BRLMs and the Syndicate Members and any associates of the BRLMs and the Syndicate Members (except asset
management companies on behalf of mutual funds, Indian financial institutions and public sector banks) cannot
participate in that portion of the Offer where allocation is discretionary and are not eligible QIBs for this Offer.
Further, the BRLMs and the Syndicate Members shall not be entitled to subscribe to this Offer in any manner except
towards fulfilling their underwriting obligation.
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic
airline. No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity
Shares of the Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA, and
all other applicable laws, rules, regulations, guidelines and approvals.
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign
Ownership Restrictions” on page 111 of this Draft Red Herring Prospectus.
Bidders should note that:
• Equity Shares offered in the Fresh Issue will be allotted only to Indian residents, SEBI registered FIIs
and QIBs registered with SEBI, and will not be allotted to multilateral and bilateral developmental
financial institutions or any other non-resident persons or entities; and
• Equity Shares offered by Tail Winds in the Offer for Sale will be allotted only to Indian residents and
NRIs.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable law, rules, regulations, guidelines and
approvals.
In accordance with the current regulations, the following restrictions are applicable for investments by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related
instruments of any company provided that the limit of 10% shall not be applicable for investments by index funds or
sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any company’s
paid-up capital carrying voting rights.
In accordance with the current regulations, the following restrictions are applicable for investments by FIIs:
No single FII can hold more than 10% of the post-Offer paid up capital of our Company (i.e. 10% of 86,334,011 Equity
Shares). In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of
each sub-account shall not exceed 10% of our total paid up capital or 5% of our total paid up capital in case such sub-
account is a foreign corporate or an individual. As of now, the aggregate FII holding in the Company cannot exceed
24% of our total paid up capital.
146
Subject to compliance with the terms of AIC No. 4 and all applicable Indian laws, rules, regulations guidelines and
approvals in terms of regulation 15A(1) of the Securities Exchange Board of India (Foreign Institutional Investors)
Regulations 1995 an FII or its sub account may issue, deal or hold, off shore derivative instruments such as
Participatory Notes, equity-linked notes or any other similar instruments against underlying securities listed or
proposed to be listed in any stock exchange in India only in favour of those entities which are regulated by any relevant
regulatory authorities in the countries of their incorporation or establishment subject to compliance of “know your
client” requirements. An FII or sub-account shall also ensure that no further downstream issue or transfer of any
instrument referred to hereinabove is made to any person other than a regulated entity.
There are certain additional restrictions on investments by foreign financial institutions and other entities seeking to
invest in domestic air transport providers, including the following restrictions specified by AIC No. 4:
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
must not be a subsidiary of a foreign airline;
• a foreign financial institution or other entity that proposes to hold equity in the domestic air transport sector
must not have foreign airlines as its shareholder;
• the substantial ownership and effective control of our Company must be vested in Indian nationals; and
• a foreign investing institution or other entity that proposes to hold equity in the domestic air transport sector
may have representation on the board of directors of a domestic airline company, but such representation shall
not exceed one-third of the total strength of such board.
In accordance with the current regulations, the following restrictions are applicable for investments by SEBI registered
VCFs and FVCIs:
The SEBI (Venture Capital) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulations, 2000
prescribe investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI.
Accordingly, the holding by any venture capital fund or foreign venture capital investor should not exceed 25% of the
corpus of the venture capital fund or of the foreign venture capital investor.
The above information is given for the benefit of the Bidders. Our Company, the Selling Shareholder and the BRLMs
are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after
the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure
that the number of Equity Shares bid for do not exceed the applicable limits under laws or regulations.
Maximum and Minimum Bid Size
For Retail Individual Bidders
The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Shares thereafter, so as to ensure
that the Bid Amount payable by the Bidder does not exceed Rs.50,000. In case of revision of Bids, the Retail
Individual Bidders have to ensure that the Bid Amount does not exceed Rs.50,000. In case the Bid Amount is over
Rs.50,000 due to revision or on exercise of Cut-off option, the Bid would be considered for allocation under the Non
Institutional Bidders category. The Cut-off option is an option given only to the Retail Individual Bidders indicating
their agreement to bid and purchase at the final Offer Price as determined at the end of the Book Building Process.
For Non Institutional Bidders and QIB Bidders
The Bid must be for a minimum of such number of Equity Shares and in multiples of [•] Equity Shares thereafter, so as
to ensure that the Bid Amount exceeds Rs.50,000. A Bid cannot be submitted for more than the size of the Offer.
However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them under
applicable laws, regulations and guidelines. Under existing SEBI Guidelines, a QIB Bidder cannot withdraw its
Bid after the Bid/Offer Closing Date. In case of revision in Bids, the Non-Institutional Bidders who are individuals
will have to ensure that the Bid amount is greater than Rs.50,000 for being considered for allocation in the Non-
Institutional Bidders category. In case the Bid amount reduces to Rs.50,000 or less due to a revision in Bids or revision
of the Price Band. Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Individual Bidder
category would be considered for allocation under the Retail Portion. Non-Institutional Bidders and QIB Bidders are
not allowed to bid at “cut off”.
147
For Bidders in the Employee Reservation Portion
The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Shares thereafter. Bidders under
the Employee Reservation Portion applying for a maximum Bid in any of the bidding options not exceeding Rs.50,000
may bid at Cut off Price. The allotment in the Employee Reservation Portion will be on a proportionate basis.
However, in case of an oversubscription in the Employee Reservation Portion, the maximum allotment to any
Employee will be capped at Rs.[•] million.
Information for the Bidders
1. Our Company will file the Red Herring Prospectus with the RoC at least 3 days before the Bid/Offer Opening
Date.
2. The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum
Application Form to potential investors.
3. Any investor (who is eligible to invest in our Equity Shares) who would like to obtain the Red Herring
Prospectus along with the Bid cum Application Form can obtain the same from our registered office or from
any of the members of the Syndicate.
4. Eligible investors who are interested in subscribing for our Equity Shares should approach any of the BRLMs
or Syndicate Members or their authorized agent(s) to register their Bids.
5. The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms
should bear the stamp of the members of the Syndicate. Bid cum Application Forms that do not bear the
stamp of the members of the Syndicate will be rejected.
Method and Process of Bidding
1. Our Company and the BRLMs shall declare the Bid/Offer Opening Date, Bid/Offer Closing Date and Price
Band in the Red Herring Prospectus filed with RoC and publish the same in two national newspapers (one
each in English and Hindi) and a regional newspaper (Marathi). This advertisement shall contain the salient
features of the Red Herring Prospectus as specified under Form 2A of the Companies Act, the method and
process of bidding and the names and addresses of the members of the Syndicate and their Bidding centers.
The members of the Syndicate shall accept Bids from the Bidders during the Bidding/Offer Period (in
accordance with the terms of the Syndicate Agreement).
2. The Bidding Period shall be open for at least five days and not more than 10 days. In case the Price Band is
revised, the revised Price Band and the Bidding/Offer Period will be published in two national newspapers
(one each in English and Hindi) and one regional newspaper (Marathi) and the Bidding/Offer Period shall be
extended for a further period of three days, subject to the total Bidding/Offer Period not exceeding 13 days.
3. During the Bidding/Offer Period, the Bidders may approach the members of Syndicate to submit their Bid.
Every member of the Syndicate shall accept Bids from investors who place orders through them and shall have
the right to vet the Bids.
4. Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for
details refer to the paragraph entitled “Bids at Different Price Levels” on page 148 of this Draft Red Herring
Prospectus) within the Price Band and specify the demand (i.e., the number of Equity Shares bid for). The
price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional
demands from the Bidder and will not be cumulated. After determination of the Offer Price, the maximum
number of Equity Shares bid for by a Bidder at or above the Offer Price will be considered for allocation and
the rest of the Bid(s), irrespective of the Bid price, will become automatically invalid.
5. The Bidder cannot bid on another Bid cum Application Form after Bid(s) on one Bid cum Application Form
have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to
either the same or to another member of the Syndicate will be treated as multiple bidding and is liable to be
rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the
Allotment of Equity Shares in this Offer. However, the Bidder can revise the Bid through the Revision Form,
the procedure for which is detailed in the paragraph “Build up of the Book and Revision of Bids” on page 150
of this Draft Red Herring Prospectus.
148
6. The members of the Syndicate will enter each option into the electronic bidding system as a separate Bid and
generate a Transaction Registration Slip (TRS), for each price and demand option and give the same to the
Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.
7. Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the
paragraph “Terms of Payment and Payment into Escrow Account” on page 149 of this Draft Red Herring
Prospectus.
Bids at Different Price Levels
1. The Price Band has been fixed at Rs.[•] to Rs.[•] per Equity Share, Rs.[•] being the floor of the Price Band
and Rs.[•] being the cap of the Price Band. The Bidders can bid at any price within the Price Band, in
multiples of Rs.[•].
2. Our Company, in consultation with the BRLMs, can revise the Price Band during the Bidding/Offer Period, in
which case the Bidding/Offer Period shall be extended further for a period of three days, subject to the total
Bidding/Offer Period not exceeding 13 days. The cap on the Price Band will not be more than 20% of the
floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of Price
Band can move up or down to the extent of 20% of the floor of the price band disclosed in the Red Herring
Prospectus.
3. Any revision in the Price Band will be widely disseminated by informing the stock exchanges, by issuing a
public notice in two national newspapers (one each in English and Hindi), and one regional newspaper
(Marathi) and also indicating the change on the web site of the BRLMs and at the terminals of the members of
the Syndicate.
4 Our Company, in consultation with the BRLMs, can finalize the Offer Price within the Price Band without the
prior approval of, or intimation, to the Bidders.
5. The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number of Equity
Shares at a specific price. Retail Individual Bidders and Employees applying for a maximum Bid in any of the
bidding options not exceeding up to Rs.50,000 may bid at “Cut-off”. However, bidding at “Cut-off” is
prohibited for QIB or Non Institutional Bidders and Employees who bid for an amount exceeding Rs.50,000,
and such Bids shall be rejected.
6. Retail Individual Bidders/Employees who bid at the Cut-Off agree that they shall purchase the Equity Shares
at the Offer Price, as finally determined which will be any price within the Price Band. Retail Individual
Bidders/Employees bidding at Cut-Off shall deposit in the Escrow Account the Bid Amount based on cap of
the Price Band. In the event the Bid Amount is higher than the Allocation Amount payable by the Retail
Individual Bidders/Employees (i.e., the total number of Equity Shares allocated in the Offer multiplied by the
Offer Price), Retail Individual Bidders/Employees shall receive the refund of the excess amounts from the
Escrow Account.
7. In case of an upward revision in the Price Band announced as above, Retail Individual Bidders / Employees
who had bid at Cut-Off could either (i) revise their Bid or (ii) make additional payment based on the Cap of
the Revised Price Band, with the member of the Syndicate to whom the original Bid was submitted. In case
the total amount (i.e. original Bid Amount plus additional payment) exceeds Rs.50,000, the Bid will be
considered for allocation under the Non Institutional category in terms of this Draft Red Herring Prospectus.
If, however, the Bidder does not either revise the Bid or make additional payment and the Offer Price is higher
than the Cap of the Price Band prior to revision, the number of Equity Shares bid for shall be adjusted
downwards for the purpose of allocation, such that the no additional payment would be required from the
Bidder.
8. In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders or
Employees who have bid at Cut-off could either revise their Bid or the excess amount paid at the time of
bidding would be refunded from the Escrow Account.
9. In the event of any revision in the Price Band whether upwards or downwards the minimum application size
shall remain [•] Equity Shares irrespective of whether the Bid Amount payable on such minimum application
is not in the range of Rs.5,000 to Rs.7,000.
149
Escrow Mechanism
Our Company and the members of the Syndicate shall open Escrow Accounts with one or more Escrow Collection
Banks in whose favor the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision
of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a certain category would be
deposited in the Escrow Account. The Escrow Collection Banks will act in terms of the Draft Red Herring Prospectus
and the Escrow Agreement. The monies in the Escrow Account shall be maintained by the Escrow Collection Banks
for and on behalf of the Bidders. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies
deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow
Collection Banks shall transfer the monies from the Escrow Account to the Public Offer Account as per the terms of the
Escrow Agreement with our Company. Payments of refund to the Bidders shall also be made from the Escrow
Accounts as per the terms of the Escrow Agreement and this Draft Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an
arrangement between our Company, the Syndicate, the Escrow Collection Banks and the Registrar to the Offer to
facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Account
Each Bidder shall, with the submission of the Bid cum Application Form draw a cheque or demand draft for the
maximum amount of the Bid in favor of the Escrow Account of the Escrow Collection Bank (for details refer to the
paragraph “Payment Instructions” on page 156 of this Draft Red Herring Prospectus) and submit the same to the
member of the Syndicate with whom the Bid is being deposited. Bid cum Application Forms accompanied by
cash/stock invest/money order shall not be accepted. The maximum Bid Amount has to be paid at the time of
submission of the Bid cum Application Form based on the highest bidding option of the Bidder.
The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Banks. The
Escrow Collection Banks will hold all monies collected for the benefit of the Bidders until the Designated Date. On the
Designated Date, the Escrow Collection Banks shall transfer the funds in respect of those Bidders whose Bids have
been accepted from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Offer Account.
The balance amounts after the transfer to the Public Offer Account, lying credited with the Escrow Collection Banks
shall be held for the benefit of the Bidders who are entitled to a refund. On the Designated Date and no later than 15
days from the Bid/Offer Closing Date, the Escrow Collection Banks shall also refund all amounts payable to
unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for allocation, to the Bidders.
Each category of Bidders (i.e., QIBs, Non Institutional Bidders and Retail Individual Bidders and Employees would be
required to pay their applicable Margin Amount at the time of the submission of the Bid-cum-Application Form. The
details of the Margin Amount payable is mentioned under the section entitled “Offer Structure” on page 142 of this
Draft Red Herring Prospectus and will be available with the Syndicate and will be as per the Syndicate Agreement.
Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Amount, any difference between the
amount payable by the Bidder for Equity Shares allocated at the Offer Price and the Margin Amount paid at the time of
Bidding, shall be payable by the Bidder no later than the Pay-in-Date, which shall be a minimum period of two days
from the date of communication of the allocation list to the members of the Syndicate by the BRLMs. If the payment is
not made favoring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled.
However, if the applicable Margin Rate for Bidders is 100%, the full Bid Amount has to be paid at the time of
submission of the Bid cum Application Form.
Where the Bidder has been allocated lesser number of equity shares than such bidder had bid for the excess amount
paid on bidding, if any, after adjustment for allocation will be refunded to such bidder within 15 days from the
Bid/Offer Closing Date, failing which we shall pay interest at 15% per annum for any delay beyond the period
mentioned above.
Electronic Registration of Bids
1. The members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE. There will
be at least one on-line connectivity in each city where a stock exchange centre is located in India, and where
Bids are accepted.
2. NSE and BSE will offer a screen-based facility for registering Bids for the Offer. This facility will be
available on the terminals of the members of the Syndicate and their authorized agents during the
Bidding/Offer Period. Members of the Syndicate can also set up facilities for off-line electronic registration of
Bids subject to the condition that they will subsequently download the off-line data file into the on-line
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facilities for book building on a half hourly basis. On the Bid/Offer Closing Date, members of the Syndicate
will upload the Bids until such time as permitted by the Stock Exchanges.
3. The aggregate demand and price for Bids registered on each of the electronic facilities of NSE and BSE will
be consolidated on half hourly basis. A graphical representation of consolidated demand and price would be
made available at the bidding centers during the Bidding/Offer Period.
4. At the time of registering each Bid, the members of the Syndicate shall enter the following details of the
investor in the on-line system:
• Name of the investor;
• Investor Category — Employee, Individual, Corporate, NRI, FII, or QIBs, etc.;
• Numbers of Equity Shares bid for;
• Bid price;
• Bid cum Application Form number;
• Whether payment is made upon submission of Bid cum Application Form; and
• Depository participant Identification number and Client Identification number of the demat account of
the Bidder.
5. A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding
options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The
registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be
allocated either by the members of the Syndicate or our Company.
6. Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
7. The members of the Syndicate have the right to review the Bid. Consequently, a member of the Syndicate
also has the right to accept or reject a Bid without assigning any reasons in case of QIBs. In case of Non
Institutional Bidders and Retail Individual Bidders and Bids under the Employee Reservation Portion, their
Bids shall not be rejected except on the technical grounds listed elsewhere in this Draft Red Herring
Prospectus.
8. It is to be distinctly understood that the permission given by NSE and BSE to use their network and software
of the online IPO system should not in any way be deemed or construed that the compliance with various
statutory and other requirements by our Company or the BRLMs are cleared or approved by NSE or BSE; nor
does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance
with the statutory and other requirements nor does it take any responsibility for the financial or other
soundness of our Company, our promoters, our management or any scheme or project of our Company.
9. It is also to be distinctly understood that the approval given by NSE and BSE should not in any way be
deemed or construed that this Draft Red Herring Prospectus has been cleared or approved by NSE or BSE; nor
does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this
Draft Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be
listed on the NSE and BSE.
Build Up of the Book and Revision of Bids
1. Bids registered by various Bidders through the members of the Syndicate shall be electronically transmitted to
the NSE or BSE mainframe on half hourly basis.
2. During the Bidding/Offer Period, any Bidder who has registered an interest in the Equity Shares at a particular
price level is free to revise the Bid within the Price Band using the printed Revision Form that is a part of the
Bid cum Application Form.
3. Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision
Form. The Bidder must complete the details of all the options in the Bid cum Application Form or earlier
Revision Form and revisions for all the options as per the Bid cum Application Form or earlier Revision Form.
For example, if a Bidder has bid for three options in the Bid cum Application Form or the earlier Revision
Form and is changing only one of the options in the Revision Form, the Bidder must still complete the details
of the other two options that are not being revised in the Revision Form. Incomplete or inaccurate Revision
Forms will not be accepted by the members of the Syndicate.
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6. The Bidder can make this revision any number of times during the Bidding Period. However, for any
revisions in the earlier Bid, the Bidders will have to use the services of the same member of the Syndicate
through whom the original Bid was placed. Bidders are advised to retain copies of the blank Revision
Form and the revised Bid must only be made on that Revision Form (or copies thereof).
7. Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the
incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if
any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in
accordance with the terms of this Draft Red Herring Prospectus. In case of QIB Bidders, the members of the
Syndicate may at their sole discretion waive the payment requirement at the time of one or more revisions by
the QIB Bidders.
8. When a Bidder revises a Bid, the Bidder shall surrender the earlier TRS and get a revised TRS from the
member of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS,
which will act as proof of having revised the Bid.
9. In case of discrepancy of data between the electronic book and the physical book, the decision of the BRLMs,
based on the physical records of the Bid cum Application Forms, shall be final and binding on all concerned.
Price Discovery and Allocation
1. After the Bid/Offer Closing Date, the BRLMs shall analyze the demand generated at various price levels and
discuss pricing strategy with our Company.
2. Our Company, in consultation with the BRLMs, shall finalize the “Offer Price” and the number of Equity
Shares to be allotted and the allotment to successful QIB Bidders. The allocation to QIBs will be decided
based on the quality of the QIB Bidder determined broadly by the size, price and time of the Bid.
3. The allocation to QIBs of at least 60% of the Net Offer would be discretionary. The allocation to Non
Institutional Bidders and Retail Individual Bidders of up to 15% and up to 25% of the Net Offer, respectively,
would be on a proportionate basis, in consultation with the Designated Stock Exchange and subject to valid
Bids being received at or above the Offer Price.
4. Under subscription, if any, in any category, would be allowed to be met with spill over of demand from any of
the other categories, at the sole discretion of our Company, in consultation with the BRLMs. Any under
subscription in the Equity Shares reserved for allocation to Employees would be treated as part of the Net
Offer to the public and allocation in accordance with the Basis of Allocation described in the section
“Statutory and Other Information” beginning on page 165 of this Draft Red Herring Prospectus.
5. Allocation to eligible NRIs, FIIs registered with SEBI or FVCIs registered with SEBI will be subject to
applicable laws, rules, regulations, guidelines and approvals.
6. The BRLMs and our Company shall notify the members of the Syndicate of the Offer Price and allocations to
their respective Bidders where the full Bid Amount has not been collected from the Bidders.
7. Our Company and the Selling Shareholder reserves the right to cancel the Offer any time after the Bid/Offer
Opening Date without assigning any reason therefore, but before allotment.
8. QIB Bidders shall not be allowed to withdraw their Bid after Bid/Offer Closing Date.
Signing of Underwriting Agreement and RoC Filing
1. Our Company, the Selling Shareholder (acting through the Company, its duly constituted attorney), the
BRLMs, and the Syndicate Members shall enter into an Underwriting Agreement on finalization of the Offer
Price and allocation(s) to the QIB Bidders.
2. After the Underwriting Agreement is signed, we will file the Red Herring Prospectus with the RoC, which
then would be termed ‘Prospectus’. The Prospectus would have details of the Offer Price, size of the Offer,
underwriting arrangements and would be complete in all material respects.
Advertisement regarding Offer Price and Prospectus
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A statutory advertisement will be issued by us after the filing of the Prospectus with the RoC. This advertisement, in
addition to the information that has to be set out in the statutory advertisement, shall indicate the Offer Price. Any
material updates between the Draft Red Herring Prospectus and the Prospectus will be included in such statutory
advertisement.
Issuance of Confirmation of Allocation Note
1. The BRLMs or Registrar to the Offer shall send to the members of the Syndicate a list of their Bidders who
have been allocated Equity Shares in the Offer.
2. The Members of the Syndicate would then send the CAN to their Bidders who have been allocated Equity
Shares in the Offer. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the
Bidder to pay the entire Offer Price for all the Equity Shares allocated to such Bidder. Those Bidders who
have not paid the full Bid Amount into the Escrow Account at the time of submitting the Bid cum Application
Form shall pay the full amount into the Escrow Account on or prior to the Pay-in Date specified in the CAN.
3. Bidders who have been allocated Equity Shares and who have already paid the full Bid Amount into the
Escrow Account at the time of submitting the Bid cum Application Form shall directly receive the CAN from
the Registrar to the Offer subject, however, to realization of their cheque or demand draft paid into the Escrow
Account. The dispatch of a CAN shall be deemed to be a valid, binding and irrevocable contract for the
Bidder to pay the entire Offer Price for all the Equity Shares allotted to such Bidder.
Designated Date and Transfer of Funds to Public Offer Account
After the funds are transferred from the Escrow Account to the Public Offer Account on the Designated Date our
Company would allot/transfer the Equity Shares to the allottees. Successful Bidders will receive credit for the Equity
Shares directly in their Depository Accounts. Equity Shares will be allotted only in the dematerialized form to the
allottees. Successful Bidders will have the option to rematerialize the Equity Shares so allotted/transferred if they so
desire as per the provisions of the Companies Act and the Depositories Act.
Our Company will ensure the Allotment of Equity Shares within 15 days of the Bid/Offer Closing Date. After the
funds are transferred from the Escrow Account to the Public Offer Account on the Designated Date, our Company
would ensure that credit is given to the successful Bidders’ depository accounts within two working days from the date
of Allotment.
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be Allotted to them
pursuant to this Offer.
General Instructions
Dos:
• Check if you are eligible to apply in particular having regard to the AIC No. 4, and applicable laws, rules,
regulations, guidelines and approvals;
• Read all the instructions carefully and complete the Resident Bid cum Application Form (white in color) or
Non-Resident Bid cum Application Form (blue in color) or Employee Bid Application Form ([•] in color), as
the case may be;
• Ensure that you Bid only within the Price Band;
• Ensure that the details about Depository Participant and beneficiary account are correct as Allotment of
Equity Shares will be in dematerialized form only;
• Ensure that the Bids are submitted at the bidding centers only on forms bearing the stamp of a member of the
Syndicate;
• Ensure that you have collected a TRS for all your Bid options;
• Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and
obtain a revised TRS;
• Investors should ensure that the name given in the Bid cum Application Form is exactly the same as the
name in which the depository account is held. In case the Bid cum Application Form is submitted in
joint names, investors should ensure that the depository account is also held in the same joint names
and such joint names are in the same sequence in which they appear in the Bid cum Application Form.
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• Ensure that you mention your Permanent Account Number (PAN) allotted under the I.T. Act where the
maximum bid for Equity Shares by a Bidder is of a total value of Rs.50,000 or more. In case neither the PAN
nor the GIR number has been allotted mention “Not allotted” in the appropriate place.
Don’ts:
• Do not Bid for lower than the minimum Bid size;
• Do not Bid/ revise the Bid to a price that is less than the floor of the Price Band or higher than the cap of the
Price Band;
• Do not Bid on another Bid cum Application Form after you have submitted the Bid to the members of the
Syndicate;
• Do not pay the Bid Amount in cash;
• Do not send Bid cum Application Forms by post; instead hand them over to a member of the Syndicate only;
• Do not Bid at Cut-off price (for Non Institutional, QIB Bidders and Employees for whom the Bid Amount
exceeds Rs.50,000);
• Do not fill up the Bid cum Application Form for an amount that exceeds the investment limit or maximum
number of Equity Shares that can be held by a Bidder under applicable laws or regulations;
• Do not submit Bids accompanied by stockinvest/cash/money order.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM
Bidders can obtain Bid cum Application Forms and/or Revision Forms from the members of the Syndicate.
Bids and Revision of Bids
Bids and revision of Bids must be:
1. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white color for
Resident Indians and NRIs applying on non-repatriation basis and blue color for eligible NRIs, FIIs registered
with SEBI, foreign venture capital investors registered with SEBI applying on repatriation basis and [•] color
for Employees).
2. Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained
herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or
Revision Forms are liable to be rejected.
3. For Retail Individual Bidders, the Bids must be for a minimum of [•] Equity Shares and in multiples of [•]
thereafter subject to a maximum Bid Amount of Rs.50,000.
4. For Non Institutional and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the
Bid Amount exceeds Rs.50,000 and in multiples of [•] Equity Shares thereafter. Bids cannot be made for
more than the size of the Offer. Bidders are advised to ensure that a single Bid from them should not exceed
the investment limits or maximum number of Equity Shares that can be held by them under applicable laws
and regulations.
5. For Employees the bid must be for a minimum of [•] Equity Shares and shall be in multiples of [•] Equity
Shares thereafter. The Allotment in the Employee Reservation Portion will be on a proportionate basis.
However, in case of an oversubscription in the Employee Reservation Portion, the maximum Allotment to any
Employee will be capped at Rs.2.5 million.
6. In single name or in joint names (not more than three) and in the same order as their Depository Participant
details).
7. Thumb impressions and signatures other than in the languages specified in the Eight Schedule in the
Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate
under official seal.
Bid by Employees
For the sake of clarity, the term “Employees” shall mean all or any of the following :
(i) a permanent employee of the Company or of Tail Winds, working in India; and
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(ii) a director of the Company or of Tail Winds, whether a whole time director, part time director or
otherwise,
all of whom are Indian Nationals, are based in India and are physically present in India on the date of submission
of the Bid cum Application Form.
1. Bids by Employees shall be made only in the prescribed Bid cum Application Form or Revision Form (i.e. [•]
colour form).
2. Employees should mention their Employee Number at the relevant place in the Bid cum Application Form.
3. The sole/First Bidder should be an Employee as defined above. In case the Bid cum Application Form is submitted
in joint names, it should be ensured that the Depository Account is also held in the same joint names and in the
same sequence in which they appear in the Bid cum Application Form.
4. Only Employees on the rolls of our Company as on the cut-off date i.e. [•] 2004 would be eligible to apply in this
Offer under reservation for Employees on a competitive basis.
5. Employees will have to Bid like any other Bidder. Only those Bids, which are received at or above the Offer Price,
would be considered for allotment under this category.
6. If the aggregate demand in this category is less than or equal to [•] Equity Shares at or above the Offer Price, full
allocation shall be made to the Employees to the extent of their demand. Any under subscription in Equity Shares
reserved for Employees would be treated as part of the Net Offer and Allotment in accordance with the description
in Basis of Allocation in the section “Statutory and Other Information” beginning on page 165 of this Draft Red
Herring Prospectus.
7. If the aggregate demand in this category is greater than 1,200,000 Equity Shares at or above the Issue Price, the
allocation shall be made on a proportionate basis subject to maximum Allotment to any Employee of Rs.2.5
million.
8. Bidding at Cut-off is allowed only for Employees whose Bid Amount is less than or equal to Rs. 50,000.
Bidder’s Bank Account Details
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant
identification number and beneficiary account number provided by them in the Bid cum Application Form, the
Registrar to the Offer will obtain from the Depository the Bidder’s bank account details. These bank account details
would be printed on the refund order, if any, to be sent to Bidders. Hence, Bidders are advised to immediately
update their bank account details as appearing on the records of the Depository Participant. Please note that
failure to do so could result in delays in credit of refunds to Bidders at the Bidder’s sole risk.
Bidder’s Depository Account Details
IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALISED
FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME,
DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER
IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN
THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE
DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN
JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN
THE SAME JOINT NAMES AND SUCH JOINT NAMES ARE IN THE SAME SEQUENCE IN WHICH
THEY APPEAR IN THE BID CUM APPLICATION FORM.
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant Identification number and beneficiary account number provided by them in the Bid cum
Application Form, the Registrar to the Offer will obtain from the Depository demographic details of the Bidders
such as address, bank account details for printing on refund orders and occupation (hereinafter referred to as
Demographic Details). Hence, Bidders should carefully fill in their Depository Account details in the Bid cum
Application Form.
These demographic details would be used for all correspondence with the Bidders including mailing of the refund
orders/CANs/allocation advice and printing of bank particulars on the refund order and the demographic details given
by Bidders in the Bid cum Application Form would not be used for these purposes by the Registrar. Hence, Bidders are
advised to update their Demographic Details as provided to their Depository Participants.
By signing the Bid cum Application Form, each Bidder will be deemed to have authorized the Depositories to provide,
upon request, to the Registrar to the Offer, the required Demographic Details as available on its records.
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Refund orders/allocation advice/CANs would be mailed at the address of the Bidder as per the Demographic Details
received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs may get
delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event,
the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure
dispatch of CANs/refund orders. Please note that any such delay shall be at the Bidder’s sole risk.
In case no corresponding record is available with the Depositories that match three parameters, i.e., name of the Bidder
(including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s
identity, then such Bids are liable to be rejected.
Bids under Power of Attorney
In case of Bids made pursuant to a Power of Attorney or by limited companies, eligible corporate bodies, registered
societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along
with a certified copy of the Memorandum and Articles of Association and/or bye laws must be submitted with the Bid
cum Application Form. Failing this, we reserve the right to accept or reject any Bid in whole or in part, in either case,
without assigning any reason therefore
In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the Power of Attorney or the relevant
resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be
submitted with the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid
in whole or in part, in either case, without assigning any reason therefore.
In case of Bids made by Insurance Companies registered with the Insurance Regulatory and Development Authority, a
certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged
along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in
whole or in part, in either case without assigning any reason therefore.
In case of Bids made by provident funds with minimum corpus of Rs.250 million and pension funds with minimum
corpus of Rs.250 million, a certified copy of certificate from a chartered accountant certifying the corpus of the
provident fund/pension fund must be lodged along with the Bid-cum-Application Form. Failing this, our Company
reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefor.
We, in our absolute discretion, reserve the right to relax the above condition of simultaneous lodging of the Power of
Attorney along with the Bid cum Application Form, subject to such terms and conditions as we may deem fit.
Bids by NRIs
NRI Bidders to comply with the following:
1. Individual NRI Bidders can obtain the Bid cum Application Forms from our registered office at SM Centre,
Andheri Kurla Road, Andheri (East), Mumbai 400 059, India, the BRLMs, members of the Syndicate or the
Registrar to the Offer.
2. NRI Bidders may please note that only such Bids as are accompanied by payment in free foreign exchange
shall be considered for allotment. NRIs who intend to make payment through Non-Resident Ordinary (NRO)
accounts shall use the Bid cum Application Form meant for resident Indians (white in color).
Bids by NRIs, FIIs registered with SEBI and Foreign Venture Capital Investors registered with SEBI on a repatriation
basis
Bids and revision to Bids must be made:
1. On the Bid cum Application Form or the Revision Form, as applicable (blue in color), and completed in full in
BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.
2. In a single name or joint names (not more than three).
3. By NRIs -Bids for a Bid Amount of up to Rs.50,000 would be considered under the Retail Portion for the
purposes of allocation and Bids for a Bid Amount of more than Rs.50,000 would be considered under Non
Institutional Bidder Portion for the purposes of allocation; By FIIs — for a minimum of such number of
Equity Shares and in multiples of [•] thereafter that the Bid Amount exceeds Rs.50,000 for further details see
“Offer Procedure - Maximum and Minimum Bid Size”.
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4. In the names of individuals, or in the names of FIIs or in the name of FVCIs . but not in the names of
multilateral and bilateral development institutions, minors, OCBs, firms or partnerships, foreign nationals
excluding NRIs or their nominees.
5. Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank
charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts purchased
abroad, such payments in Indian Rupees will be converted into U.S. Dollars or any other freely convertible
currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will
be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of
which should be furnished in the space provided for this purpose in the Bid cum Application Form. We will
not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.
Payment Instructions
Our Company shall open Escrow Accounts with the Escrow Collection Banks for the collection of the Bid Amounts
payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Offer.
Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the
following terms:
Payment into Escrow Account:
1. The Bidders for whom the applicable margin is equal to 100%, shall, with the submission of the Bid-cum-
Application form, draw a payment instrument for the Bid Amount in favor of the Escrow Account and submit
the same to the members of the Syndicate along with the Bid cum Application Form.
2. In case the Margin Amount paid by the Bidders during the Bidding/Offer Period is less than the Offer Price
multiplied by the Equity Shares allotted to the Bidder, the balance amount shall be paid by the Bidders into the
Escrow Account within the period specified in the CAN, which shall be subjected to a minimum period of two
days from the date of communication of the allottment list to the Syndicate Member(s) by the BRLMs.
3. In case the payment of the Bid Amount has been waived by a member of the Syndicate during the Bidding
Period, on receipt of the CAN, an amount equal to the Offer Price multiplied by the Equity Shares allocated to
the Bidder, shall be paid by the Bidders into the Escrow Account within the period specified in the CAN
which shall be a minimum period of two days from the date of communications of the allocation list to the
members of the Syndicate by the BRLMs.
4. The payment instruments for payment into the Escrow Account should be drawn in favor of:
(a) In case of Resident Bidders: “Escrow Account — Jet Airways Public Offer”
(b) In case of Non Resident Bidders: “Escrow Account — Jet Airways Public Offer -NR”
(c) In case of Employees, “Escrow Account – Jet Airways Public Offer – Employees”
• In case of Bids by NRIs applying on repatriation basis, the payments must be made through
Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on
application remitted through normal banking channels or out of funds held in Non-Resident
External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained
with banks authorized to deal in foreign exchange in India, along with documentary
evidence in support of the remittance. Payment will not be accepted out of a Non-Resident
Ordinary (NRO) Account of a Non-Resident Bidder bidding on a repatriation basis.
Payment by drafts should be accompanied by a bank certificate confirming that the draft has
been issued by debiting an NRE or FCNR Account.
• In case of Bids by NRIs applying on non-repatriation basis, the payments must be made
through Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount
payable on application remitted through normal banking channels or out of funds held in
Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR)
Accounts, maintained with banks authorized to deal in foreign exchange in India, along with
documentary evidence in support of the remittance or out of a Non-Resident Ordinary
(NRO) Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by
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drafts should be accompanied by a bank certificate confirming that the draft has been issued
by debiting an NRE or FCNR or NRO Account.
• In case of Bids by FIIs, the payment should be made out of funds held in a Special Rupee
Account along with documentary evidence in support of the remittance. Payment by drafts
should be accompanied by a bank certificate confirming that the draft has been issued by
debiting the Special Rupee Account.
5. Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess
amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares
allocated, will be refunded to the Bidder from the Escrow Account.
6. The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated
Date.
7. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account, as
per the terms of the Escrow Agreement, into the Public Offer Account with the Bankers to the Offer.
8. No later than 15 days from the Bid/Offer Closing Date, the Escrow Collection Bank shall refund all amounts
payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for
allocation to the Bidders
Payments should be made by cheque or demand draft drawn on any bank (including a Co-operative bank) which is
situated at and is a member of, or sub-member of the bankers clearing house, located at the centre where the Bid cum
Application Form is submitted. Outstation cheques/bank drafts on banks not participating in the clearing process will
not be accepted and applications accompanied by such cheques/bank drafts are liable to be rejected. Cash/money
orders/postal orders will not be accepted.
Payment by Stockinvest
In terms of RBI Circular DBOD No. FSC BC 42/24.47.001/2003-04 dated November 5, 2003, the Stockinvest Scheme
was withdrawn with immediate effect. Hence, payment through Stockinvest will not be accepted in this Offer.
Submission of Bid cum Application Form
All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or
drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid cum Application Forms.
A member of the Syndicate may, at its discretion, waive the requirement of payment at the time of submission of the
Bid cum Application Form and the Revision Form in the case of QIB Bidders.
The collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms
or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will
serve as the duplicate of the Bid cum Application Form for the records of the Bidder. No separate receipts shall be
issued for the money paid on the submission of Bid cum Application Form or Revision Form.
Other Instructions
Joint Bids in the case of Individuals
Individuals may make bids in single or joint names (not more than three). In the case of joint Bids, all refund amounts
will be made only in favor of the Bidder whose name appears first in the Bid cum Application Form or Revision Form
(“First Bidder”). All communications will be addressed to the First Bidder and will be dispatched to his or her address.
Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or
more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI
and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that
the Bids clearly indicate the scheme concerned for which the Bid has been made.
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Bids made by Employees both under Employee Reservation Portion as well as in the Net Offer shall not be treated as
multiple bids.
We reserve the right to reject, in our absolute discretion, all or any multiple Bids in all or any categories.
‘PAN’ or ‘GIR’ Number
Where the maximum Bid for Equity Shares by a Bidder is for a total value of Rs.50,000 or more, i.e., the actual
numbers of Equity Shares Bid for multiplied by the Bid Amount is Rs.50,000 or more, the Bidder or, in the case of a
Bid in joint names, each of the Bidders should mention his or her Permanent Account Number (PAN) allotted under the
I.T. Act, as amended or where the same has not been allotted, the General Index Register (GIR) Number and the
Income-Tax Circle, Ward or District. In case neither the PAN nor the GIR number has been allotted, the Bidders must
mention “Not allotted” in the appropriate place. Bid cum Application Forms without this information will be
considered incomplete and are liable to be rejected.
Our Right to Reject Bids
Our Company and the BRLMs reserve the right to reject any Bid without assigning any reason therefore in case of QIB
Bidders. In case of Non Institutional Bidders and Retail Individual Bidders and Employees, our Company would have
the right to reject Bids only on technical grounds. Consequent refunds shall be made by cheque or pay order or draft
and will be sent to the Bidder’s address at the Bidder’s risk.
Grounds for Technical Rejections
Bidders are advised to note that Bids are liable to be rejected on technical grounds, including the following:
1. Amount paid does not tally with the amount payable for the highest value of Equity Shares bid for;
2. Bank account details (for refund) are not given;
3. Age of First Bidder not given;
4. Bids by minors;
5. PAN or GIR Number not given if Bid is for Rs.50,000 or more;
6. Bids for lower number of Equity Shares than specified for that category of investor;
7. Bids at a price less than the floor of the Price Band and higher than the cap of the Price Band;
8. Bids at Cut-off price by a QIB or a Non Institutional Bidder and Employees under the Employee Reservation
Portion where Bid Amount exceeds Rs.50,000;
9. Bids for number of Equity Shares, which are not multiples of [•];
10. Category not ticked;
11. Multiple Bids;
12. In case of Bid under power of attorney or by limited companies, corporate, trust, etc., relevant documents are
not submitted;
13. Bid cum Application Form does not have the stamp of a member of the Syndicate;
14. Bid cum Application Form does not have the Bidder’s depository account details, including as specified
below;
15. Bid cum Application Forms are not submitted by the Bidders within the time prescribed as per the Bid cum
Application Form, Bid/Offer Opening Date advertisement and this Draft Red Herring Prospectus and as per
the instructions in this Draft Red Herring Prospectus and the Bid cum Application Form;
16. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations see the details
regarding the same at page 146 of this Draft Red Herring Prospectus;
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17. Bids not duly signed by the sole/joint Bidders;
18. Bids by OCBs or multilateral and bilateral development financial institutions;
19. Bids accompanied by stockinvest/cash/money order;
20. Bids by U.S. residents or U.S. persons other than “qualified institutional buyers” as defined in Rule 144A of
the U.S. Securities Act of 1933;
21. In case no corresponding record is available with the Depositories that matches three parameters, i.e., name of
the Bidder (including the sequence of names of joint holders), the depository participant’s ID (DP ID) and the
beneficiary’s identity;
22. Bids by persons who are not eligible to acquire Equity Shares of our Company, in terms of the AIC No. 4, and
other applicable laws, rules, regulations, guidelines and approvals.
Equity Shares in Dematerialized Form with NSDL or CDSL
In terms of Section 68B of the Companies Act, the Equity Shares in this Offer shall be allotted only in dematerialized
form (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through
electronic mode).
In this context, two tripartite agreements have been signed between the Registrar to the Offer, the Depositories and the
Company:
1. An agreement dated [•], 2004 among NSDL, the Company and the Registrar to the Offer for offering the
Depository option to the investors; and.
2. An agreement dated [•], 2004 between CDSL, the Company and the Registrar to the Offer for offering the
Depository option to the investors.
Bidders will be allotted Equity Shares only in the demateralized mode.
Bids from any Bidder without the following details of his or her depository account are liable to be rejected.
1. A Bidder applying for Equity Shares must have at least one beneficiary account with either of the depository
participants of NSDL or CDSL prior to making the Bid.
2. The Bidder must necessarily fill in the details (including the beneficiary account number and depository
participant’s identification number) appearing in the Bid cum Application Form or Revision Form.
3. Equity Shares allotted to a Bidder will be credited in electronic form directly to the beneficiary account (with
the depository participant) of the Bidder.
4. Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the
account details in the depository. In case of joint holders, the names should necessarily be in the same
sequence as they appear in the depository account of the Bidder(s).
5. If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the Bid
cum Application Form or Revision Form, it is liable to be rejected.
6. The Bidder is responsible for the correctness of his or her demographic details given in the Bid cum
Application Form vis-à-vis those with his or her depository participant.
7. It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges having
electronic connectivity with NSDL and CDSL. All the stock exchanges where our Equity Shares are proposed
to be listed are connected to NSDL and CDSL.
8. The trading of our Equity Shares would be in dematerialized form only and for all investors in the demat
segment of the respective stock exchange.
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9. Non-transferable allotment advise or refund orders will be directly sent to the Bidder by the Registrar to the
Offer.
Communications
All future communications in connection with Bids made in the Offer should be addressed to the Registrar to the Offer
quoting the full name of the sole or First Bidder, Bid cum Application Form number, number of Equity Shares applied
for, date of Bid form, name and address of the member of the Syndicate where the Bid was submitted and cheque or
draft number and issuing bank thereof.
Undertakings by our Company
The Company undertakes as follows:
• that the complaints received in respect of this Offer shall be attended to by us expeditiously;
• that we shall take all steps for the completion of the necessary formalities for listing and commencement of
trading at all the Stock Exchanges where the Equity Shares are to be listed within seven working days of
finalization of the basis of allotment;
• that the funds required for dispatch of refund orders or allotment advice by registered post or speed post shall be
made available to the Registrar to the Offer by us;
• that the refund orders or allotment advice to the Bidders shall be dispatched within specified time; and
• that no further offer of Equity Shares shall be made until the Equity Shares offered through this Draft Red
Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription,
etc.
Undertakings by the Selling Shareholder
The Selling Shareholder undertakes as follows:
• the Equity Shares being sold pursuant to the Offer for Sale are free and clear of any liens or encumbrances,
and shall be transferred to the successful Bidders within the specified time; and
• that no further offer of Equity Shares shall be made till the Equity Shares offered through this Draft Red
Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-
subscription etc.
Utilization of Offer Proceeds
The Board of Directors of the Company certify that:
• all monies received out of the Fresh Issue shall be transferred to a separate bank account other than the bank
account referred to in sub-section (3) of Section 73 of the Companies Act;
• details of all monies utilized out of Fresh Issue referred above shall be disclosed under an appropriate separate
head in the balance sheet of the Company indicating the purpose for which such monies have been utilized; and
• details of all unutilized monies out of the Fresh Issue, if any, shall be disclosed under the appropriate separate
head in the balance sheet of the Company indicating the form in which such unutilized monies have been
invested.
Disposal of Applications and Application Money
We shall ensure dispatch of allotment advice or refund orders and giving of benefit to the beneficiary account with
depository participants and submission of the allotment and listing documents to the Stock Exchanges within two
working days of finalization of the basis of allotment of Equity Shares. We shall ensure the dispatch of refund orders,
if any, of value up to Rs.1,500, “Under Certificate of Posting”, and dispatch of refund orders above Rs.1,500, if any, by
Registered Post or Speed Post at the sole or First Bidder’s sole risk.
We shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and
commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed are taken within
seven working days of finalization of the basis of allotment.
In accordance with the Companies Act, the requirements of the stock exchanges and SEBI Guidelines, the Company
further undertakes that:
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• Allotment/transfer of Equity Shares shall be made only in dematerialized form within 15 days of the Bid/Offer
Closing Date;
• The Company would ensure dispatch of refund orders within 15 days of the Bid/Offer Closing Date; and
• The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned
above), if Allotment is not made, refund orders are not dispatched and/or demat credits are not made to
investors within 15 days from the Bid/Offer Closing Date as per the Guidelines issued by the Ministry of
Finance, Government of India, pursuant to their letter no. F-8/6/SE/79 dated July 31, 1983, as amended by
their letter no. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further
modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.
Our Company will provide adequate funds required to the Registrar to the Offer for dispatch of refund orders or
allotment advice.
Refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at
par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at
other centers will be payable by the Bidders.
The Company and the Selling Shareholder shall not have recourse to the Offer proceeds until the approvals for trading
of the Equity Shares has been received from the Stock Exchanges.
The Company shall transfer to the Selling Shareholder, the proceeds from the Offer for Sale, on the same being
permitted to be released in accordance with applicable laws.
Restrictions on Foreign Ownership of Indian Securities
There are various restrictions under Indian laws and regulations applicable to foreign investment in a domestic airline
For more information on such restrictions, see the section entitled “Regulations and Policies – Foreign Ownership
Restrictions” on page 111 of this Draft Red Herring Prospectus.
No person shall make a Bid in pursuance of this Offer, unless such person is eligible to acquire Equity Shares of the
Company in accordance with AIC No. 4 and the November 10, 2004 notification of the MoCA and all other applicable
laws, rules, regulations, guidelines and approvals.
Investors that Bid in the Offer will be required to confirm and will be deemed to have represented to the Company, the
Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the
Company and will not offer, sell, pledge or transfer the Equity Shares of the Company to any person who is not eligible
under applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The
Company, the Selling Shareholder, the Underwriters and their respective directors, officers, agents, affiliates and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to
acquire Equity Shares of the Company.
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BASIS FOR OFFER PRICE
We shall determine the Offer Price in consultation with the BRLMs on the basis of assessment of market demand for
the offered Equity Shares by way of Book Building Process.
You should read the following summary with the section entitled “Risk Factors” beginning on page xi of this Draft Red
Herring Prospectus and the details about us and our financial statements included in this Draft Red Herring Prospectus.
The trading price of our Equity Shares could decline due to these risks and you may lose all or part of your investments.
QUALITATIVE FACTORS
Factors external to the Company
• Healthy Market Growth Rate
The Indian aviation industry has been growing at a healthy rate when compared to certain other countries in
the world. The domestic air traffic in India has grown at a CAGR of 8.6% over fiscal 2002 to fiscal 2004 while
the international traffic has grown at a CAGR of 8.5% during the same period.
• Under-penetrated Indian Market
Indian aviation market is still highly under-penetrated when compared to other developed economies. The
average air travel in India is estimated at 0.014 trips per person per year, which is low when compared to an
average of 2.02 trips per person per year in the United States.
Factors internal to the Company
• Largest domestic airline in the country
We are the largest domestic airline in India in terms of passengers carried in fiscal 2004 and the six months
ended September 30, 2004, and enjoyed a market share of 42.3% for the six months ended September 30,
2004. Our market share (in terms of revenue passengers) has grown from 6.4% in fiscal 1994 to 42.3% in the
six months ended September 30, 2004.
• Strong brand and customer service
We have established a strong brand that helps to distinguish us from our competitors by identifying us as a
safe and reliable airline that is focused on customer service. We have received numerous awards in recognition
of our service, including the Business World award for the most respected company in the travel and
hospitality sector in 2003 as well as 2004, the Best Domestic Airline of Asia by Asian readers of Travel Trade
Gazette for the year 2003 and 2004 and the Financial Express Business Traveler Award (Domestic Airline
Category) for Business Class, Economy Class and Best Service (Airport and In flight) in 2003 and 2004. We
were also rated as one of the ten most respected companies in India by Business World. Our brand has been
selected as a “superbrand” by the Indian Superbrands Council in August 2003.
During the six month ended September 30, 2004, we have been rated either “good” or “excellent” by
approximately 95% of our customers who have completed our service tracker questionnaire.
• Focus on business travellers
We offer several services directed towards the convenience of the business traveler, including telephone
check-in facilities, through and “in-city” check-in facilities, priority baggage service, providing flight
information on cellular phones of customers, frequent flyer programs, customer loyalty programs, business
class section on almost all flights and business class airport lounges. In addition to these facilities, our ability
to deliver high levels of “on-time” departures and our focus on providing high quality service have enabled us
to become the preferred airline for business travellers.
We estimate that in fiscal 2004 and the six months ended September 30, 2004, approximately 80% to 85% of
our passengers were business travelers in India.
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• Management team
Our Board of Directors and the management team comprises people who have extensive knowledge and
experience in the airline industry, in India as well as abroad.
• Strong marketing, sales and distribution network
We have an extensive marketing and distribution network, both in India and abroad. We currently have
general sales agent representation in 69 locations in India and 74 countries overseas. Besides, we have a
popular frequent flyer programme with approximately 413,970 members as of November 30, 2004.
• Young fleet of aircraft and high utilization rate
We have a young fleet of aircraft with a current average age of 4.5 years. In fiscal 2004 and the six months
ended September 30, 2004, our aircraft operated an average of 9.46 and 9.84 hours per day, respectively. By
achieving high utilization, we are able to optimize crew movement, spread our fixed costs over a greater
number of flights and available seat kilometers.
• Infrastructural facilities
Our main hubs of operations are Mumbai, Delhi, Chennai, Kolkata and Bangalore, which are key markets for
us. Our presence in these cities in terms of parking bays and landing slots provide us with a strong competitive
advantage over our competitors. We own a hangar facility in Delhi and have leased one in Bangalore, which
provides us the capability of undertaking up to C checks in-house.
QUANTITATIVE FACTORS
1. Adjusted earning per share (EPS)
Year EPS (Rs.) Weight
Fiscal 2002 (5.34) 1
Fiscal 2003 (17.84) 2
Fiscal 2004 19.44 3
Weighted Average 2.88
(i) EPS has been calculated as per the following formula:
(Net Profit attributable to equity shareholders) / (Total No. of equity shares outstanding during the
year/period)
(ii) Net Profit, as restated and appearing in the statement of profits and losses has been considered for the
purpose of computing the above ratio. The net profit is based on the restated financial statements of
the Company.
(iii) EPS calculations have been done in accordance with Accounting Standard 20 – “Earnings per share”
issued by the Institute of Chartered Accountants of India”.
2. Price/Earning Ratio (P/E) in relation to Offer Price of Rs. [?]
(i) Based on the year ended March 31, 2004 EPS of Rs. 19.44 is [?].
(ii) There are no listed comparables in the Indian airline industry, hence there is no industry P/E.
3. Average Return on Net Worth (RONW)
Year Average RONW Weight
Fiscal 2002 -15.00% 1
Fiscal 2003 -94.17% 2
Fiscal 2004 105.17% 3
Weighted Average
18.70%
(i) Average RONW has been calculated as per the following formula:
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(Net Profit after tax )/ (Average Net Worth excluding revaluation reserve during the year/period)
(ii) Net worth computations in the above workings include ‘Cumulative Convertible Redeemable
Preference Shares’.
4. Minimum Return on total Net Worth after the Offer required to maintain pre-Offer EPS of [?] is [?]%
5. Net Asset Value (NAV) per Equity Share
(a) As of September 30, 2004: Rs. 26.46; After the Offer: Rs. [?]
(b) Offer Price - Rs. [?]
(i) NAV has been calculated as per the following formula:
(Net worth excluding revaluation reserve, preference share capital including annualized return in arrears
thereon at the end of the year/period) / (Total no. of Equity Shares outstanding during the year/period)
6. Comparison with Industry Peers
There are no listed comparables in the Indian airline industry, hence this comparison is not possible.
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STATUTORY AND OTHER INFORMATION
Consents
Consents in writing of: (a) the Directors, the Company Secretary and Compliance Officer, the Auditors, Legal Advisors
to the Company, Bankers to the Company and Bankers to the Offer; and (b) Book Running Lead Managers to the
Offer, Syndicate Members, Escrow Collection Bankers, Registrar to the Offer and Legal Advisors to the Underwriters,
to act in their respective capacities, have been obtained and filed along with a copy of the Prospectus with the Registrar
of Companies, Maharashtra located at Mumbai, as required under Sections 60 and 60B of the Companies Act and such
consents have not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with
the RoC.
Deloitte, Haskins & Sells, Chartered Accountants, and Chaturvedi & Shah, Chartered Accountants, our statutory
auditors have given their written consent to the inclusion of their report in the form and context in which it appears in
this Draft Red Herring Prospectus and such consent and report has not been withdrawn up to the time of delivery of the
Draft Red Herring Prospectus for registration with the RoC.
Chaturvedi & Shah, Chartered Accountants, have given their written consent to the tax benefits accruing to our
Company and its members in the form and context in which it appears in this Draft Red Herring Prospectus and such
consent has not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with the
RoC.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Fresh Issue less the Employee Reservation
Portion to the extent of [•] amount including devolvement of the members of the Syndicate, if any, within 60 days from
the Bid/Offer Closing Date, the Company shall forthwith refund the entire subscription amount received. If there is a
delay beyond eight days after the Company becomes liable to pay the amount, the Company shall pay interest as per
Section 73 of the Companies Act. The requirement for minimum subscription is not applicable to the Offer for Sale.
Expert Opinion
Except as stated elsewhere in this Draft Red Herring Prospectus, we have not obtained any expert opinions.
Changes in Auditors
There have been no changes of the auditors in the last three years except as detailed below
Name of Auditor Date of Appointment Date of resignation Reasons for change
C.C. Chokshi & Co. September 29, 2004 Did not seek re-appointment
Deloitte Haskins & Sells September 29, 2004 Appointed
Chaturvedi & Shah September 29, 2004 Appointed
Basis of Allotment or Allocation
A. For Retail Individual Bidders
• Bids received from the Retail Individual Bidders at or above the Offer Price shall be grouped together
to determine the total demand under this category. The allotment to all the successful Retail Individual
Bidders will be made at the Offer Price.
• The Net Offer size less allotment to Non Institutional and QIB Bidders shall be available for allotment
to Retail Individual Bidders who have bid in the Offer at a price that is equal to or greater than the
Offer Price.
• If the aggregate demand in this category is less than or equal to 4,016,700 Equity Shares at or above the
Offer Price, full allotment shall be made to the Retail Individual Bidders to the extent of their demand.
• If the aggregate demand in this category is greater than 4,016,700 Equity Shares at or above the Offer
Price, the allotment shall be made on a proportionate basis up to a minimum of [•] Equity Shares. For
the method of proportionate basis of allotment, refer below and in multiples of [•] Equity Shares
thereafter.
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B. For Non Institutional Bidders
• Bids received from Non institutional Bidders at or above the Offer Price shall be grouped together to
determine the total demand under this category. The allotment to all successful Non Institutional
Bidders will be made at the Offer Price.
• The Net Offer size less allotment to QIBs and Retail Portion shall be available for allotment to Non
Institutional Bidders who have bid in the Offer at a price that is equal to or greater than the Offer Price.
• If the aggregate demand in this category is less than or equal to 2,410,020 Equity Shares at or above the
Offer Price, full allotment shall be made to Non Institutional Bidders to the extent of their demand.
• In case the aggregate demand in this category is greater than 2,410,020 Equity Shares at or above the
Offer Price, allotment shall be made on a proportionate basis up to a minimum of [•] Equity Shares.
For the method of proportionate basis of allotment refer below and in multiples of [•] equity share
thereafter.
The aggregate allotment to Retail and Non Institutional Bidders shall not exceed 6,426,720 Equity Shares.
C. For QIB Bidders
• Bids received from the QIB Bidders at or above the Offer Price shall be grouped together to determine
the total demand under this category. The allotment to all the QIBs will be made at the Offer Price.
• The Net Offer size less allotment to Non Institutional Portion and Retail Portion shall be available for
allotment to QIBs who have bid in the Offer at a price that is equal to or greater than the Offer Price.
• The allotment would be decided by the Company in consultation with the BRLMs and would be at our
sole discretion, based on various factors, such as quality of the Bidder, size, price and date of the Bid.
The aggregate allotment to QIB Bidders shall not be less than 9,640,081 Equity Shares.
D. For Employee Reservation Portion
(the “Employees” for purposes of this paragraph)
• Bids received from the Employees at or above the Offer Price shall be grouped together to determine
the total demand under this category. The allocation to all the successful Employees will be made at the
Offer Price.
• If the aggregate demand in this category is less than or equal to 1,200,000 Equity Shares at or above the
Offer Price, full allocation shall be made to the Employees to the extent of their demand.
• If the aggregate demand in this category is greater than 1,200,000 Equity Shares at or above the Offer
Price, the allocation shall be made on a proportionate basis subject to a maximum allotment of any
employee of Rs.2.5 million. For the method of proportionate basis of allocation, refer below.
The unsubscribed portion, if any, out of the Equity Shares in the Employee Reservation Portion will be added back to
the categories of Non Institutional Bidders and Retail Individual Bidders in the ratio 50:50. Undersubscription, if any,
in the Non-Institutional Bidder and Retail Individual Bidder categories, would be allowed to be met with spill over
from other categories, at the discretion of the Company in consultation with the BRLMs.
Method of Proportionate Basis of Allotment
In the event of the Offer being over-subscribed, the basis of allotment to Retail and Non Institutional Bidders shall be
finalized by us in consultation with the Designated Stock Exchange. The Executive Director or Managing Director (or
any other senior official nominated by them) of the Designated Stock Exchange along with the BRLMs and the
Registrar to the Offer shall be responsible for ensuring that the basis of allotment is finalized in a fair and proper
manner.
The allotment shall be made in marketable lots, on a proportionate basis as explained below:
a) Bidders will be categorized according to the number of Equity Shares applied for.
b) The total number of Equity Shares to be allotted to each category as a whole shall be arrived at on a
proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders
in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-
subscription ratio.
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c) Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate basis,
which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of
the over-subscription ratio, in that category subject to a minimum allotment of [•] Equity Shares. The allotment
lot shall be the same as the minimum application lot irrespective of any revisions to the price band.
d) In all Bids where the proportionate allotment is less than [•] Equity Shares per Bidder, the Allotment shall be
made as follows:
• Each successful Bidder shall be allotted a minimum of [•] Equity Shares; and
• The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a
manner such that the total number of Equity Shares allotted in that category is equal to the number of
Equity Shares calculated in accordance with (b) above.
e) If the proportionate Allotment to a Bidder is a number that is more than [•] but is not a multiple of [•] (which is
the marketable lot), the number in excess of the multiple of [•] would be rounded off to the higher multiple of [•]
if that number is [•] or higher. If that number is lower than [•], it would be rounded off to the lower multiple of
[•]. All Bidders in such categories would be allotted Equity Shares arrived at after such rounding off.
f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares allotted
to the Bidders in that category, the remaining Equity Shares available for allotment shall be first adjusted against
any other category, where the allotted Equity Shares are not sufficient for proportionate allotment to the
successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be
added to the category comprising Bidders applying for minimum number of Equity Shares.
Expenses of the Offer
The expenses of this Offer include, among others, underwriting and management fees, selling commission, printing and
distribution expenses, legal fees, statutory advertisement expenses and listing fees. The total expenses of the Offer are
estimated to be approximately Rs.[•] million.
Other than listing fees which will be paid by us, all expenses with respect to the Offer will be shared between the
Company and the Selling Shareholder on a pro-rata basis, in the ratio of the Equity Shares issued by the Company in
the Fresh Issue and the Equity Shares sold by the Selling Shareholder in the Offer for Sale.
Fees Payable to the Book Running Lead Managers, Syndicate Member(s) and Advisor
The total fees payable to the BRLMs and Syndicate Member(s) (including underwriting commission and selling
commission) will be as per the Engagement Letter executed with the Company and the Selling Shareholder dated
January 3, 2005, a copy of which is available for inspection at our registered office. The fees payable to the Advisor
will be as per an engagement letter to be entered into with the Company, a copy of which will be available for
inspection at our registered office.
Fees Payable to the Registrar to the Offer
The fees payable to the Registrar to the Offer for processing fee per application, data entry charges, processing of
application(s) opted for Demat, over printing of CAN/Refund order, preparation of refund data on magnetic tape,
hosting investor allotment/non allotment information on website, printing of bulk mailing register will be as per the
Memorandum of Understanding to be signed with the Company, copies of which will be available for inspection at our
registered office.
The Registrar will be reimbursed for all relevant out-of-pocket expenses including such as cost of stationery, postage,
stamp duty, communication expenses. Adequate funds will be provided to the Registrar to the Offering to enable them
to send fund orders or allotment advice by registered post/speed post/under certificate of posting.
Commission and Brokerage on Previous Issues
Since this is an initial public offer, no sum has been paid or is payable as commission or brokerage for subscribing to or
procuring or agreeing to procure subscription for any of our Equity Shares since our inception.
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Previous Rights and Public Issues
We have not made any previous rights and public issues except as stated in the section entitled “Capital Structure” on
page 22 of this Draft Red Herring Prospectus.
Outstanding Debentures or Bond Issues or Preference Shares
We have no outstanding debentures or bond issues or any preference shares, save and except for 69,828,750 CCRPS of
Rs.10 each issued to IFC. IFC has by its letter dated December 6, 2004, advised our Company that it has decided not to
exercise its conversion rights, but that it will instead opt for mandatory redemption in terms of Section 4.02(f)(i) of its
Subscription, Conversion and Redemption Agreement dated February 8, 2001 with our Company.
Capitalization of Reserves or Profits
We have not capitalized our reserves or profits at any time, except as stated in the section entitled “Capital Structure”
on page 22 of this Draft Red Herring Prospectus.
Issues otherwise than for Cash
Except as stated in “Capital Structure” on page 22 of this Draft Red Herring Prospectus, we have not issued any Equity
Shares for consideration otherwise than for cash.
Application in Offer
Equity Shares being issued through this Draft Red Herring Prospectus can be applied for in the dematerialized form
only.
Option to Subscribe in the Offer
IDFC is not our existing promoter or shareholder of our Company. As of the date of this Draft Red Herring Prospectus,
there are no outstanding warrants, options or rights to subscribe to our Equity Shares save and except for the conversion
right accorded to IDFC pursuant to the Subordinated Rupee Debt Agreement dated August 20, 2001 which IDFC has
conditionally waived pursuant to its letter dated December 17, 2004.
Purchase of Property
Except as disclosed in this Draft Red Herring Prospectus, there is no property which we have purchased or acquired or
propose to purchase or acquire which is to be paid for wholly, or in part, from the net proceeds of the present Offer or
the purchase or acquisition of which has not been completed on the date of this Draft Red Herring Prospectus, other
than property in respect of which:
• the contracts for the purchase or acquisition were entered into in the ordinary course of business, and the
contracts were not entered into in contemplation of the Offer nor is the Offer contemplated in consequence of
the contracts; or
• the amount of the purchase money is not material.
Remuneration of Executive Director
The salient features of the remuneration terms for Mr. Saroj Datta, Executive Director are detailed as under:
• Basic salary: Rs.1,92,500 per month;
• Other allowances not exceeding Rs.88,000 per month; and
• The Company to provide a suitable fully furnished four-bed room residential accommodation.
In addition to the above, other entitlements for our Executive Director includes a car with all expenses paid for,
telephone and telefax facilities, leave, medical and travel benefits in accordance with the Company’s rules and
regulations and provident fund, gratuity and such other retirement benefits.
The employment can be terminated either by our Executive Director or our Company by giving three months’ notice,
provided that the Company has the option of paying three months’ salary in lieu of notice.
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Remuneration of other Directors
There is no remuneration except sitting fees that is payable to the other Directors of our Company.
Interest of Promoters and Directors
Promoters
Tail Winds and Mr. Naresh Goyal are our promoters.
Mr. Goyal is an interested party in the currently subsisting contracts between the Company and the following promoter
group companies:
• Jetair Private Limited – GSA in India for the Company;
• Jet Enterprises Private Limited – licensor of trademarks to the Company;
• Jet Airways LLC, UAE – global GSA for the Company;
• Jet Airways of India Inc. – GSA in USA and Canada for the Company;
• India Jet Airways (Pty) Limited – GSA in South Africa for the Company; and
• Transmodal Service Private Limited – ground transport provider for the Company.
Tail Winds is an interested party in:
• The proceeds of the secondary sale; and
• any dividend and distributions made by the Company.
Tail Winds and/or Mr. Goyal will be interested parties to the extent of future contracts that we may enter into with any
promoter group companies.
Directors
All the Directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for
attending meetings of the Board or committee thereof. With regard to Mr. Saroj K. Datta, Executive Director, please
see “Statutory and Other Information - Remuneration of Executive Director” on page 168 of this Draft Red Herring
Prospectus.
The Directors may also be regarded as interested in the Equity Shares, if any, held by or that may be subscribed by and
allotted to the companies, firms and trusts, in which they are interested as directors, members, partners and/or trustees.
The following Directors are the interested to the extent of the contracts / relationship with the Company
• Mr. J.R. Gagrat is:
• a partner of the law firms of M/s. Gagrat & Co., in India and M/s. Gagrat and Gardi in Dubai who are
legal advisors to the Company; and
• Director on the board of Tail Winds.
• Mr. P.R.S. Oberoi as the Chairman of EIH Hotels Ltd., whose flight services division (Oberoi Flight Services)
is a catering supplier to the Company.
• Mr. Ali Ghandour, as a director on the board of Tail Winds.
• Mr. Victoriano P. Dungca, as a director on the board of Tail Winds and of Jet Airways of India, Inc.
• Mr. Saroj K. Datta, as a director on the board of Jetair Private Limited and Jet Enterprises Private Limited.
Revaluation of Assets
We have revalued our aircraft as on March 31, 2002, with reference to the then existing prices, in order to relate these
aircraft more closely to existing replacement values. The resulting appreciation aggregating to Rs.7,299.67 million has
been added to the gross block and the corresponding credit taken to the revaluation reserves. As of September 30, 2004,
the balance in the revaluation reserve was Rs.3,011.58 million.
Classes of Shares
Our authorized capital is Rs.2,000 million, which is divided into 130 million Equity Shares of Rs.10 each and 70
million preference shares of Rs.10 each.
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Payment or Benefit to Promoters or Officers of our Company
Except as stated otherwise in this Draft Red Herring Prospectus, no amount or benefit has been paid or given within the
two preceding years or is intended to be paid or given to our promoters or officers except the normal remuneration for
services rendered as Directors, officers or employees.
None of the beneficiaries of loans and advances, and sundry debtors are related to the Directors of the Company.
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MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF JET AIRWAYS (INDIA) LIMITED
Capitalized terms used in the section have the meaning given to such terms in the Articles of Association of our
Company. Note that capitalized terms used elsewhere in this Draft Red Herring Prospectus may be defined differently
than in this section.
Pursuant to Schedule II to the Companies Act, 1956, and the SEBI Guidelines, the main provisions of the Articles of
Association of Jet Airways (India) Limited are set forth below:
The regulations contained in Table “A” of Schedule I to the Companies Act (Act 1 of 1956) shall apply only in so far as
the same are not provided for or are inconsistent with these Articles and the regulations for the management of the
Company and for observance of the members thereof and their representatives shall, subject to any exercise of the
statutory powers of the Company with reference to repeal or alteration of or addition to, its regulations by Special
Resolution, as prescribed by the Companies Act, 1956, be such as are contained in these Articles.
NG means Mr. Naresh Goyal. The "NG Group" means NG, Tail Winds Limited and their respective affiliates(as
defined in our Articles), as the case may be.
Our Articles provide that, where the articles require that a decision is to be made or a right exercised by a member of
the NG Group, it is sufficient if that decision is taken by: (a) NG if he has capacity to act; or (b) any person who is
authorised to take such decisions on behalf of the NG Group and which person has been notified in writing to our
Company; or (c)failing (a) and (b) above, such members of the NG Group, who hold the majority of Shares of our
Company.
NAME PROTECTION
Article 3 provides that:
(a) Jet Enterprises has pursuant to certain trademark license agreements granted to the Company and the
Company has accepted from Jet Enterprises non-assignable, exclusive licenses to use certain trademarks on
the terms more particularly stipulated therein. Upon expiration or termination of any or all of these license
agreements, in accordance with their terms the Company will, inter alia, discontinue the use of the name and
the marks, and shall not thereafter use the same in any form or manner as a part of the Company’s corporate
name or trade name and shall change its name in such a manner as to delete the word “JET AIRWAYS” or its
logo or trademarks appearing in the name of the Company and:
(1) cease and desist from and discontinue the use of the word “JET AIRWAYS” or its logo as part of its
corporate name and/or its the trade name and from using all trademarks, service marks, copyrights,
domain names and designs bearing the name “JET AIRWAYS” or any variation thereof.
(2) take all steps as may be necessary for the purpose of changing its corporate name as aforesaid.
(3) undertake at all times that the Company’s corporate name shall not comprise of any word or
expression or logo or trademarks similar to the word “JET AIRWAYS” or its logo or any variation
thereof.
(4) assign any and all trademarks, service marks, copyrights, domain name and designs bearing the name
“JET AIRWAYS” to Jet Enterprises, at the Company’s cost.
(5) cancel and terminate all agreements, licenses and writings entered into with any Persons which relate
to any and all trademarks, service marks, copyrights, domain names and designs bearing the name
“JET AIRWAYS” at the Company’s cost .
(b) The Members will at all times exercise their voting rights to carry out and implement the provisions of this
Article.
(c) Without prejudice to any provisions contained in the Act, (including Sections 87 and 92(2) of the Act), the
Members further agree of their own free will and volition that they will at all times exercise their voting rights
to vote in favour of all resolutions if required to effectuate what is provided for by this Article.
(d) This Article shall be binding on both the Company and the Members and every Member shall be deemed to
have joined the Company on the foregoing basis.
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SHARE CAPITAL
Article 4 provides that:
(a) The Authorised Share Capital of the Company is Rs. 2000,000,000(Rupees Two Thousand Million only)
divided into 130,000,000 (One Hundred and Thirty Million) Equity Shares of Rs.10 (Rupees Ten only) each
and 70,000,000 (Seventy Million) Preference Shares of Rs.10 (Rupees Ten only) each.
(b) The Paid-up Share Capital shall be at all times a minimum of Rs.500,000 (Rupees Five Hundred Thousand
only) as required under the Act.
(c) The Company has power from time to time to increase its authorised or issued and Paid up Share Capital only
if the NG Group vote in favour of any or all such resolutions required to be passed.
(d) In the event it is permitted by law, the Share Capital of the Company may be classified into Shares with
differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such
conditions as may be prescribed.
(e) Subject to Article 4(d) all Shares shall be of the same class and shall be alike in all respects and the holders
thereof shall be entitled to identical rights and privileges including without limitation to identical rights and
privileges with respect to dividends, voting rights, and distribution of assets in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Company.
(f) The Company in General Meeting may from time to time by an Ordinary Resolution, increase the Capital by
the creation of new Shares, such increase to be of such aggregate amount and to be divided into Shares of such
respective amounts as the resolution shall prescribe. The new Shares shall be issued upon such terms and
conditions and with such rights and privileges annexed thereto, as by the General Meeting creating the same
shall be directed and if no direction be given by the General Meeting, as the Board shall determine; and, in
particular, such Shares may be issued with a preferential or qualified right to Dividends and in the distribution
of the assets of the Company and with a right of voting at General Meetings of the Company in conformity
with Sections 87 of the Act. Whenever the Capital of the Company has been increased under the provisions of
this Article, the Directors shall comply with the provisions of Section 97 of the Act.
(g) Except so far as otherwise provided by the conditions of issue or by these presents, any Capital raised by the
creation of new Shares, shall be considered as part of the existing Capital and shall be subject to the provisions
herein contained with reference to the payment of calls and instalments, forfeiture, lien, surrender, transfer and
transmission, voting and otherwise.
(h) All of the provisions of these Articles shall apply to all of the Members of the Company.
ADRs/GDRs
Article 8 provides that:
The Company shall, subject to the provisions of the Act, compliance with all applicable laws, rules and regulations and
the consent of the Board, have power to issue ADRs or GDRs on such terms and in such manner as the Board deems fit
including their conversion and repayment. Such terms may include, at the discretion of the Board, limitations on voting
by holders of ADRs or GDRs, including without limitation, exercise of voting rights in accordance with the directions
of the Board.
ALTERATION OF SHARE CAPITAL
Article 9 provides that:
The Company may, by Ordinary Resolution in General Meeting from time to time alter the conditions of its
Memorandum as follows, that is to say, it may:
(a) increase its Share Capital by such amount as it thinks fit and expedient by issuing new Shares of such amount
as may be deemed expedient and the new Shares shall be issued on such terms and conditions and with such
rights and privileges annexed thereto, as the General Meeting resolving upon the creation thereof, shall direct
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and if no direction be given, as the Board of Directors shall determine, and in particular such Shares maybe
issued with a preferential right to Dividends and in the distribution of the assets of the Company;
(b) consolidate and divide all or any of its Share Capital into Shares of larger amount than its existing Shares;
(c) convert all or any of its fully Paid up Shares into stock and reconvert that stock into fully Paid up Shares of
any denomination
(d) sub-divide its Shares, or any of them, into Shares of smaller amount than is fixed by the Memorandum, so
however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on
each reduced Share shall be the same as it was in the case of the Share from which the reduced Share is
derived;
(e) cancel Shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to
be taken by any person, and diminish the amount of its Share Capital by the amount of the Shares so
cancelled. A cancellation of Shares in pursuance of this Article shall not be deemed to be a reduction of Share
Capital within the meaning of the Act.
REDUCTION OF SHARE CAPITAL
Article 10 provides that:
The Company may (subject to the provisions of Sections 78, 80 and 100 to 105 [both inclusive] of the Act), from time
to time by Special Resolution, reduce its Capital, any Capital Redemption Reserve Account and the Securities Premium
Account in any manner for the time being authorised by law, and in particular, Capital may be paid off on the footing
that it may be called up again or otherwise. This Article is not to derogate any power the Company would have, if it
were omitted.
POWER OF COMPANY TO PURCHASE ITS OWN SHARES
Article 11 provides that:
Pursuant to a resolution of the Board of Directors, the Company may purchase its own Shares by way of a buy-back
arrangement, in accordance with Section 77A of the Act and the Securities and Exchange Board of India (Buy-Back of
Securities) Regulations, 1998, subject to compliance with all applicable Requirements of Law.
POWER TO MODIFY RIGHTS
Article 12 provides that:
Where, the Capital, by reason of the issue of Preference Shares or otherwise, is divided into different classes of Shares,
all or any of the rights and privileges attached to each class may, subject to the provisions of Sections 106 and 107 of
the Act, be modified, commuted, affected or abrogated or dealt with by agreement between the Company and any
Person purporting to contract on behalf of that class, provided the same is affected with the sanction of a Special
Resolution passed at a separate meeting of the holders of the issued Shares of that class and all the provisions hereafter
contained as to General Meetings (including the provisions relating to quorum at such meetings) shall mutatis mutandis
apply to every such meeting.
FURTHER ISSUE OF SHARES
Article 14 provides that:
(a) The Share Capital of the Company shall be in accordance with Requirements of Law, as in force from time to
time.
(b) Where it is proposed to increase the subscribed Capital of the Company by allotment of further Shares,
whether out of un-issued Share Capital or out of increased Share Capital, then such further Shares shall be
offered to the Persons who at the date of the offer are holders of the Shares of the Company, in proportion as
nearly as circumstances admit, to the Capital Paid up on those Shares at that date. Such offer shall made by a
notice specifying the number of Shares offered and limiting a time not being less than thirty days from the date
of the offer within which the offer if not accepted will be deemed to have been declined. After the expiry of
the time specified in the notice aforesaid or on receipt of earlier intimation from the person to whom such
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notice is given that he declined to accept the Shares offered, the Board may dispose of them in such manner as
they think most beneficial to the Company.
(c) The offer aforesaid shall be deemed to include a right exercisable by the Person concerned to renounce the
Shares offered to them in favour of any other Person and the notice issued in relation thereto shall contain a
statement of this right. PROVIDED THAT the Board may decline, without assigning any reason to allot any
Shares to any Person in whose favour any Member may renounce the Shares offered to him.
(d) Notwithstanding anything contained in the preceding sub-article, the Company may offer further shares to any
person or persons and such person or persons may or may not include the persons who at the date of the offer,
are the holders of the equity shares of the Company:
(i) by a special resolution to that effect is passed by the Company in General Meeting, or
(ii) where no such special resolution is passed, if the votes cast (whether on a show of hands or on a poll,
as the case may be) in favour of the proposal contained in the resolution moved in the General
Meeting (including the casting vote, if any, of the Chairman) by Members who, being entitled so to
do vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the
proposal by Members so entitled and voting and the Central Government is satisfied, on an
application made by the Board of Directors in this behalf, that the proposal is most beneficial to the
Company.
(e) Notwithstanding anything contained in sub-Article (b) above, but subject however, to Section 81(3) of the Act,
if applicable, the Company may increase its subscribed capital on exercise of an option attached to the
Debentures issued or loans raised by the Company to convert such Debentures or loans into Shares or to
subscribe for Shares in the Company.
(f) Notwithstanding anything contained in Section 79 of the Act, the Company may issue sweat equity shares in
accordance with the provisions of Section 79A of the Act.
(g) Nothing in sub-article (c) above shall be deemed:
(a) To extend the time within which the offer should be accepted; or
(b) To authorise any Person to exercise the right of renunciation for a second time, on the ground that the
Person in whose favour the renunciation was first made has declined to take the Shares comprised in
the renunciation.
(h) Nothing in this Article shall apply to the increase of the subscribed Capital of the Company caused by the
exercise of an option attached to the Debentures issued or loans raised by the Company:
(i) To convert such Debentures or loans into Shares in the Company; or
(ii) To subscribe for Shares in the Company (whether such option is conferred in these Articles or
otherwise).
PROVIDED THAT the terms of issue of such Debentures or the terms of such loans include a term providing
for such option and such term:
(a) Either has been approved by the Central Government before the issue of the Debentures or the raising
of the loans or is in conformity with Rules, if any, made by that Government in this behalf; and
(b) In the case of Debentures or loans or other than Debentures issued to or loans obtained from the
Government or any institution specified by the Central Government in this behalf, has also been
approved by a Special Resolution passed by the Company in General Meeting before the issue of the
Debentures or raising of the loans.
(i) Any issue of Shares or other Securities shall be in compliance with any applicable laws, regulations or
guidelines or any Requirements of Law to Persons who can acquire Securities of a company incorporated in
India and engaged in the air transport sector.
ISSUE OF NEW CERTIFICATE IN PLACE OF ONE DEFACED, LOST OR DESTROYED
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Article 16 provides that:
(a) If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back thereof for
endorsement of transfer, then upon production and surrender thereof to the Company, a new certificate may be
issued in lieu thereof, and if any certificate is lost or destroyed then upon proof thereof to the satisfaction of
the Company and on execution of such indemnity as the Company deem adequate, being given, a new
Certificate in lieu thereof shall be given to the Member entitled to such lost or destroyed Certificate. Every
Certificate under this Article shall be issued without payment of fees if the Directors so decide, or on payment
of such fees (not exceeding Rupees two for each certificate) as the Directors shall prescribe, provided that no
fee shall be charged for issue of a new certificate in replacement of those which are old, defaced or worn out
or where there is no further space on the back thereof for endorsement of transfer.
Provided that, notwithstanding what is stated above, the Directors shall comply with such rules or regulations
or requirements of any stock exchange or the rules made under the Act or the rules made under the Securities
Contracts (Regulation) Act, 1956 or any other act or rules applicable in this behalf.
(b) The provisions of this Article shall mutatis mutandis apply to Debentures and other Securities of the Company.
(c) When a new share certificate has been issued in pursuance of sub-article (a) of this Article, it shall state on the
face of it and against the stub or counterfoil to the effect that it is “Duplicate issued in lieu of Shares
Certificate No. …….. ” or “Issued in lieu of Share Certificate No. …… Sub-divided/replaced/on
consolidation of Shares” as the case may be. The word “Duplicate” shall be stamped or punched in bold letters
across the face of the Share Certificate.
(d) Where a new share certificate has been issued in pursuance of sub-articles (a) or (b) of this Article, particulars
of every such share certificate shall be entered in a Register of Renewed and Duplicate Certificates indicating
against the name of the Member to whom the certificate is issued, the number and date of issue of the share
certificate in lieu of which the new certificate is issued and the necessary charges indicated in the Register of
Members by suitable cross reference in the “Remarks” column.
(e) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on
the authority of a Resolution of the Board. The blank forms shall be consecutively machine–numbered and the
forms and the blocks, engravings, facsimiles and hues relating to the printing of such forms shall be kept in the
custody of the Secretary or of such other person as the Board may appoint for the purpose; and the Secretary
or the other person aforesaid shall be responsible for rendering an account of these forms to the Board.
(f) The Managing Director or the Executive Director of the Company for the time being or if the Company has no
Managing Director or the Executive Director, every Director of the Company shall be responsible for the
maintenance, preservation and safe custody of all books and documents relating to the issue of share
certificates except the blank forms of the Share certificate referred to in sub-article (e) of this Article.
(g) All books referred to in sub-article (f) of this Article, shall be preserved in good order permanently.
(h) If any Share stands in the names of two or more Members, the Member first named in the Register of
Members shall as regards receipt of Dividends or bonus, or service of notices and all or any other matters
connected with the Company except voting at Meetings and the transfer of Shares, be deemed the sole holder
thereof, but the joint holders of a Share shall be severally as well as jointly liable for the payment of all
installments and calls due in respect of such Shares, and for all incidents thereof according to these Articles.
(i) Except as ordered by a Court of competent jurisdiction or as by law required, the Company shall be entitled to
treat the Member whose name appears on the Register of Members as the holder of any Share or whose name
appears as the Beneficial Owner of Shares in the records of the Depository, as the absolute owner thereof and
accordingly shall not be bound to recognise any benami, trust or equity or equitable, contingent or other claim
to or interest in such Share on the part of any other Person whether or not he shall have express or implied
notice thereof. The Board shall be entitled at their sole discretion to register any Shares in the joint names of
any two or more Persons or the survivor or survivors of them.
CALLS
Article 19 provides that:
(a) Subject to the provisions of Section 91 of the Act, the Board may, from time to time, subject to the terms on
which any Shares may have been issued and subject to the conditions of allotment, by a resolution passed at a
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meeting of the Board, (and not by circular resolution), make such call as it thinks fit upon the Members in
respect of all moneys unpaid on the Shares held by them respectively and each Member shall pay the amount
of every call so made on him to the Person or Persons and at the times and places appointed by the Board. A
call may be made payable by installments.
(b) Thirty days notice in writing at the least of every call (otherwise than on allotment) shall be given by the
Company specifying the time and place of payment and if payable to any Person other than the Company, the
name of the person to whom the call shall be paid, provided that before the time for payment of such call the
Board may by notice in writing to the Members revoke the same.
(c) A call shall be deemed to have been made at the time when the resolution of the Board authorising such call
was passed and may be made payable by the Members whose names appear on the Register of Members on
such date or at the discretion of the Board on such subsequent date as shall be fixed by the Board.
(d) A call may be revoked or postponed at the discretion of the Board.
(e) The joint holder of a Share shall be jointly and severally liable to pay all installments and calls due in respect
thereof.
(f) The Board may, from time to time at its discretion, extend the time fixed for the payment of any call and may
extend such time as to all or any of the Members who, from residence at a distance or other cause the Board
may deem fairly entitled to such extension; but no Members shall be entitled to such extension save as a matter
of grace and favour.
(g) If any Member or allottee fails to pay the whole or any part of any call or installment, due from him on the day
appointed for payment thereof, or any such extension thereof as aforesaid, he shall be liable to pay interest on
the same from the day appointed for the payment thereof to the time of actual payment at such rate as shall
from time to time be fixed by the Board but nothing in this Article shall render it obligatory for the Board to
demand or recover any interest from any such Member.
(h) Any sum, which by the terms of issue of a Share or otherwise, becomes payable on allotment or at any fixed
date or by installments at a fixed time whether on account of the nominal value of the Share or by way of
premium shall for the purposes of these Articles be deemed to be a call duly made and payable on the date on
which by the terms of issue or otherwise the same became payable, and in case of non-payment, all the
relevant provisions of these Articles as to payment of call, interest, expenses, forfeiture or otherwise shall
apply as if such sum became payable by virtue of a call duly made and notified.
(i) On the trial or hearing of any action or suit brought by the Company against any Member or his Legal
Representatives for the recovery of any money claimed to be due to the Company in respect of his Shares, it
shall be sufficient to prove that the name of the Member in respect of whose Shares the money is sought to be
recovered appears entered on the Register of Members as the holder, or one of the holders at or subsequently
to the date at which the money sought to be recovered is alleged to have become due on the Shares in respect
of which such money is sought to be recovered; that the resolution making the call is duly recorded in the
minute book; and that notice of such call was duly given to the Member or his representatives so sued in
pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made
such call nor that a quorum of Directors was present at the Board at which any call was made, nor that the
meeting at which any call was made was duly convened or constituted nor any other matters whatsoever; but
the proof of the matters aforesaid shall be conclusive evidence of the debt.
(j) Neither a judgment or decree in favour of the Company for calls, nor the receipt by the Company of a portion
of any money which shall from time to time be due from any Member to the Company in respect of his Shares,
either by way of principal or interest, nor any indulgence granted by the Company in respect of the payment of
any such money shall preclude the Company from thereafter proceeding to enforce a forfeiture of such Shares
as hereinafter provided.
(k) The Board may, if it thinks fit (subject to the provisions of Section 92 of the Act) agree to and receive from
any Member willing to advance the same, the whole or any part of the amounts due upon the Shares held by
him beyond the sums actually called up, and upon the amount so paid or satisfied in advance or upon so much
thereof as from time to time and at any time thereafter as exceeds the amount of the calls then made upon and
due in respect of the Shares in respect of which such advance has been made, the Board may pay interest , as
the Member paying such sum in advance and the Board agree upon. The Board may agree to repay at any time
any amount so advanced or may at any time repay the same upon giving to the Member three (3) months
notice in writing. Provided that the money paid in advance of calls on any Shares may carry interest but shall
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not in respect thereof confer a right to participate in profits or dividend. The Directors may at any time repay
the amount so advanced.
(l) No Member paying any such sum in advance shall be entitled to voting rights in respect of the moneys so paid
by him until the same would but for such payment, become presently payable.
(m) The provisions of these Articles shall mutatis mutandis apply to the calls on Debentures of the Company.
COMPANY’S LIEN ON SHARES:
Article 20 provides that:
(a) The Company shall have a first and paramount lien upon all the Shares/Debentures (other than fully paid-up
Shares/Debentures) registered in the name of each Member (whether solely or jointly with others) and upon
the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time
in respect of such Shares/Debentures and no equitable interest in any Share shall be created except upon the
condition that this Article will have full effect, and such lien shall extend to all Dividends and bonuses from
time to time declared in respect of such Shares and interest in respect of Debentures. Unless otherwise agreed,
the registration of a transfer of Shares/Debentures shall operate as a waiver of the Company’s lien, if any, on
such Shares/Debentures. The Directors may at any time declare any Shares/Debentures wholly or in part to be
exempt from the provisions of this Article.
(b) For the purpose of enforcing such lien the Board may sell the Shares subject thereto in such manner as they
shall think fit, and for that purpose may cause to be issued a duplicate certificate in respect of such Shares and
may authorise one of their number to execute a transfer thereof on behalf of and in the name of such Member.
No sale shall be made until such period as aforesaid shall have elapsed and until notice in writing of the
intention to sell shall have been served on such Member or his Legal Representative, and default shall have
been made by him or them in payment, fulfillment, or discharge of such debts, liabilities or engagements for
fourteen days after such notice.
(c) The net proceeds of any such sale shall be received by the Company and applied in or towards payment of
such part of the amount in respect of which the lien exists as is presently payable and the residue if any
shall(subject to a like lien for sums not presently payable as existed upon the Shares before the sale)be paid to
the Person entitled to the Shares at the date of the sale.
FORFEITURE OF SHARES
Article 21 provides that:
(a) If any Member fails to pay any call or installment or any part thereof or any money due in respect of any
Shares either by way of principal or interest on or before the day appointed for the payment of the same or any
such extension thereof as aforesaid, the Board may, at any time thereafter, during such time as the call or
installment or any part thereof or other moneys remain unpaid or a judgment or decree in respect thereof
remain unsatisfied, give notice to him or his Legal Representatives requiring him to pay the same together
with any interest that may have accrued and all expenses that may have been incurred by the Company by
reason of such non-payment.
(b) The notice shall name a day, (not being less than fourteen days from the date of the notice), and a place or
places on or before which such call or installment or such part or other moneys as aforesaid and interest
thereon, (at such rate as the Board shall determine and payable from the date on which such call or installment
ought to have been paid), and expenses as aforesaid are to be paid. The notice shall also state that in the event
of non-payment at or before the time and at the place appointed, the Shares in respect of which the call was
made or installment is payable, will be liable to be forfeited.
(c) If the requirements of any such notice as aforesaid shall not be complied with, any Share in respect of which
such notice has been given, may at any time thereafter before payment of all calls, installments, other moneys
due in respect thereof, interest and expenses as aforesaid, be forfeited by a Resolution of the Board to that
effect. Such forfeiture shall include all Dividends declared or any other moneys payable in respect of the
forfeited Share and not actually paid before the forfeiture.
(d) When any Share shall have been so forfeited, notice of the forfeiture shall be given to the Member in whose
name it stood immediately prior to the forfeiture or if any of his Legal Representatives or to any of the Persons
entitled to the Shares by transmission, and an entry of the forfeiture with the date thereof, shall forthwith be
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made in the Register of Members, but no forfeiture shall be in any manner invalidated by any omission or
neglect to give such notice or to make any such entry as aforesaid.
(e) Any Share so forfeited shall be deemed to be the property of the Company and may be sold, re-allotted, or
otherwise disposed of either to the original holder thereof or to any other Person upon such terms and in such
manner as the Board shall think fit.
(f) Any Member whose shares have been forfeited shall, not withstanding the forfeiture, be liable to pay and shall
forthwith pay to the Company on demand all calls, amounts, installments, interest and expenses and other
moneys owing upon or in respect of such Shares at the time of the forfeiture together with interest thereon
from the time of the forfeiture until payment at such rate. as the Board may determine and the Board may
enforce, (if it thinks fit), payment thereof as if it were a new call made at the date of forfeiture.
(g) The forfeiture of a Share shall involve extinction at the time of the forfeiture of all interest in all claims and
demands against the Company, in respect of the Share and all other rights incidental to the Share, except only
such of these rights as by these Articles are expressly saved.
(h) A declaration in writing that the declarant is a Director or Secretary of the Company and that a Share in the
Company has been duly forfeited in accordance with these Articles on a date stated in the declaration, shall be
conclusive evidence of the facts therein stated as against all Persons claiming to be entitled to the Shares.
(i) Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers hereinbefore given,
the Board may appoint some Person to execute an instrument of transfer of the Shares sold and cause the
purchaser’s name to be entered in the Register of Members in respect of the Shares sold and the purchaser
shall not be bound to see to the regularity of the proceedings, or to the application of the purchase money, and
after his name has been entered in the Register of Members in respect of such Shares, the validity of the sale
shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages
only and against the Company exclusively.
(j) Upon any sale, re-allotment or other disposal under the provisions of the preceding Articles, the certificate or
certificates originally issued in respect of the related Shares shall, (unless the same shall on demand by the
Company have been previously surrendered to it by the defaulting Member), stand cancelled and become null
and void and of no effect and the Board shall be entitled to issue a new certificate or certificates in respect of
the said Shares to the person or persons entitled thereto.
(k) The Board may at any time before any Share so forfeited shall have been sold, re-allotted or otherwise
disposed of, annul the forfeiture thereof upon such conditions as it thinks fit.
TRANSFER AND TRANSMISSION OF SHARES
Article 22 provides that:
(a) The Company shall keep a “Register of Transfers” and shall have recorded therein fairly and distinctly
particulars of every transfer or transmission of any Share, Debenture or other Security held in a material form.
(b) Every instrument of transfer of Shares shall be in writing in the usual common form or in such form as may be
prescribed under Section 108 of the Act and shall be delivered to the Company within such time as may be
prescribed under the Act.
(c) (1) An application for the registration of a transfer of the Shares in the Company may be made either by
the transferor or the transferee.
(2) Where the application is made by the transferor and relates to partly paid Shares, the transfer shall not
be registered unless the Company gives notice of the application to the transferee and the transferee
makes no objection to the transfer within two weeks from the receipt of the notice.
(d) Every such instrument of transfer shall be executed both by the transferor and the transferee and attested and
the transferor shall be deemed to remain the holder of such Share until the name of the transferee shall have
been entered in the Register of Members in respect thereof.
(e) The Board shall have power on giving not less than seven days previous notice by advertisement in a
newspaper circulating in the city, town or village in which the Office of the Company is situated to close the
transfer books, the Register of Members and/or Register of Debenture-holders at such time or times and for
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such period or periods, not exceeding thirty days at a time and not exceeding in the aggregate forty-five days
(45) in each year, as it may deem expedient.
(f) Subject to the provisions of Sections 111 and 111A of the Act, or any statutory modification of the said
provisions for the time being in force and any other Requirements of Law, the Board may, at its own absolute
and uncontrolled discretion and without assigning any reason, decline to register or acknowledge any transfer
of Shares and in particular may so decline in any case in which (i) the proposed transferee is a Person who is
not permitted by any applicable law, regulation or guideline or any Requirements of Law, to acquire securities
of a company incorporated in India and engaged in the air transport sector or (ii) if the Company has a lien
upon the Shares or any of them or (iii) whilst any moneys in respect of the Shares desired to be transferred or
any of them has remained unpaid or not or unless the transferee is approved by the Board and such refusal
shall not be affected by the fact that the proposed transferee is already a Member. But in such cases it shall,
within one (1) month from the date on which the instrument of transfer was lodged with the Company send to
the transferee and the transferor notice of refusal to register such transfer. The registration of a transfer shall be
conclusive evidence of the approval of the Board of the transferee.
Provided that registration of a transfer shall not be refused on the ground of the transferor being either alone or
jointly with any other Person or Persons indebted to the Company on any account whatsoever except where
the Company has a lien on Shares.
(g) Subject to the provisions of the Act and these Articles, the Directors shall have the absolute and uncontrolled
discretion to refuse to register a Person entitled by transmission to any Shares or his nominee as if he were the
transferee named in any ordinary transfer presented for registration, and shall not be bound to give any reason
for such refusal and in particular may also decline in respect of Shares upon which the Company has a lien.
(h) Transfer of Shares in whatever lot should not be refused, though there would be no objection to the Company
refusing to split a share certificate into several scrips of any small denominations or to consider a proposal for
transfer of Shares comprised in a share certificate to several Members, involving such splitting, if on the face
of it such splitting/transfer appears to be unreasonable or without a genuine need. The Company should not,
therefore, refuse transfer of Shares in violation of the stock exchange listing requirements on the ground that
the number of Shares to be transferred is less than any specified number.
(i) In the case of the death of any one or more of the Members named in the Register of Members as the joint-
holders of any Share, the survivors shall be the only Member or Members recognized by the Company as
having any title to or interest in such Share, but nothing herein contained shall be taken to release the estate of
a deceased joint-holder from any liability on Shares held by him jointly with any other Person.
(j) The Executors or Administrators or holder of the Succession Certificate or the Legal Representatives of a
deceased Member, (not being one of two or more joint-holders), shall be the only Members recognized by the
Company as having any title to the Shares registered in the name of such Member, and the Company shall not
be bound to recognize such Executors or Administrators or holders of Succession Certificate or the Legal
Representatives unless such Executors or Administrators or Legal Representatives shall have first obtained
Probate or Letters of Administration or Succession Certificate, as the case may be, from a duly constituted
court in the Union of India, provided that the Board may in its absolute discretion dispense with production of
Probate or Letters of Administration or Succession Certificate, upon such terms as to indemnity or otherwise
as the Board may in its absolute discretion deem fit and may under these Articles register the name of any
Person who claims to be absolutely entitled to the Shares standing in the name of a deceased Member, as a
Member.
(k) The Board shall not knowingly issue or register a transfer of any share to a minor or insolvent or Person of
unsound mind.
(l) Subject to the provisions of Articles, any Person becoming entitled to Shares in consequence of the death,
lunacy, bankruptcy of any Member or Member, or by any lawful means other than by a transfer in accordance
with these Articles, may with the consent of the Board, (which it shall not be under any obligation to give),
upon producing such evidence that he sustains the character in respect of which he proposes to act under this
Article, or of his title, as the Board thinks sufficient, either be registered himself as the holder of the Shares or
elect to have some Person nominated by him and approved by the Board, registered as such holder; provided
nevertheless, that if such Person shall elect to have his nominee registered, he shall testify the election by
executing in favour of his nominee an instrument of transfer in accordance with the provisions herein
contained and until he does so, he shall not be freed from any liability in respect of the Shares.
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(m) A Person becoming entitled to a Share by reason of the death or insolvency of a Member shall be entitled to
the same Dividends and other advantages to which he would be entitled if he were the registered holder of the
Shares, except that he shall not, before being registered as a Member in respect of the Shares, be entitled to
exercise any right conferred by membership in relation to meetings of the Company; PROVIDED THAT the
Directors shall, at any time, give notice requiring any such Person to elect either to be registered himself or to
transfer the Shares, and is the notice is not complied with within ninety days, the Directors may thereafter
withhold payment of all Dividends, bonuses or other moneys payable in respect of the Shares until the
requirements of the notice have been complied with.
Every instrument of transfer shall be presented to the Company duly stamped for registration accompanied by such evidence as the Board may require to prove the title of the transferor, his right to transfer the Shares and
every registered instrument of transfer shall remain in the custody of the Company until destroyed by order of
the Board.
(o) In case of transfer and transmission of Shares or other marketable securities where the Company has not
issued any certificates and where such Shares or Securities are being held in any electronic and fungible form
in a Depository, the provisions of the Depositories Act, 1996 shall apply.
(p) Before the registration of a transfer, the certificate or certificates of the Share or Shares to be transferred must
be delivered to the Company along with (save as provided in Section 108 of the Act) a properly stamped and
executed instrument of transfer.
(q) No fee shall be payable to the Company, in respect of the transfer or transmission of Shares, or for registration
of any power of attorney, probate, letters of administration and succession certificate, certificate of death or
marriage or other similar documents.
(r) The Company shall incur no liability or responsibility whatsoever in consequence of its registering or giving
effect to any transfer of Shares made or purporting to be made by any apparent legal owner thereof, (as shown
or appearing in the Register of Members), to the prejudice of a Person or Persons having or claiming any
equitable right, title or interest to or in the said Shares, notwithstanding that the Company may have had any
notice of such equitable right, title or interest or notice prohibiting registration of such transfer, and may have
entered such notice or referred thereto, in any book of the Company and the Company shall not be bound or
required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or
interest or be under any liability whatsoever for refusing or neglecting so to do, though it may have been
entered or referred to in some book of the Company but the Company shall nevertheless be at liberty to regard
and attend to any such notice, and give effect thereto if the Board shall so think fit.
(s) The provision of these Articles shall subject to the provisions of the Act and any requirements of law mutatis
mutandis apply to the transfer or transmission by operation of law to other Securities of the Company.
DEMATERIALISATION OF SECURITIES
Article 23 provides that:
(a) Dematerialisation: Notwithstanding anything contained in these Articles, the Company shall be entitled to
dematerialise its existing Securities, rematerialise its Securities held in the Depositories and/or to offer its fresh
Securities in a dematerialised form pursuant to the Depositories Act, and the rules framed thereunder, if any.
(b) Options for Investors: Subject to Section 68B of the Act, every Person subscribing to Securities offered by the
Company shall have the option to receive security certificates or to hold the Securities with a Depository. Such
a Person who is the Beneficial Owner of the Securities can at any time opt out of a Depository, if permitted by
law, in respect of any Securities in a manner provided by the Depositories Act, and the Company shall, in the
manner and within the time prescribed, issue to the Beneficial Owner the required Certificate of Securities.
If a Person opts to hold his Securities with a Depository, the Company shall intimate such Depository the
details of allotment of the Securities and on receipt of the information, the Depository shall enter in its record
the name of the allottee as the Beneficial Owner of the Securities.
(c) Securities in Depositories to be in fungible form: All Securities held by a Depository shall be dematerialized
and be in fungible form. Nothing contained in Sections 153, 153A, 153B, 187B, 187C and 372A of the Act
shall apply to a Depository in respect of the Securities held by it on behalf of the Beneficial Owners.
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(d) Rights of Depositories & Beneficial Owners:
(i) Notwithstanding anything to the contrary contained in the Act or these Articles, a Depository shall be
deemed to be the Registered Owner for the purposes of effecting transfer of ownership of Securities
on behalf of the Beneficial Owner.
(ii) Save as otherwise provided in (i) above, the Depository as the Registered Owner of the Securities
shall not have any voting rights or any other rights in respect of the Securities held by it.
(iii) Every person holding Shares of the Company and whose name is entered as the Beneficial Owner in
the records of the Depository shall be deemed to be a Member of the Company.
(iv) The Beneficial Owner of Securities shall, in accordance with the provisions of these Articles and the
Act, be entitled to all the rights and subject to all the liabilities in respect of his Securities, which are
held by a Depository.
(e) Service of Documents: Notwithstanding anything contained in the Act or these Articles to the contrary, where
Securities are held in a Depository, the records of the Beneficial Ownership may be served by such Depository
on the Company by means of electronic mode or by delivery of floppies or discs.
(f) Transfer of Securities:
(i) Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of Securities
effected by transferor and transferee both of whom are entered as Beneficial Owners in the records of
a Depository.
(ii) In the case of transfer or transmission of Shares or other marketable Securities where the Company
has not issued any certificates and where such Shares or Securities are being held in any electronic or
fungible form in a Depository, the provisions of the Depositories Act shall apply.
(g) Allotment of Securities dealt with in a Depository: Notwithstanding anything in the Act or these Articles,
where Securities are dealt with by a Depository, the Company shall intimate the details of allotment of
relevant Securities thereof to the Depository immediately on allotment of such Securities.
(h) Certificate No. Etc. of Securities in Depository: Nothing contained in the Act or these Articles regarding the
necessity of having certificate number/distinctive numbers for Securities issued by the Company shall apply to
Securities held with a Depository.
(i) Register and Index of Beneficial Owners: The Register and Index of Beneficial Owners maintained by a
Depository under the Depositories Act, shall be deemed to be the Register and Index (if applicable) of
Members and Security-holders for the purposes of these Articles.
NOMINATION OF SHARES
Article 24 provides that:
(1) Every holder of Shares in, or holder of Debentures of, the Company may, at any time, nominate, in the manner
prescribed under the Act, a Person to whom his Shares in, or Debentures of, the Company shall vest in the
event of his death.
(2) Where the Shares in, or Debentures of, the Company are held by more than one Person jointly, the joint
holders may together nominate, in the manner prescribed under the Act, a Person to whom all the rights in the
Shares or Debentures of the Company shall vest in the event of death of all the joint holders.
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether
testamentary or otherwise, in respect of such Shares in or Debentures of, the Company, where a nomination
made in the manner prescribed under the Act, purports to confer on any Person the right to vest the Shares in,
or Debentures of, the Company, the nominee shall, on the death of the Member or debenture holder of the
Company or, as the case may be, on the death of the joint holders become entitled to all the rights in the Shares
or Debentures of the Company or, as the case may be, all the joint holders, in relation to such Shares or
Debentures of the Company to the exclusion of all other persons, unless the nomination is varied or cancelled
in the prescribed manner under the Act.
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(4) Where the nominee is a minor, the holder of the Shares or Debentures concerned, can make the nomination to
appoint in prescribed manner under the Act, any Person to become entitled to the Shares or Debentures of the
Company in the event of his death, during the minority.
TRANSMISSION IN CASE OF NOMINATION
Article 25 provides that:
(1) Notwithstanding anything contained in other Articles, any Person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, 1956, upon the production of such evidence as may be
required by the Board and subject as hereinafter provided, elect either:-
(a) to be registered himself as holder of the Share or Debenture, as the case may be, or
(b) to make such transfer of the Share or Debenture, as the case may be, as the deceased shareholder or
debenture holder, as the case may be, could have made.
(2) If the person being a nominee, so becoming entitled, elects to be registered as holder of the Share or
Debenture, himself, as the case may be, he shall deliver or send to the Company a notice in writing signed by
him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased
Member or debentureholder, as the case may be.
(3) All the limitations, restrictions and provisions of the Act relating to the right to transfer and the registration or
transfer of Shares or Debentures shall be applicable to any such notice or transfer as aforesaid as if the death of
the Member had not occurred and the notice or transfer where a transfer signed by that Member or
debentureholder, as the case may be.
(4) A Person, being a nominee, becoming entitled to a Share or Debenture by reason of the death of the holder
shall be entitled to the same Dividends and other advantages to which he would be entitled if he were the
registered holder of the Share or Debenture except that he shall not, before being registered a Member in
respect of his Share or Debenture, be entitled in respect of it to exercise any right conferred by membership in
relation to meetings of the Company.
Provided that the Board may, at any time, give notice requiring any such Person to elect either to be registered
himself or to transfer the Share or Debenture, and if the notice is not complied with within ninety days, the
Board may thereafter withhold payment of all Dividends, bonuses or other moneys payable in respect of the
Share or Debenture until the requirements of the notice have been complied with.
NOMINATION FOR FIXED DEPOSITS
Article 26 provides that:
A depositor may, at any time, make a nomination and the provisions of Sections 109A and 109B shall, as far as may be,
apply to the nominations made pursuant to the provisions of Sections 58A(11) of the Act.
NOMINATION IN CERTAIN OTHER CASES
Article 27 provides that:
Subject to the provisions of the Act and these Articles, any person becoming entitled to Shares in consequence of the
death, lunacy, bankruptcy or insolvency of any Member, or by any lawful means other than by a transfer in accordance
with these Articles, may, with the consent of the Board (which it shall not be under any obligation to give), upon
producing such evidence that he sustains the character in respect of which he proposes to act under this Article or of
such title as the Board thinks sufficient, either be registered himself as the holder of the Shares or elect to have some
Person nominated by him and approved by the Board registered as such holder; provided nevertheless that, if such
Person shall elect to have his nominee registered, he shall testify the election by executing in favour of his nominee an
instrument of transfer in accordance with the provisions herein contained and until he does so, he shall not be freed
from any liability in respect of the Shares.
RESTRICTED RIGHT OF TRANSFER
Article 28 provides that:
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No Person shall exercise any rights or privileges of Members until he shall have paid all sums (whether in respect of
call or otherwise) for the time being due in respect of the Shares held by him or due in any manner whatsoever to the
Company.
MANAGEMENT OF COMPANY’S AFFAIRS
Article 33 provides that:
Subject to the provisions of the Act and these Articles, the entire management of the Company’s affairs including all
decisions and resolutions shall be entrusted by the Members of the Company to its Board of Directors. All matters
arising at a meeting of the Board of Directors, other than those otherwise specified in these Articles if any shall be
decided by a majority vote, subject to any casting vote of the Chairman in the event of a tie.
REQUISITION OF EXTRAORDINARY GENERAL MEETING
Article 38 provides that:
(a) The Board may, whenever it thinks fit, call an Extraordinary General Meeting and it shall do so upon a
requisition in writing by any two Directors or by any Member or Members holding in the aggregate not less
than one-tenth of such of the Paid-up Share Capital as at that date carries the right of voting in regard to the
matter in respect of which the requisition has been made, and such meeting shall be held at the Office of the
Company or at such place and at such time as the Board thinks fit.
(b) Any valid requisition so made by Members must state the object or objects of the meeting proposed to be
called, and must be signed by the requisitionists and be deposited at the Office; provided that such requisition
may consist of several documents in like form each signed by one or more requisitionists.
(c) Upon the receipt of any such requisition, the Board shall forthwith call an Extraordinary General Meeting and
if they do not proceed within twenty-one days from the date of the requisition being deposited at the Office to
cause a meeting to be called on a day not later than forty-five days from the date of deposit of the requisition,
the requisitionists or such of their number as represent either a majority in value of the Paid-Up Share Capital
held by all of them or not less than one-tenth of such of the Paid-up Share Capital of the Company as is
referred to in Section 169(4) of the Act, whichever is less, may themselves call the Meeting, but in either case
any Meeting so called shall be held within three months from the date of the delivery of the requisition as
aforesaid.
(d) Any Meeting called under the foregoing sub-Articles by the requisitionists, shall be called in the same manner,
as nearly as possible, as that in which a Meeting is to be called by the Board.
(e) The accidental omission to give any such notice as aforesaid to any of the Members, or the non-receipt thereof,
shall not invalidate any resolution passed at any such Meeting.
(f) No General Meeting, Annual or Extraordinary, shall be competent to enter into, discuss or transact any
business which has not been mentioned in the notice or notices by which it was convened.
NO BUSINESS TO BE TRANSACTED IN GENERAL MEETING IF QUORUM IS NOT PRESENT
Article 39 provides that:
(a) Five Members present in person (who shall include the authorized representatives of the NG Group) shall be
the quorum.
(b) Notwithstanding what is stated in Article 39(a) above, the NG Group may by notice in writing waive the
requirement of the presence of its representative for the purpose of constituting a valid quorum in respect of a
General Meeting.
CHAIRMAN OF THE GENERAL MEETING
Article 41 provides that:
(a) NG shall be the Chairman of every General Meeting so long as he is willing to be a Director and the Chairman
of the Company. In the absence of NG at any General Meeting, one of the NG Group Nominees shall preside
at such Meeting as the Chairman of such General Meeting.
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(b) If for any reason NG is unable to continue as the Chairman of the Company, then the Chairman of the Board
shall be the Chairman of every General Meeting. In the absence of the Chairman of the Board at any General
Meeting, one of the NG Group Nominees shall preside at such Meeting as the Chairman of that General
Meeting. No business shall be discussed at any General Meeting except the election of a Chairman while the
chair is vacant.
CHAIRMAN CAN ADJOURN THE GENERAL MEETING
Article 42 provides that:
The Chairman may adjourn the General Meeting from time to time and from place to place within the city, town or
village in which the Office of the Company is situate but no business shall be transacted at any adjourned meeting other
than the business left unfinished at the meeting from which the adjournment took place.
QUESTIONS AT GENERAL MEETING HOW DECIDED
Article 43 provides that:
(a) At any General Meeting, a resolution put to the vote of the Meeting shall, unless a poll is demanded, be
decided on a show of hands. Before or on the declaration of the result of the voting on any resolution on a
show of hands, a poll may be ordered to be taken by the Chairman of the Meeting of his own motion and shall
be ordered to be taken by him on a demand made in that behalf by any Member or Members present in person
or by proxy and holding shares in the Company which confer a power to vote on the resolution not being less
than one-tenth of the total voting power in respect of the resolution, or in which an aggregate sum of not less
than fifty thousand rupees has been Paid-up. Unless a poll is demanded, a declaration by the Chairman that a
resolution has, on a show of hands, been carried or carried unanimously, or by a particular majority, or lost
and an entry to that effect in the Minute Book of the Company shall be conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded in favour of or against that resolution.
(b) In the case of an equality of votes, the Chairman shall both on a show of hands and at a poll, (if any), have a
casting vote in addition to the vote or votes to which he may be entitled as a Member.
(c) If a poll is demanded as aforesaid, the same shall subject to anything stated in these Articles be taken at such
time, (not later than forty-eight hours from the time when the demand was made), and place within the City,
Town or Village in which the Office of the Company is situate and either by a show of hands or by ballot or
by postal ballot, as the Chairman shall direct and either at once or after an interval or adjournment, or
otherwise and the result of the poll shall be deemed to be the decision of the Meeting at which the poll was
demanded. Any business other than that upon which a poll has been demanded may be proceeded with,
pending the taking of the poll. The demand for a poll may be withdrawn at any time by the Person or Persons
who made the demand.
(d) Where a poll is to be taken, the Chairman of the Meeting shall appoint two scrutineers to scrutinise the votes
given on the poll and to report thereon to him. One of the scrutineers so appointed shall always be a Member,
(not being an officer or employee of the Company), present at the Meeting provided such a Member is
available and willing to be appointed. The Chairman shall have power at any time before the result of the poll
is declared, to remove a scrutineer from office and fill vacancies in the office of scrutineer arising from such
removal or from any other cause.
(e) Any poll duly demanded on the election of a Chairman of a Meeting or any question of adjournment, shall be
taken at the Meeting forthwith.
(f) The demand for a poll except on the question of the election of the Chairman and of an adjournment shall not
prevent the continuance of a Meeting for the transaction of any business other than the question on which the
poll has been demanded.
(g) No report of the proceedings of any General Meeting of the Company shall be circulated or advertised at the
expense of the Company unless it includes the matters required by these Articles or Section 193 of the Act to
be contained in the Minutes of the proceedings of such Meeting.
(h) The Members will do nothing to prevent the taking of any action by the Company or act contrary to or with
the intent to evade or defeat the terms as contained in these Articles.
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VOTES OF MEMBERS
Article 44 provides that:
(a) No Member shall be entitled to vote either personally or by proxy at any General Meeting or Meeting of a
class of Members either upon a show of hands or upon a poll in respect of any Shares registered in his name
on which calls or other sums presently payable by him have not been paid or in regard to which the Company
has exercised any right of lien.
(b) Subject to the provisions of these Articles, without prejudice to any special privilege or restrictions as to
voting for the time being attached to any class of shares for the time being forming a part of the Capital of the
Company, every Member not disqualified by the last preceding Article, shall be entitled to be present, and to
speak and vote at such Meeting, and on a show of hands, every Member present in person shall have one vote
and upon a poll, the voting right of such Member present, either in person or by proxy, shall be in proportion
to his share of the Paid Up Share Capital of the Company held alone or jointly with any other Person or
Persons.
Provided however, if any Member holding Preference Shares be present at any Meeting of the Company, save
as provided in Clause (b) of Sub-Section (2) of Section 87 of the Act, he shall have a right to vote only on
resolutions placed before the Meeting, which directly affect the rights attached to his Preference Shares.
(c) On a poll taken at a Meeting of the Company, a Member entitled to more than one vote, or his proxy, or any
other Person entitled to vote for him (as the case may be), need not, if he votes, use or cast all his votes in the
same way.
(d) A Member of unsound mind or in respect of whom an order has been made by any Court having jurisdiction in
lunacy, may vote, whether on a show of hands or on a poll, through a committee or through his legal
guardian; and any such committee or guardian may, on a poll vote by proxy. If any Member be a minor his
vote in respect of his Share(s) shall be exercised by his guardian(s), who may be selected (in case of dispute)
by the Chairman of the meeting.
(e) If there be joint registered holders of any shares, any one of such Persons may vote at any Meeting or may
appoint another Person, (whether a Member or not) as his proxy in respect of such Shares, as if he were solely
entitled thereto; but the proxy so appointed shall not have any right to speak at the Meeting and if more than
one of such joint-holders be present at any Meeting, then one of the said Persons so present whose name
stands higher in the Register of Members shall alone be entitled to speak and to vote in respect of such Shares,
but the other joint- holders shall be entitled to be present at the Meeting. Several Executors or Administrators
of a deceased Member in whose name Shares stand shall for the purpose of these Articles be deemed joint-
holders thereof.
(f) Subject to the provision of these Articles, votes may be given personally or by an attorney or by proxy. A body
corporate, whether or not a Company within the meaning of the Act, being a Member may vote either by a
proxy or by a representative duly authorised in accordance with Section 187 of the Act and such representative
shall be entitled to exercise the same rights and powers, (including the right to vote by proxy), on behalf of the
body corporate which he represents as that body could have exercised if it were an individual Member.
(g) Any Person entitled to transfer any Shares of the Company may vote at any General Meeting in respect thereof
in the same manner as if he were the registered holder of such Shares, provided that forty-eight hours at least
before the time of holding the Meeting or adjourned Meeting as the case may be at which he proposes to vote,
he shall satisfy the Board of his right to such Shares and give such indemnity (if any) as the Board may require
unless the Board shall have previously admitted his right to vote at such Meeting in respect thereof.
(h) Every proxy, (whether a Member or not), shall be appointed in writing under the hand of the appointer or his
attorney, or if such appointer is a corporation under the Common Seal of such corporation or be signed by an
officer or an attorney duly authorised by it, and any committee or guardian may appoint proxy. The proxy so
appointed shall not have any right to speak at a Meeting.
(i) An instrument of proxy may appoint a proxy either for (i) the purposes of a particular Meeting (as specified in
the instrument) or (ii) for any adjournment thereof or (iii) it may appoint a proxy for the purposes of every
Meeting of the Company, or (iv) of every Meeting to be held before a date specified in the instrument for
every adjournment of any such Meeting.
(j) A Member present by proxy shall be entitled to vote only on a poll.
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(k) An instrument appointing a proxy and a power of attorney or other authority (including by way of a Board
Resolution, (if any),) under which it is signed or a notarially certified copy of that power or authority or
resolution as the case may be, shall be deposited at the Office not later than forty-eight hours before the time
for holding the Meeting at which the Person named in the instrument proposes to vote and in default the
instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the
expiration of 12 months from the date of its execution. An attorney shall not be entitled to vote unless the
power of attorney or other instrument or resolution as the case may be appointing him or a notarially certified
copy thereof has either been registered in the records of the Company at any time not less than forty-eight
hours before the time for holding the Meeting at which the attorney proposes to vote, or is deposited at the
Office of the Company not less than forty-eight hours before the time fixed for such Meeting as aforesaid.
Notwithstanding that a power of attorney or other authority has been registered in the records of the Company,
the Company may, by notice in writing addressed to the Member or the attorney, given at least 48 hours before
the Meeting, require him to produce the original power of attorney or authority or resolution as the case may
be and unless the same is deposited with the Company not less than forty-eight hours before the time fixed for
the Meeting, the attorney shall not be entitled to vote at such Meeting unless the Board in their absolute
discretion excuse such non-production and deposit.
(l) Every instrument of proxy whether for a specified Meeting or otherwise should, as far as circumstances admit,
be in any of the forms set out in Schedule IX of the Act or a form as near thereto as circumstance admit.
(m) If any such instrument of appointment be confined to the object of appointing an attorney or proxy for voting
at Meetings of the Company it shall remain permanently or for such time as the Directors may determine in the
custody of the Company; if embracing other objects a copy thereof, examined with the original, shall be
delivered to the Company to remain in the custody of the Company.
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death of the principal, or revocation of the proxy or of any power of attorney under which such proxy
was signed, or the transfer of the Share in respect of which the vote is given, provided that no intimation in
writing of the death, revocation or transfer shall have been received at the Office before the Meeting.
(o) No objection shall be made to the validity of any vote, except at the Meeting or poll at which such vote shall
be tendered, and every vote whether given personally or by proxy, not disallowed at such Meeting or poll shall
be deemed valid for all purposes of such Meeting or poll whatsoever.
(p) The Chairman of any Meeting shall be the sole judge of the validity of every vote tendered at such Meeting.
The Chairman present at the taking of a poll shall be in the sole judge of the validity of every vote tendered at
such poll.
(1) The Company shall cause minutes of all proceedings of every General Meeting to be kept by making
within thirty days of the conclusion of every such Meeting concerned, entries thereof in books kept
for that purpose with their pages consecutively numbered.
(2) Each page of every such book shall be initialed or signed and the last page of the record of
proceedings of each Meeting in such book shall be dated and signed by the Chairman of the same
Meeting within the aforesaid period of thirty days or in the event of the death or inability of that
Chairman within that period, by a Director duly authorised by the Board for that purpose.
(3) In no case the minutes of proceedings of a Meeting shall be attached to any such book as aforesaid by
pasting or otherwise.
(4) The Minutes of each Meeting shall contain a fair and correct summary of the proceedings thereat.
(5) All appointments of Directors of the Company made at any Meeting aforesaid shall be included in the
minutes of the Meeting.
(6) Nothing herein contained shall require or be deemed to require the inclusion in any such Minutes of
any matter which in the opinion of the Chairman of the Meeting (i) is or could reasonably be
regarded as, defamatory of any person, or (ii) is irrelevant or immaterial to the proceedings, or (iii) is
detrimental to the interests of the Company. The Chairman of the Meeting shall exercise an absolute
discretion in regard to the inclusion or non-inclusion of any matter in the Minutes on the aforesaid
grounds.
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(7) Any such Minutes shall be evidence of the proceedings recorded therein.
(8) The book containing the Minutes of proceedings of General Meetings shall be kept at the Registered
Office of the Company and shall be open, during business hours, for such periods not being less in
the aggregate than two hours in each day as the Board determines, for the inspection of any Member
without charge.
(9) The Company shall cause minutes to be duly entered in books provided for the purpose of: -
a) the names of the Directors and Alternate Directors present at each General Meeting;
b) all Resolutions and proceedings of General Meeting;
(q) The Members shall vote (whether in person or by proxy) all of the Shares owned or held of record by them at
any Annual or Extraordinary General Meeting of the Company called for the purpose of filling positions to the
Board of Directors, appointed as a Director of the Company under Section 274(1) of the Act in accordance
with these Articles.
(r) The Members will do nothing to prevent the taking of any action by the Company or act contrary to or with
the intent to evade or defeat the terms as contained in these Articles.
(s) All matters arising at a General Meeting of the Company, other than as specified in the Act or these Articles if
any, shall be decided by a majority vote.
(t) The Members shall exercise their voting rights as shareholders of the Company to ensure that the Act and/or
these Articles are implemented and acted upon by the Members, and by the Company and to prevent the taking
of any action by the Company or by any Member , which is contrary to or with a view or intention to evade or
defeat the terms as contained in these Articles.
DIRECTORS
Article 45 provides that:
(a) Until otherwise determined by the Company in a General Meeting and subject to Sections 252 and 259 of the
Act, the number of Directors (excluding Alternate Directors) shall not be less than three and not more than
fifteen. The composition of the Board (including the number of Directors who are Indian Nationals) will be in
accordance with all applicable Requirements of Law.
(b) The NG Group shall be entitled to appoint one third of the members of the Board (NG Group Nominees) who
shall be Non-Retiring Directors.
(c) If a NG Group Nominee retires, resigns, is removed or otherwise vacates office at any time then, subject to
Article 48 the NG Group shall be entitled to nominate one replacement Director upon the retirement, removal or
resignation of their nominee Director.
(d) The NG Group Nominees shall hold office at the pleasure of the NG Group, and be subject to removal by the NG
Group. Their appointment and removal shall be effective by a notice in writing addressed to the Board, under the
hand of one of the authorized representatives of the NG Group and the same shall take effect forthwith upon
being delivered to the Company. As and when there is a vacancy on the Board of the Company for any cause or
reason out of the Directors nominated by the NG Group, such vacancy shall be filled by the NG Group.
CHAIRMAN OF THE BOARD OF DIRECTORS
Article 46 provides that:
(a) NG shall be and shall continue as the non-retiring Chairman of the Board so long as he is willing to be a
Director and Chairman of the Company and shall not be liable to retire by rotation. The Chairman shall
preside at all meetings of the Board and the General Meeting of the Company. In the absence of NG at any
meeting of the Board, one of the NG Group Nominees shall preside at such meeting as the Chairman. The
Chairman shall have a casting vote in the event of a tie.
(b) If for any reason NG is unable to continue as the Chairman, the members of the Board of Directors shall
appoint one of the NG Group Nominees as the Chairman.
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(c) All the Directors shall exercise their voting rights to ensure that these Articles are implemented and acted upon
by them to prevent the taking of any action by the Company or by any Member, which is contrary to or with a
view or intention to evade or defeat the terms as contained in these Articles.
APPOINTMENT OF ALTERNATE DIRECTORS
Article 47 provides that:
Subject to Section 313 of the Act, any Director shall be entitled to nominate an alternate director to act for him during
his absence for a period of not less than 3 months. The Board may appoint such a person as an Alternate Director to act
for a Director (hereinafter called “the Original Director”) (subject to such person being acceptable to the Chairman)
during the Original Director’s absence for a period of not less than three months from the State in which the meetings
of the Board are ordinarily held. An Alternate Director appointed under this Article shall not hold office for a period
longer than that permissible to the Original Director in whose place he has been appointed and shall vacate office if and
when the Original Director returns to the State. If the term of the office of the Original Director is determined before he
so returns to the State, any provisions in the Act or in these Articles for automatic re-appointment shall apply to the
Original Director and not to the Alternate Director.
CASUAL VACANCY AND ADDITIONAL DIRECTORS
Article 48 provides that:
(a) Subject to the provisions of the Act and these Articles, the Board shall have the power at any time and from
time to time to appoint any qualified Person to be a Director either as an addition to the Board or to fill a
casual vacancy but so that the total number of Directors shall not at any time exceed the maximum number
fixed under Article 45. Any Person so appointed as an addition shall hold office only up to the date of the next
Annual General Meeting. Any person appointed to fill a casual vacancy shall hold office only up to the date to
which the Original Director in whose place he is appointed would have held office if it had not been vacated
but shall be eligible for election.
(b) As and when there is a vacancy on the Board of the Company for any cause or reason out of the Directors
nominated by the NG Group (i.e. NG Group Nominees) such a vacancy shall be filled by the NG Group.
DEBENTURE DIRECTORS
Article 49 provides that:
If it is provided by a Trust Deed, securing or otherwise, in connection with any issue of Debentures of the Company,
that any Person/ Lender or Persons/ Lenders shall have power to nominate a Director of the Company, then in the case
of any and every such issue of Debentures, the Person/ Lender or Persons/ Lenders having such power may exercise
such power from time to time and appoint a Director accordingly. Any Director so appointed is herein referred to a
Debenture Director. A Debenture Director may be removed from office at any time by the Person/ Lender or Persons/
Lenders in whom for the time being is vested the power under which he was appointed and another Director may be
appointed in his place. A Debenture Director shall not be bound to hold any qualification shares.
NO QUALIFICATION SHARES FOR DIRECTORS
Article 50 provides that:
A Director shall not be required to hold any qualification Shares of the Company.
REMUNERATION OF DIRECTORS
Article 51 provides that:
(a) Subject to the provisions of the Act, a Managing Director or Managing Directors, and any other Director/s
who is/are in the whole time employment of the Company may be paid remuneration either by a way of
monthly payment or at a specified percentage of the net profits of the Company or partly by one way and
partly by the other, subject to the limits prescribed under the Act.
(b) Subject to the provisions of the Act, a Director (other than a Managing Director or an Executing Director) may
be paid remuneration either:
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(i) by way of monthly, quarterly or annual payment, or
(ii) by way of commission.
(c) The remuneration payable to each Director for every Meeting of the Board or Committee of the Board
attended by them shall be such sum as may be determined by the Board from time to time within the
maximum limits prescribed from time to time by the Central Government pursuant to the first proviso to
Section 310 of the Act.
SPECIAL REMUNERATION FOR EXTRA SERVICES RENDERED BY A DIRECTOR
Article 52 provides that:
If any Director be called upon to perform extra services or special exertions or efforts (which expression shall include
work done by a Director as a member of any Committee formed by the Directors), the Board may arrange with such
Director for such special remuneration for such extra services or special exertions or efforts either by a fixed sum or
otherwise as may be determined by the Board and such remuneration may be either in addition to or in substitution for
his remuneration otherwise provided.
TRAVEL EXPENSES OF DIRECTORS
Article 53 provides that:
The Board may allow and pay to any Director who is not a bonafide resident of the place where the meetings of the
Board/committee meetings are ordinarily held and who shall come to such place for the purpose of attending any
meeting, such sum as the Board may consider fair compensation for travelling, , lodging and/ or other expenses, in
addition to his fee for attending such Board Meetings/ committee meetings as above specified; and if any Director be
called upon to go or reside out of his ordinary place of his residence on the Company’s business, he shall be entitled to
be repaid and reimbursed travelling and other expenses incurred in connection with the business of the Company.
CONTINUING DIRECTORS
Article 54 provides that:
The continuing Directors may act notwithstanding any vacancy in their body; but, if and so long as their number is
reduced below the minimum number fixed by Article 45 hereof, the continuing Directors not being less than two may
act for the purpose of increasing the number of Directors to that number, or of summoning a General Meeting, but for
no other purpose.
VACATION OF OFFICE BY DIRECTOR
Article 55 provides that:
(1) Subject to Sections 283 and 314 of the Act, the office of a Director, including NG or any NG Group Nominee
shall ipso facto be vacated if:
(a) he is found to be of unsound mind by a Court of competent jurisdiction; or
(b) he applies to be adjudicated an insolvent; or
(c) he is adjudged an insolvent; or
(d) he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect
thereof to imprisonment for not less than six months; or
(e) he fails to pay any calls made on him in respect of Shares of the Company held by him whether alone
or jointly with others, within six months from the date fixed for the payment of such call, unless the
Central Government has by notification in the Official Gazette removed the disqualification incurred
by such failure; or
(f) he absents himself from three consecutive Meetings of the Board or from all Meetings of the Board
for a continuous period of three months, whichever is longer, without obtaining leave of absence from
the Board; or
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(g) he, (whether by himself or by any Person for his benefit or on his account), or any firm in which he is
a partner, or any private company of which he is a director, accepts a loan, or any guarantee or
security for a loan, from the Company, in contravention of Section 295 of the Act; or
(h) having been appointed a Director by virtue of his holding any office or other employment in the
Company, he ceases to hold such office or other employment in the Company; or
(i) he acts in contravention of Section 299 of the Act; or
(j) he becomes disqualified by an order of the Court under Section 203 of the Act; or
(k) he is removed in pursuance of Section 284 of the Act; or
(l) if he is a NG Group Nominee , upon receipt of notice by the Board from the NG Group, informing the
Board of the withdrawal of his nomination; or
(m) he is disqualified under section 274 (1)(g) of the Act.
(2) Subject to the provisions of the Act, a Director may resign his office at any time by notice in writing addressed
to the Board of Directors and such resignation shall become effective upon its acceptance by the Board.
REMOVAL OF DIRECTORS
Article 56 provides that:
The NG Group Nominees shall hold office at the pleasure of NG Group and be subject to removal by the Members of
the NG Group.
MANAGING DIRECTOR (S)/ EXECUTIVE DIRECTOR (S)/ MANAGER
Article 63 provides that:
(a) Subject to the provisions of Article 45 and Section 267, 268, 269, 309, 310, 311, 316 and 317 and other
applicable provisions and Schedule XIII of the Act and of these Articles, the NG Group shall have the right by
a notice in writing signed by NG or a NG Group Nominee addressed to the Board, the right to designate one or
more of the NG Group Nominees as the Managing Director(s) or Manager or Executive Director(s) of the
Company and the Board shall within one week of the date of receipt of such letter, appoint such designate or
designates as the Managing Director(s) or Manager or Executive Director(s) of the Company. The NG Group
shall have the right by a similar notice to require the Board to remove any Managing Director(s) or Manager
or Executive Director(s) of the Company and the Board shall within one week of the date of receipt of such
notice take steps to remove such person from such office with the Company. On a vacancy being caused in the
office of the Managing Director(s) or Manager or Executive Director(s), whether by resignation, death,
removal or otherwise, the NG Group shall have the right to designate another NG Group Nominee for such
appointment and the Board shall proceed to appoint such NG Group Nominee in the same manner as
prescribed above. The terms of appointment of Managing Director(s) or Manager or Executive Director(s)
shall be as are specified, (with the power to vary such terms) by the NG Group from time to time and these
shall be the terms on which such persons shall be appointed by the Board. The Managing Director(s) or
Manager or Executive Director(s), as the case may be, so appointed, shall be responsible for and in charge of
the day to day management and affairs of the Company and subject to the provisions of the Act and these
Articles, the Board shall vest in such Managing Director/s or Manager or Executive Director(s), as the case
may be, all the powers vested in the Board generally.
(b) The Managing Director(s) or Manager or Executive Director(s), as the case may be, of the Company in office
on the date of adoption of this Article by the Company shall be deemed to be the Managing Director or
Manager or Executive Director, as the case may be designated by the NG Group for appointment and
appointed by the Board, as provided in sub-Article (a) above and the remaining provisions of sub-Article (a)
above shall apply to such Managing Director or Executive Director or Manager (as the case may be).
PROCEEDINGS OF THE BOARD OF DIRECTORS
Article 68 provides that:
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(a) The Board may meet for the dispatch of the business, adjourn and otherwise regulate its meetings on a date,
time and venue as indicated by the Chairman, provided however, the Board shall meet once in every three
calendar months and at least four times in a year in accordance with Section 285 of the Act or any statutory
modifications thereof.
(b) The Company Secretary shall as and when, directed by the Chairman convene a meeting of the Board by
giving a notice in writing to every Director.
(c) The Board of Directors may meet either at the Office of the Company, or at any other location in India or
outside India as the Chairman may determine.
(d) At least 7 days notice of every meeting of the Board shall be given in writing to every Director for the time
being at his usual address in India and in the case of a Director resident outside India, at his address outside
India and to his alternate, if any in India at his usual address in India. A meeting of the Board may be
convened in accordance with these Articles by a shorter notice in case of any emergency as directed by the
Chairman or the Managing Director or the Executive Director, as the case may be. Such notice or shorter
notice may be sent by post or by fax or email depending upon the circumstances.
(e) If permissible under applicable Requirements of Law, a Director may attend Board Meetings by any video or
audio conferencing facility that permits simultaneous communication between participants.
QUORUM FOR BOARD MEETING
Article 69 provides that:
Subject to Section 287 of the Act, the quorum for a Meeting of the Board shall be presence of at least one- third of its
total strength which must include at least an equal number of Directors who are NG Group Nominees (or his or their
alternate) unless such absent NG Group Nominee Director(s) consent in writing to a quorum requirement being
satisfied despite his or their absence. Provided that where at any time the number of interested Directors exceeds or is
equal to two-thirds of the total strength of the number of remaining Directors, that is to say, the number of Directors
who are not interested, present at the Meeting being not less than two (of whom atleast one should be an NG Group
Nominee), they shall be the quorum during such time.
ADJOURNED BOARD MEETING FOR WANT OF QUORUM
Article 70 provides that:
(a) If any duly convened Board Meeting cannot be held for want of a quorum, in terms of Article 69 above then
such a meeting shall automatically stand adjourned for 7 days after the original Meeting at the same time and
place, or if that day is a public holiday, on the next succeeding day which is not a public holiday to the same
time and place Provided however, the adjourned meeting may be held on such other date and such other place
as may be unanimously agreed by all the Directors.
(b) If in the event of a quorum once again not being available at such an adjourned meeting, the Directors present
shall constitute the quorum and may transact business for which the meeting has been called.
QUESTIONS AT BOARD MEETINGS HOW DECIDED
Article 71 provides that:
(a) Questions arising at any meeting of the Board, other than as specified in these Articles, if any, shall be decided
by a majority vote. In the case of an equality of votes, the Chairman shall have a second or casting vote.
(b) No regulation made by the Company in General Meeting, shall invalidate any prior act of the Board, which
would have been valid if that regulation had not been made.
COMMITTEES AND DELEGATION BY THE BOARD
Article 73 (c) provides that:
(a) Without prejudice to the powers conferred by the other Articles and so as not to in any way to limit or restrict
those powers, the Board may, subject to the provisions of Section 292 of the Act, delegate any of their powers
to the Managing Director(s), the Executive Director(s) or Manager or the Chief Executive Officer of the
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Company. The Managing Director(s), the Executive Director(s) or the Manager or the Chief Executive
Officer(s) as aforesaid shall, in the exercise of the powers so delegated, conform to any regulations that may
from time to time be imposed on them by the Board and all acts done by them in exercise of the powers so
delegated and in conformity with such regulations shall have the like force and effect as if done by the Board.
(b) Subject to the provisions of the Act, any Requirements of Law and anything stated in these Articles the Board
may delegate any of their powers to Committees of the Board consisting of such member or members of the
Board as it thinks fit, and it may from time to time revoke and discharge any such committee of the Board
either wholly or in part and either as to persons or purposes, but every Committee of the Board so formed shall
in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed
on it by the Board. All acts done by any such Committee of the Board in conformity with such regulations and
in fulfillment of the purposes of their appointment but not otherwise, shall have the like force and effect as if
done by the Board.
(c) Subject to applicable Requirements of Law, in respect of each committee of the Board of Directors, the NG
Group is entitled to nominate atleast one of the NG Group Nominees to each of the committees of the Board
of the Company.
(d) The Meetings and proceedings of any such Committee of the Board consisting of two or more members shall
be governed by the provisions herein contained for regulating the meetings and proceedings of the Directors,
so far as the same are applicable thereto and are not superseded by any regulation made by the Directors under
the last preceding Article.
OFFICERS
Article 77 provides that:
(a) The Company shall have its own professional management and such officers shall be appointed from time to
time as designated by its Board. The officers of the Company shall serve at the discretion of the Board.
(b) The officers of the Company shall be responsible for the implementation of the decisions of the Board, subject
to the authority and directions of the Board and shall conduct the day to day business of the Company.
(c) The officers of the Company shall be the Persons in charge of and responsible to the Company for the conduct
of the business of the Company and shall be concerned and responsible to ensure full and due compliance with
all statutory laws, rules and regulations as are required to be complied with by the Company and/or by the
Board of Directors of the Company.
(d) Qualified experienced managerial, and marketing executives and other officers shall be appointed for the
operation and conduct of the business of the Company.
(e) The Board shall appoint with the approval of the Chairman, the President and/or Chief Executive Officer
and/or Chief Operating Officer of the Company, as well as persons who will be appointed to the posts of
senior executive management.
DIVIDEND POLICY
Article 84 provides that:
(a) The profits of the Company, subject to any special rights relating thereto being created or authorised to be
created by the Memorandum or these Articles and subject to the provisions of these Articles shall be divisible
among the Members in proportion to the amount of Capital Paid-up or credited as Paid-up and to the period
during the year for which the Capital is Paid-up on the Shares held by them respectively. Provided always that,
(subject as aforesaid), any Capital Paid-up on a Share during the period in respect of which a Dividend is
declared, shall unless the Directors otherwise determine, only entitle the holder of such Share to an
apportioned amount of such Dividend as from the date of payment.
(b) Subject to the provisions of Section 205 of the Companies Act, 1956 the Company in General Meeting may
declare Dividends, to be paid to Members according to their respective rights and interests in the profits but no
Dividends shall exceed the amount recommended by the Board, but the Company in General Meeting may
declare a smaller Dividend, and may fix the time for payments not exceeding 30 days from the declaration
thereof.
193
(c) (i) No Dividend shall be declared or paid otherwise than out of profits of the Financial Year arrived at
after providing for depreciation in accordance with the provisions of Section 205 of the Act or out of
the profits of the Company for any previous Financial Year or years arrived at after providing for
depreciation in accordance with those provisions and remaining undistributed or out of both provided
that: -
(I) if the Company has not provided for depreciation for any previous Financial Year or years it
shall, before declaring or paying a Dividend for any Financial Year provide for such
depreciation out of the profits of that Financial Year or out of the profits of any other
previous Financial Year or years,
(II) if the Company has incurred any loss in any previous Financial Year or years the amount of
the loss or an amount which is equal to the amount provided for depreciation for that year or
those years whichever is less, shall be set off against the profits of the Company for the year
for which the Dividend is proposed to be declared or paid or against the profits of the
Company for any previous Financial Year or years arrived at in both cases after providing
for depreciation in accordance with the provisions of sub-section (2) of Section 205 of the
Act or against both.
(ii) The declaration of the Board as to the amount of the net profits shall be conclusive.
(d) The Board may from time to time, pay to the Members such interim Dividend as in their judgment the position
of the Company justifies.
(e) Where Capital is paid in advance of calls upon the footing that the same shall carry interest, such Capital shall
not whilst carrying interest, confer a right to participate in profits or Dividend.
(f) (i) Subject to the rights of Persons, if any, entitled to Shares with special rights as to Dividend, all
Dividends shall be declared and paid according to the amounts paid or credited as paid on the Shares
in respect whereof Dividend is paid but if and so long as nothing is Paid upon any Shares in the
Company, Dividends may be declared and paid according to the amount of the Shares.
(ii) No amount paid or credited as paid on Shares in advance of calls shall be treated for the purpose of
this regulation as paid on Shares.
(iii) All Dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid
on the Shares during any portion or portions of the period in respect of which the Dividend is paid,
but if any Shares are issued on terms providing that it shall rank for Dividend as from a particular
date such Shares shall rank for Dividend accordingly.
(g) Subject to the provisions of the Act and these Articles, the Board may retain the Dividends payable upon
Shares in respect of any Person, until such Person shall have become a Member, in respect of such Shares or
until such Shares shall have been duly transferred to him.
(h) Any one of several Persons who are registered as the joint-holders of any Share may give effectual receipts for
all Dividends or bonus and payments on account of Dividends or bonus or sale proceeds of fractional
certificates or other moneys payable in respect of such Shares.
(i) Subject to the provisions of the Act, no Member shall be entitled to receive payment of any interest or
Dividends in respect of his Share(s), whilst any money may be due or owing from him to the Company in
respect of such Share(s); either alone or jointly with any other Person or Persons; and the Board may deduct
from the interest or Dividend payable to any such Member all sums of money so due from him to the
Company.
(j) A transfer of Shares shall not pass the right to any Dividend declared thereon before the registration of the
transfer.
(k) Unless otherwise directed any Dividend may be paid by cheque or warrant or by a pay slip or receipt (having
the force of a cheque or warrant) and sent by post or courier or by any other legally permissible means to the
registered address of the Member or Person entitled or in case of joint-holders to that one of them first named
in the Register of Members in respect of the joint-holding. Every such cheque or warrant shall be made
payable to the order of the Person to whom it is sent and in case of joint-holders to that one of them first
named in the Register of Members in respect of the joint-holding. The Company shall not be liable or
responsible for any cheque or warrant or pay slip or receipt lost in transmission, or for any Dividend lost to a
Member or Person entitled thereto, by a forged endorsement of any cheque or warrant or a forged signature on
194
any pay slip or receipt of a fraudulent recovery of Dividend. If two or more Persons are registered as joint-
holders of any Share(s) any one of them can give effectual receipts for any moneys payable in respect thereof.
Several Executors or Administrators of a deceased Member in whose sole name any Share stands shall for the
purposes of this Article be deemed to be joint-holders thereof.
(l) No unpaid Dividend shall bear interest as against the Company.
(m) Any General Meeting declaring a Dividend may on the recommendation of the Board, make a call on the
Members of such amount as the Meeting fixes, but so that the call on each Member shall not exceed the
Dividend payable to him, and so that the call will be made payable at the same time as the Dividend; and the
Dividend may, if so arranged as between the Company and the Members, be set-off against such calls.
UNPAID OR UNCLAIMED DIVIDEND
Article 85 provides that:
(i) If the Company has declared a Dividend but which has not been paid or the Dividend warrant in respect
thereof has not been posted or sent within 30 days from the date of declaration to any Member entitled to the
payment of such dividends, the Company shall within 7 days from the date of expiry of the said period of 30
days, open a special account in that regard with any scheduled bank called the “Unpaid Dividend of JET
AIRWAYS (INDIA) LIMITED” and transfer to the said account the total amount of Dividend which remains
unpaid or in relation to which no Dividend warrant has been posted.
(ii) Any money so transferred to the unpaid dividend account of the Company which remains unpaid or unclaimed
for a period of 7 years from the date of such transfer, shall be transferred by the Company to the Fund
established under sub-section (1) of Section 205C of the Act, viz. “Investors Education and Protection Fund”.
(iii) No unpaid or unclaimed Dividend shall be forfeited by the Board.
CAPITALISATION OF PROFITS
Article 86 provides that:
The Company in General Meeting may, upon the recommendation of the Board, resolve:
i) that it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the
Company’s reserve accounts or to the credit of the Company’s profit and loss account or otherwise, as
available for distribution, and
ii) that such sum be accordingly set free from distribution in the manner specified herein below in sub-article (iii)
as amongst the Members who would have been entitled thereto, if distributed by way of Dividends and in the
same proportions.
iii) The sum aforesaid shall not be paid in cash but shall be applied either in or towards:
(a) paying up any amounts for the time being unpaid on any Shares held by such Members respectively;
(b) paying up in full, un-issued Shares of the Company to be allotted, distributed and credited as fully
Paid up, to and amongst such Members in the proportions aforesaid; or
(c) partly in the way specified in sub-article (a) and partly in the way specified in sub-article (b).
AMENDMENT TO MEMORANDUM AND ARTICLES OF ASSOCIATION
Article 91 provides that:
(a) The Members shall vote all the Shares owned or held of record by such Members at any Annual or
Extraordinary General Meeting of the Company in accordance with these Articles.
(b) The Members shall not pass any resolution or take any decision which is contrary to any of the terms of these
Articles.
195
(c) The Articles of the Company shall not be amended unless (i) Members holding not less than 75% of the
Shares (and who are entitled to attend and vote ) cast votes in favour of each such amendment/s to the Articles
and (ii) unless the NG Group votes in favour of such amendment/s, so long as the NG Group are Members of
the Company and vote on such amendment/s.
(d) Notwithstanding anything stated in these Articles, if the NG Group holds less than 26% of the shares of the
Company, then neither NG nor the NG Group will be entitled to the rights as stipulated in Articles 4(c), 39,
45, 56, 63 and 73(c) of these Articles.
(e) Notwithstanding anything stated in these Articles, if the NG Group holds less than 10% of the shares of the
Company, then neither NG nor the NG Group will be entitled to the rights as stipulated in Articles 41(b) and
46(b) of these Articles.
196
FINANCIAL INFORMATION
1. Summary Statements of Assets and Liabilities and Profits and Losses, as restated, under Indian GAAP as of
and for the years ended March 31, 2000, 2001, 2002, 2003 and 2004 and for the six months ended September
30, 2004; and related audit report.
2. Balance Sheet and Profit and Loss, as audited under Indian GAAP, as of and for the six months ended
September 30, 2004, and related audit report.
3. Statement of Differences Between Indian GAAP, IAS/IFRS and U.S. GAAP.
197
Deloitte Haskins & Sells Chaturvedi & Shah
Chartered Accountants Chartered Accountants
12, Dr. Annie Besant Road, A-3 Laxmi Towers, 1
st
Floor
Opposite Shiv Sagar Estate, Bandra Kurla Complex,
Worli Bandra (East)
Mumbai 400 018 Mumbai 400 051
AUDITORS’ REPORT
To,
The Board of Directors,
Jet Airways (India) Private Limited,
41/42 Maker Chambers III,
Nariman Point,
Mumbai 400 021
Dear Sirs,
We have examined the financial information of Jet Airways (India) Private Limited (‘Jet Airways’ or ‘the Company’)
described below in A and B and annexed to this report and initialed by us for identification. The said financial
information has been prepared in accordance with the requirements of paragraph B (1) of Part II of Schedule II to the
Companies Act, 1956 (‘the Act’), the Securities and Exchange Board of India (“SEBI”) - Disclosure and Investor
Protection Guidelines, 2000 (as amended vide Circular No. 11 on August 14, 2003 and Circular no.
SEBI/CFD/DIL/DIP/13/2004/28/5 dated May 28, 2004) (‘the Guidelines’) issued by the Securities and Exchange
Board of India on January 19, 2000 in pursuance of Section 11 of the Securities and Exchange Board of India Act,
1992; and related clarifications. The financial information has been prepared by the Company and approved by the
Board of Directors of the Company.
A. Financial Information As Per Audited Financial Statements:
We have examined the attached summary statement of profits and losses as restated to reflect the retrospective effect
of the accounting policies adopted by the Company as at September 30, 2004, of the Company for the years ended
March 31, 2000, March 31, 2001, March 31, 2002, March 31, 2003, March 31, 2004 and for the half year ended
September 30, 2004 (Annexure I), the attached summary statement of assets and liabilities as at those period end dates
as restated to reflect the retrospective effect of the accounting policies adopted by the Company as at September 30,
2004 (Annexure II), and the related financial statement schedules as restated to reflect the retrospective effect of the
accounting policies adopted by the Company as at September 30, 2004 (Annexure III) together referred to as the
‘Summary Statements’.
Our examination consisted of:
i. Auditing the financial statements of the Company for the half year ended September 30, 2004 and
comparing the information therein to the information in the ‘Summary Statements’,
ii. Comparing the information in the ‘Summary Statements’, for the years ended March 31, 2000, 2001,
2002, 2003 and 2004 with the annual financial statements for those years audited by C.C.Chokshi & Co.
We have relied upon these audited financial statements,
iii. Auditing the adjustments made to aforesaid financial information to arrive at the as restated amounts in the
‘Summary Statements’.
The aforesaid financial statements have been adopted by the Board of Directors and the Members for those respective
years and by the Board of Directors for the half-year ended September 30, 2004.
Based on our examination of these Summary Statements, we state that:
The restated profits and losses have been arrived at after charging all expenses including depreciation and
after making such adjustments and regroupings as in our opinion are appropriate in the respective years /
period
198
The Summary Statements of the Company have been restated with retrospective effect (wherever possible) to
reflect the accounting policies adopted by the Company as at September 30, 2004. These and other
adjustments are explained in Annexure IV.
There are no qualifications in the auditors’ reports that require any adjustment to the Summary Statements.
There are no extra-ordinary items that need to be disclosed separately in the Summary Statements.
B. Other financial Information
We have examined the following financial information relating to the Company proposed to be included in the
Prospectus, approved by the Board of Directors and annexed to this report:
i. Summary of accounting ratios based on the restated profits relating to earnings per share, net asset value and
return on net worth (Annexure V)
ii. Tax Shelter statement (Annexure VI)
iii. Capitalisation statement of the Company (Annexure VII)
In our opinion, the financial information of the Company attached to this report as mentioned in paragraphs (A) and (B)
above, read with respective significant accounting policies and notes as annexed to this report and after making
adjustments and re-groupings as considered appropriate; has been prepared in accordance with Part II of Schedule II of
the Act and the Guidelines issued by SEBI.
This report is intended solely for your information and for inclusion in the Prospectus in connection with the specific
Initial Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our
prior written consent.
For Deloitte Haskins & Sells For Chaturvedi & Shah
Chartered Accountants Chartered Accountants
R. Salivati C.D.Lala
Partner Partner
Membership No: 34004 Membership No: 35671
Place: Mumbai Place: Mumbai
Date : December 20, 2004 Date : December 20, 2004
199
INDEX OF FINANCIAL INFORMATION
Annexure I: A. Summary Statement of Profits and Losses as restated
B. Profit and Loss Account as at April 1, 1999 as restated
Annexure II : Summary Statement of Assets and Liabilities as restated
Annexure III : Financial Statement Schedules
A. Schedule of Loans
B. Schedule of Quoted Investments
C. Schedule of Sundry Debtors
D. Statement of Restated Cash Flows
E. Schedule of Non-operating Revenues
F. Details of Rates of Dividend
G. Schedule of Contingent liabilities
H. Segment Disclosures and Other Notes
I. Schedule of Related Party Transactions.
Annexure IV : Notes on adjustments and Significant Accounting policies for restated financial
statements
Annexure V : Summary of accounting ratios
Annexure VI : Tax Shelter statement
Annexure VII : Capitalisation statement of the Company
200
ANNEXURE I A - SUMMARY STATEMENT OF PROFITS AND LOSSES, AS RESTATED
INR 000s
Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Income
Operating Revenues 19,817,591 25,000,523 25,262,865 28,756,808 34,474,211 19,264,181
Non-operating Revenues 226,076 275,606 1,234,156 664,184 1,183,183 402,545
Total Revenues
20,043,667 25,276,129 26,497,021 29,420,992 35,657,394 19,666,726
Expenditure
Employees Remuneration and Benefits 1,659,879 2,215,435 2,299,294 2,634,482 2,822,436 1,738,827
Aircraft Fuel 3,961,878 5,640,711 5,289,985 6,504,024 7,417,838 4,713,116
Selling & Distribution Expenses 2,923,772 3,653,776 3,727,195 4,150,324 4,263,982 2,527,210
Other Operating Expenses (including
Maintenance & Airport Charges etc)
6,016,374 7,344,013 7,152,294 8,514,217 9,062,341 4,575,707
Aircraft rentals 2,400,732 2,476,122 2,965,100 2,780,264 2,266,428 1,006,666
Depreciation 2,086,104 2,600,276 3,488,334 4,732,715 5,151,543 2,290,861
Interest 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,232,231
Total Expenditure 19,917,171 25,139,316 26,630,914 31,877,370 33,875,969 18,084,618
Profit /(Loss) before taxation 126,496 136,813 (133,893) (2,456,378) 1,781,425 1,582,108
Provision for Taxation
Current Tax 24,746 12,000 420 500 150,330 122,410
Deferred Tax - - - (12,377) - 166,101
Profit /(Loss) after taxation as per audited
accounts (A)
101,750 124,813 (134,313) (2,444,501) 1,631,095 1,293,597
Adjustment on account of changes in
accounting policies
Capitalisation of Software Purchased
(Refer Note No 1 (a) in Annexure IV)
30,369 2,648 1,081 2,285 - -
Depreciation
(Refer Note No 1 (a) in Annexure IV)
(16,257) (21,341) (14,764) (7,371) (2,181) (577)
Frequent flyer expenses
(Refer Note No 1 (b) in Annexure IV)
7,147 42,001 (19,815) (58,896) - -
Reversal of Provisions as per AS 29 (Net)
(Refer Note No 1 (c) in Annexure IV)
313,976 318,273 27,489 393,512 511,631 -
Deferred Tax
(Refer Note No 1 (d) in Annexure IV)
(249,223) (274,327) 86,337 853,003 (580,731) (597,742)
Adjustment on account of Prior Period
Items
(Refer Note No 2 in Annexure IV)
(69,858) (4,762) 61,100 70,147 (60,201) (9,179)
Other adjustments
Refer Note No 3 in Annexure IV)
115,495 174,263 (318,163) (3,642) 13,509 -
Total of adjustments 131,649 236,755 (176,735) 1,249,038 (117,973) (607,498)
Tax impact of adjustments
(Refer Note No 4 in Annexure IV)
41,601 43,275 - - 21,257 2,184
Total of adjustments after tax impact
(B)
90,048 193,480 (176,735) 1,249,038 (139,230) (609,682)
Net Profit/(Loss), as restated
(A+B)
191,798 318,293 (311,048) (1,195,463) 1,491,865 683,915
Profit and Loss Account at the beginning
of the period
463,240 575,019 801,226 333,178 (860,599) 631,266
Profit /(Loss) available for appropriation
as restated
655,038 893,312 490,178 (862,285) 631,266 1,315,181
Excess provision for Tax written back - - 14,544 - - -
Provision for Dividend on preference
shares no longer required
- - 66 1,686 - -
Transfer to Contingency Reserve - 7,200 52,108 - - -
Dividend
Proposed on Preference Share Capital - 4,371 36,600 - - -
Interim paid on Equity Share Capital 72,089 72,089 - - -
Proposed on Equity Share Capital - - 82,902 - - -
Income Tax on Dividend 7,930 8,426 - - - -
BALANCE CARRIED FORWARD AS
RESTATED
575,019 801,226 333,178 (860,599) 631,266 1,315,181
The above statement should be read with Notes to the Summary statement of Profits and Losses and Assets and Liabilities, as restated, together with the significant
accounting policies appearing in Annexure IV.
201
ANNEXURE I B - PROFIT & LOSS ACCOUNT AS AT APRIL 1, 1999
INR' 000s
Profit and Loss Account Balance as at April 1, 1999 333,604
as per Audited Financial Statements
Capitalisation of Software Purchased 35,268
(Refer Note No 1 (a) in Annexure IV)
Depreciation (8,504)
(Refer Note No 1 (a) in Annexure IV)
Frequent flyer expenses 29,563
(Refer Note No 1 (b) in Annexure IV)
Reversal of Provisions as per AS-29 583,175
(Refer Note No 1 (c) in Annexure IV)
Deferred Tax (460,254)
(Refer Note No 1 (d) in Annexure IV)
Adjustment on account of Prior Period Items 12,752
(Refer Note No 2 in Annexure IV)
Other adjustments 18,538
(Refer Note No 3 in Annexure IV)
Tax impact on adjustments (80,902)
(Refer Note No 4 in Annexure IV)
129,636
Profit and Loss Account Balance as at April 1, 1999 as restated 463,240
202
ANNEXURE II - SUMMARY STATEMENT OF ASSETS AND LIABILITIES, RESTATED AS AT
INR 000s
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
A Fixed Assets
Gross Block 18,734,789 21,949,941 36,641,155 50,169,299 51,689,718 52,084,594
Less: Accumulated Depreciation 4,179,443 6,823,320 8,706,665 15,325,550 20,534,834 23,316,800
Net Block 14,555,346 15,126,621 27,934,490 34,843,749 31,154,884 28,767,794
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Net Block after adjustment for Revaluation Reserve 14,555,346 15,126,621 20,634,824 29,435,052 27,279,199 25,756,214
Add: Capital Work In Progress 790,537 1,989,481 13,015,464 3,007,865 151,901 124,904
Total (A) 15,345,883 17,116,102 33,650,288 32,442,917 27,431,100 25,881,118
B Investments (B) - - - 597,000 2,334,164 5,008,292
C Current Assets, Loans and Advances
a) Inventories 1,363,980 2,329,059 3,021,375 3,409,999 3,474,355 3,420,493
b) Sundry Debtors 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
c) Cash and Bank Balances 2,466,836 2,577,452 4,286,178 4,719,502 3,699,412 3,886,425
d) Loans and Advances 1,697,754 2,029,875 1,464,613 1,711,503 1,803,409 1,947,005
Total (C) 7,094,010 8,334,750 10,738,007 12,071,587 11,321,551 11,929,708
D Liabilities and Provisions
a) Current Liabilities & Provisions 3,823,755 4,351,581 6,988,045 6,582,603 6,209,711 7,113,230
b) Deferred Tax Liability 709,477 983,804 897,467 32,087 612,818 1,376,662
c) Secured Loans 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
d) Unsecured Loans 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
Total (D) 21,089,315 23,168,579 39,881,962 41,598,215 35,841,619 36,629,682
E Subordinated Debt (E) - - 2,640,000 2,840,733 3,080,775 3,341,100
F Net Worth (A + B + C - D - E) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Net Worth Represented by
G Share Capital
Equity Capital 720,889 720,889 720,889 720,889 720,889 720,889
Preference Capital - 698,288 698,288 698,288 698,288 698,288
Total (G) 720,889 1,419,177 1,419,177 1,419,177 1,419,177 1,419,177
H Reserves and Surplus
Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Contingency Reserve - 7,200 59,308 59,308 59,308 59,308
General Reserve 54,670 54,670 54,670 54,670 54,670 54,670
Profit & Loss Account 575,019 801,226 333,178 (860,599) 631,266 1,315,181
Total 629,689 863,096 7,746,822 4,662,076 4,620,929 4,440,739
Less: Revaluation Reserve - - 7,299,666 5,408,697 3,875,685 3,011,580
Total (Net of Revaluation Reserves) (H) 629,689 863,096 447,156 (746,621) 745,244 1,429,159
I Net Worth (G + H) 1,350,578 2,282,273 1,866,333 672,556 2,164,421 2,848,336
Note : The above statement should be read with the notes to the Summary Statement of Profits and Losses and Assests and Liabilities, as
restated, together with Significant Accounting Policies appearing in Annexure IV.
203
Annexure III A : SCHEDULE OF LOANS
INR '000s
Secured Loans
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
State Bank of India - - - 901,648 - -
UTI Bank Ltd. - - - 142,455 - -
Citibank N.A. - - - 12 - -
Corporation Bank - - - 248,971 3,433 -
IndusInd Bank Ltd. - - 732,000 712,275 - -
Financial Institutions 150,000 930,000 - - - -
12% Non Convertible Redeemable Debentures 1,534,000 - - - - -
Overdraft facilities from Banks - 1,201,753 - - - -
From Others (HDFC Ltd) - - - - 600,000 600,000
Total 1,684,000 2,131,753 732,000 2,005,361 603,433 600,000
1) Interest on loan was payable in the range of 12% to 14.5%, 6.5% to 14%, 3% to 5%, 6% to 8%, 9% to 10.5% and 9% for the period ended March 31, 2000,
March 31, 2001, March 31, 2002, March 31, 2003, March 31, 2004 and September 30, 2004 respectively.
2) Loans outstanding as at September 30, 2004 except from HDFC Ltd. are secured by hypothecation of Stocks and Debtors and/ or pledge of Fixed Deposits. The
loan from HDFC Ltd. is secured by hypothecation of the Simulator and other accessories thereto.
Unsecured Loans (INR '000s)
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Outstanding Hire Purchase/ Finance Lease 14,217,708 15,649,546 21,189,626 29,584,190 28,415,657 27,539,790
Instalments for aircraft and vehicles
HDFC Ltd. - - - 600,000 - -
ICICI Bank Ltd. - - - 250,000 - -
GE Capital Services India - - - 500,000 - -
Banks 654,375 - - - - -
Others - 51,895 10,074,824 2,043,974 - -
Total 14,872,083 15,701,441 31,264,450 32,978,164 28,415,657 27,539,790
204
ANNEXURE III B - SCHEDULE OF QUOTED INVESTMENTS
The Book Value and Market Value of quoted investments of the company is as below:
(INR '000s)
Particulars Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book
Value
Market
Value
Number of
Shares/Units
Book Value
Market
Value
Number of
Shares/Units
Book Value Market Value
Number of
Shares/Units
Book Value
Market
Value
TRADE INVESTMENTS
Units in Mutual Funds - - - -
-
- - - - 50,032,345 597,000 597,000 216,229,616 2,334,164 2,334,674 439,708,484 5,008,292 5,038,181
TOTAL - - - -
-
- - - - 50,032,345 597,000 597,000 216,229,616 2,334,164 2,334,674 439,708,484 5,008,292 5,038,181
205
ANNEXURE III C - SCHEDULE OF SUNDRY DEBTORS
(INR '000s)
Particulars Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
A) Debts outstanding for a period exceeding six
months: 7,130 90,080 216,076 181,647 66,905 68,579
B) Other Debts 1,570,060 1,327,672 1,769,153 2,067,058 2,304,633 2,645,588
1,577,190 1,417,752 1,985,229 2,248,705 2,371,538 2,714,167
Unsecured - Considered Good 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
- Considered Doubtful 11,750 19,388 19,388 18,122 27,163 38,382
1,577,190 1,417,752 1,985,229 2,248,705 2,371,538 2,714,167
Less: Provision for Doubtful Debts 11,750 19,388 19,388 18,122 27,163 38,382
Total 1,565,440 1,398,364 1,965,841 2,230,583 2,344,375 2,675,785
206
ANNEXURE III D STATEMENT OF RESTATED CASH FLOWS
APRIL ,1999 TO
April ,2000 to April ,2001 to April ,2002 to April ,2003 to April ,2004 to
March, 2000 March, 2001 March, 2002 March, 2003 March, 2004 September, 2004
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
A.
Cash Flow from Operating
Activities
Net Profit / ( Loss) before tax 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Adjustments for :
Depreciation & Stock Obsolescence 2,201,562 2,679,558 3,510,433 4,752,390 5,355,180 2,435,859
Loss / (Profit) on sale of Fixed
assets
996 (259) (895,978) (180,244) (385,928) 34,880
(Profit) on sale of Investments - - - (39,660) (23,724) (15,945)
Interest expense 868,432 1,208,982 1,708,712 2,561,344 2,891,401 1,232,231
Provision for doubtful debts 2,073 7,638 - 719 9,041 11,219
Operating profit before working
capital changes
3,580,431 4,543,814 3,926,202 5,034,206 10,090,153 5,270,596
Changes in Inventories (581,310) (996,349) (774,912) (409,171) (262,526) (52,874)
Changes in Sundry Debtors 255,344 159,438 (567,477) (265,461) (122,833) (342,629)
Changes in Fixed Deposits with
Banks
(1,026,246) (97,579) (920,822) (963,028) 708,274 527,295
Changes in Loans & Advances (599,831) (279,645) 531,689 (171,745) (101,237) (32,789)
Changes in Current Liabilities and
Provisions
261,348 541,131 398,337 1,152,828 50,304 961,592
Cash generated from operations 1,889,736 3,870,810 2,593,017 4,377,629 10,362,135 6,331,191
Income tax (paid) / refunded (19,342) (52,476) (19,630) (83,291) 9,331 (110,806)
Wealth tax paid (92) (290) (722) (309) (300) -
Net cash from operating activities A 1,870,302 3,818,044 2,572,665 4,294,029 10,371,166 6,220,385
B.
Cash Flow from Investing
Activities
Capital Expenditure - Aircraft &
Others
(5,830,736) (4,368,726) (9,275,310) (12,364,600) (3,123,775) (816,615)
Proceeds from sale of fixed assets 1,133 3,353 2,358,104 1,519 863,750 2,590
Purchase of Investments - - - (8,885,000) (29,104,731) (19,329,889)
Sale of Investments - - - 8,327,660 27,391,291 16,671,706
Net cash from investing activities B (5,829,603) (4,365,373) (6,917,206) (12,920,421) (3,973,465) (3,472,208)
C.
Cash flows from Financing
Activities
Increase in Capital - 698,288 - - - -
Subordinated Debt - - 2,640,000 - - -
Increase (Decrease) in Term Loans 5,092,531 1,277,111 4,367,476 10,738,881 (3,920,461) (879,300)
Interest paid (1,100,857) (1,254,945) (1,870,280) (2,524,377) (2,789,056) (1,154,574)
Dividend paid - (160,088) (4,751) (117,816) - -
Net cash used from financing
activities
C 3,991,674 560,366 5,132,445 8,096,688 (6,709,517) (2,033,874)
Net change in cash (A+B+C) 32,373 13,037 787,904 (529,704) (311,816) 714,303
Cash and cash equivalents at
beginning of year
133,481 165,854 178,891 966,795 437,091 125,275
Cash and Bank equivalents at end
of year
165,854 178,891 966,795 437,091 125,275 839,578
Note : Fixed Deposits with banks with maturity period of more than three months including interest accrued thereon and
Fixed Deposit under lien are not included in Cash and Cash equivalents.
207
ANNEXURE III E : SCHEDULE OF NON OPERATING REVENUES
Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Other Income 226,076 275,606 1,234,156 664,184 1,183,183 402,545
Net Profit / (Loss) before Tax as restated 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Percentage 45 43 -* -* 53 26
Source of Income Year ended Year ended Year ended Year ended Year ended Six months ended Nature
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Interest on Bank & Other Deposits 188,837 211,978 247,343 370,649 251,151 106,385 Recurring
Exchange Difference (Net) 32,045 59,032 21,696 334,756 Recurring
Profit on Sale of Other Fixed Assets (Net) - 259 Recurring
Profit on Sale and Hire Purchase Back of Engines 49,780 180,914 170,753 Refer Note 1
Profit on Sale of Investments 39,660 23,724 15,945 Recurring
Profit on Sale of Aircraft 846,434 266,206
Provision for Doubtful Debts no longer required (Refer Note 2) 1,266 151 Recurring
Dividend on Investments 17,080 27,977 Recurring
Excess Provisions no longer required 5,358 182,199 Recurring
Other Income 5,194 4,337 68,903 71,695 114,155 69,888 Recurring
Total 226,076 275,606 1,234,156 664,184 1,183,183 402,545
* Since there is a Net Loss the percentages have not been shown
Notes:
1) In the year 2001-02, the Company had sold two aircraft engines and acquired them back on hire purchase. The
profit earned in this transaction has been deferred over the terms of the hire purchase, in accordance with the
provision of Accounting Standards (AS 19 on leases).
2) The amount indicates the profit on sale of aircraft sold and acquired back on operating lease.
208
ANNEXURE III F : DETAILS OF RATES OF DIVIDEND
Class of Shares Face Value Year ended Year ended Year ended Year ended Year ended
Six months
ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Equity Shares Rs. 10
- Interim 10% 10% - - - -
- Final - - 11.50% - - -
Total 10% 10% 11.50% - - -
5% Cumulative Convertible
Redeemable Preference
Shares Rs. 10 - 5% 5% - - -
(Refer Note 1)
Notes :
1) The Company issued 69,828,750 Cumulative Convertible Redeemable Preference Shares of Rs. 10/- each fully paid up for the first time in
February, 2001.
209
ANNEXURE III G - SCHEDULE OF CONTINGENT LIABILITIES
INR 000s
As at Year ended Year ended Year ended Year ended Year ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Bank Guarnatees and Letters of Credit - - - 1,724,513 3,109,681 3,201,797
Estimated amount of Contracts remainig to
be executed on captial account and not
provided for
18,056,264 15,250,234 15,029 7,928 433,628 234,863
Claims against the Company not
acknowledged as debts
3,615 296,963 296,688 372,513 777,393 838,066
Arrears of Preference Dividend and
annualised return thereon
- - - 92,429 182,393 242,374
Total 18,059,879 15,547,197 311,717 2,197,383 4,503,095 4,517,100
The above amounts have been compiled from the audited financial statements of the Company for the respective years/ period.
210
Annexure III H: SEGMENT DISCLOSURES AND OTHER NOTES
SEGMENT REPORTING
The Company commenced international operations on March 23, 2004. The proportion of
international operations revenue to the total revenue is insignificant, therefore has not been reported
separately.
As such all other related activities revolve around the main business. Hence there are no such
separate reportable segments, as required by the Accounting Standard - 17 on “Segment Reporting”
issued by the Institute of Chartered Accountants of India.
OTHER NOTES
Aircraft Lease Rentals are stated net of sub-lease rental receipts of Rs. 105,496 ('000s) and Rs.
79,011 ('000s) for the year ended March 31, 2004 and six months period ended September 30, 2004.
211
ANNEXURE III - I : SCHEDULE OF RELATED PARTY TRANSACTIONS
(a) Names of related parties and nature of relationship where control exists
Sr. No. Category of related parties Names
1 Holding Company Tailwinds Ltd.
2 Associates Jetair Private Limited
Jet Enterprises Private Limited
Jet Airways LLC
Jet Airways of India Inc.
Jetair Tours Private Limited
Vimpal Holding Private Limited
International Cargo Carriers Private Limited
National Travel Services (Partnership Firm)
3 Key Management Personnel Mr. S.K. Datta
4 Parties with Substantial Interest Naresh Goyal
5 Others (relative of Naresh Goyal) Anita Goyal
212
(b) Transactions & balances with related parties (INR '000s)
Nature of Transaction
Holding
Company/
Parties with
Substantial
Interest
Associates
Key Management
Personnel
Others (relative of
Naresh Goyal)
Transactions for the year ended March 31, 2002
Dividend 82,902 - - -
Remuneration - - 4,425 3,436
Agency Commission - 898,230 - -
Expenses Reimbursed - (470,681) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 43,262 - -
Balance as at 31 March, 2002
Deposits & Advances for Leased Premises - 33,500 - -
Sundry Creditors - 20,126 - -
Sundry Debtors - 82,127 - -
Share Capital 720,889 - - -
Transactions for the year ended March 31, 2003
Remuneration - - 3,940 2,165
Agency Commission - 842,116 - -
Rent - 39,744 - -
Expenses Reimbursed - (364,976) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 45,945 - -
Balance as at 31 March, 2003
Deposits & Advances for Leased Premises - 160,337 - -
Sundry Creditors - 85,244 - -
Sundry Debtors - 38,330 - -
Share Capital 720,889 - - -
Transactions for the year ended March 31, 2004
Remuneration - - 3,900 2,109
Agency Commission - 1,003,067 - -
Rent - 17,856 - -
Expenses Reimbursed - (464,640) - -
(Staff Costs, communication costs, rent)
Trademark Fees - 55,892 - -
Balance as at 31 March, 2004
Deposits & Advances for Leased Premises - 167,837 - -
Sundry Creditors - 13,014 - -
Sundry Debtors - 13,251 - -
Share Capital 720,889 - - -
Transactions for the Six months ended September 30, 2004
Remuneration - - 2,065 43
Agency Commission - 628,489 - -
Rent - 5,178 - -
Expenses Reimbursed - - - -
(Staff Costs, communication costs, rent) - (313,423) - -
Trademark Fees - 36,588 - -
Balance as at September 30, 2004
Deposits & Advances for Leased Premises - 164,837 - -
Sundry Creditors - 108,558 - -
Sundry Debtors - - - -
Share Capital 720,889 - - -
The information has been provided from the financial year 2001-02, when the Accounting Standard 18 on 'Related Party
Disclosures' issued by the Institute of Chartered Accountants of India became mandatory
213
ANNEXURE IV: NOTES ON ADJUSTMENTS AND SIGNIFICANT ACCOUNTING POLICIES FOR
RESTATED FINANCIAL STATEMENTS.
(I) NOTES ON ADJUSTMENTS
1. Changes in accounting policies
a. Depreciation
Until the year ended March 31, 2003, the expense incurred on software was treated as revenue expenditure.
In order to comply with the Accounting Standard 26 on Intangible assets issued by the “Institute of
Chartered Accountants of India”, the company has capitalized the software which results in future
economic benefits and has amortised it over 36 months on straight line method.
Accordingly, the fixed assets have been restated and depreciation has been recomputed for the years ended
March 31, 2000,March 31,2001, March 31,2002 and March. 31,2003. Further, reserves as at April 1,1999
have been appropriately adjusted to reflect the impact of change pertaining to prior years.
b. Frequent Flyer Expenses
Until the year ended March 31, 2002 the cost of allowing free travel to members of frequent flyer program
was computed on the basis of average cost per free seat.
Effective April 1, 2002 the frequent flyer expenses has been computed considering the incremental cost as
per the IATA Airline Accounting Guideline.
Accordingly, the frequent flyer expenses has been restated for the years ended March 31, 2000, March
31,2001 and March 31,2002. Further, reserves as at April 1,1999 have been appropriately adjusted to
reflect the impact of change pertaining to prior years.
c. Provisions for Aircraft Maintenance and Repairs
Until the year ended March 31, 2004, aircraft maintenance costs were provided at a predetermined rate for
each block hour flown except for Engines / Auxilliary Power Units covered by third party maintenance
agreement.
In order to comply with the accounting standard 29 on “Provisions, Contigent Liablities and Contigent
Assests” issued by the Institute of Chartered Accountants of India, the Company has started charging, from
the accounting period commencing on April 1, 2004, the above mentioned expenses on as incurred basis
except where such overhaul costs are covered by third party maintenance contracts.
Accordingly, the expenses have been restated for the years ended March 31, 2000, March 31, 2001, March
31, 2002, March 31, 2003 and March 31, 2004. Further, Reserves as at March 31, 1999 have been
appropriately adjusted to reflect the impact of the change pertaining to the prior years.
d. Deferred Tax
The Company adopted Accounting Standard 22, Accounting for taxes on Income issued by the “Institute
of Chartered Accountants of India” for the first time in preparing the financial statements for the year
ended March 31, 2003. Accordingly, for the purpose of this statement, the deferred tax asset/liability has
been recognized in the respective years of origination, considering the adjustment on account of change in
accounting policy and other changes with the corresponding effect to the statement of profits, as restated.
2. Prior Period Adjustments
In the financial statements for the year ended March 31, 2004 and the half year ended September 30, 2004,
the Company had recognised / charged off certain amount of Income and Expense as prior period. For the
purpose of this statement, the said income / expense have been appropriately adjusted in the years that it
relates to.
214
3. Other Adjustments
a. Impact of Change in accounting estimates
During the year ended March 31, 2004 the Company has revised the estimated useful life of the Galley
Equipments, which forms a part of the Engineering Inventory. Accordingly provision for obsolescence on
such inventory has been adjusted on the straight line method basis over its balance useful life as estimated
by the management. The management’s estimate of the useful life of such inventory is 10 years. In the
earlier years the depreciation has been calculated on the straight-line method at the rates prescribed in
schedule XIV to the Companies Act, 1956.
Accordingly, provision for obsolescence has been adjusted against profits for the years ended March 31,
2000, March 31, 2001, March 31, 2002 and March 31, 2003, in line with the above-mentioned change in
estimate. Further, reserves as at April 1,1999 have been appropriately adjusted to reflect the impact of
change pertaining to prior years.
b. Re-negotiation of aircraft maintenance contract
Post the events of September 11, 2001, the Company has re-negotiated the aircraft maintenance contract in
the financial year 2001-2002 with retrospective effect.
Accordingly, the impact (net) has been adjusted against profits for the years ended March 31, 2000 and
March 31, 2001. Further, reserves as at April 1,1999 have been appropriately adjusted to reflect the impact
of change pertaining to prior years.
4. Current Tax Impact of Adjustments
Current tax impact of adjustments pertains to tax effect on restatement adjustments provided at the tax
rates applicable in the respective years.
5. Non-Adjustment Items:
a. Actuarial valuation of Gratuity for and upto the year ended March 31, 2001.
For and upto year ended March 31, 2001 the Company was making provision for gratuity on the basis of
assumption that all the employees who are in the service of the company as at the year-end are entitled for
the same.
The Company changed the basis of provision for Gratuity on actuarial basis from the year ended March 31,
2002 as per the Accounting Standard – 15 on Accounting for Retirement Benefits in the Financial
Statement of Employers issued by the “Institute of Chartered Accountants of India”. No adjustment has
been made for and upto the year ended March 31, 2001 in the absence of information.
b. Actuarial valuation of Leave Encashment for and upto the year ended March 31, 2002.
For and upto year ended March 31, 2002 the Company was making provision for Leave Encashment on
the basis of actual accumulated leave, in excess of 30 days, lying at the credit at the year end.
The Company changed the basis of provision for Leave Encashment on actuarial basis from the year ended
March 31, 2003 as per the Accounting Standard – 15 on Accounting for Retirement Benefits in the
Financial Statement of Employers issued by the “Institute of Chartered Accountants of India”. No
adjustment has been made for and upto the year ended March 31, 2002 in the absence of information.
c. Capitalisation of Borrowing Costs
For and upto the year ended March 31, 2000 the Company charged the borrowing costs incurred on
acquisition of fixed assets to the Profit and Loss Account.
Pursuant to the introduction of Accounting Standard 16 on Borrowing Cost issued by the Institute of
Chartered Accountants of India, the Company has changed its accounting policy to captialise the interest
on borrowings directly attributable to acquisition of aircraft. No adjustment has been made for and upto the
years ended March 31, 2000 in the absence information.
215
6. Material Re-groupings
“Hire Purchase – Finance charges” have been re-grouped from “Operating Expenses” and is included as a
part of “Interest Expense” for the half year ended September 30, 2004 and the years ended March 31,
2000, March 31, 2001, March 31, 2002, March 31, 2003 and March 31, 2004.
216
(II) SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS :
The financial statements have been prepared under the historical cost convention, except for certain
aircraft, which have been revalued, in accordance with the generally accepted accounting principles in
India and the provisions of the Companies Act, 1956.
B. USE OF ESTIMATES :
The presentation of financial statements in conformity with generally accepted accounting principles
requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on
the date of the financial statements and the reported amount of revenue and expenses during the reporting
period. Differences between the actual result and estimates are recognised in the period in which the results
are known / materialised.
C. REVENUE RECOGNITION :
Passenger and Cargo income is recognised on flown basis, i.e. when the service is rendered.
The net sales (sales net of refunds) are initially credited to the "Forward Sales Account". Income
recognised as indicated above is reduced from the Forward Sales Account and the balance is shown under
Current Liabilities.
Balances in Forward Sales are recognised as income where a claim for refund has not been made for two
years.
D. COMMISSION :
As in the case of revenue, the commission paid / payable on sales including any over-riding commission is
recognised only on flown basis.
E. EMPLOYEE RETIREMENT BENEFITS :
The Company makes regular contribution to Provident Fund and this contribution is charged to Profit and
Loss Account. Provisions for Gratuity and Leave Encashment Benefit are made on the basis of actuarial
valuation and charged to Profit and Loss Account.
F. FIXED ASSETS :
Fixed assets are stated at cost and includes amount added on revaluation less accumulated depreciation and
impairment loss, if any. All costs relating to acquisition & installation of fixed assets upto the time the
assets get ready for their intended use are capitalised.
Impairment loss (if any) is provided to the extent the carrying amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an asset's selling price or its Value in Use. Value in Use is the
present value of estimated future cash flows expected to arise from the continuing use of an asset and from
its disposal at the end of its useful life. Net Selling Price is the amount obtainable from the sale of an asset
in an arms length transaction between knowledgeable, willing parties, less the cost of disposal.
The cost of improvements to Leased Properties as well as customs duty/modification cost incurred on
aircraft taken on operating lease have been capitalised and disclosed appropriately.
G. ASSETS TAKEN ON LEASE :
(a) Operating Lease: Rentals are expensed with reference to the Lease Term and other considerations.
(b) Finance Lease (Hire Purchase): The lower of the fair value of the assets and the present value of the
minimum lease rentals is capitalised as Fixed Assets with corresponding amount shown as Lease
Liability (Outstanding Hire Purchase/Finance lease Instalments). The principal component of the
lease rentals is adjusted against the leased liability and interest component is charged to the Profit
and Loss Account.
217
H. INTANGIBLE ASSETS :
Computer Software is amortised over 36 months on straight-line method.
I. INVESTMENTS :
Current Investments are carried at lower of cost and quoted/fair value. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is made only if such a decline is other
than temporary in the opinion of the management.
J. BORROWING COSTS :
Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part
of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are
incurred.
K. DEPRECIATION :
Depreciation has been provided on Written Down Value method at the rates and in the manner prescribed
under the schedule XIV to the Companies Act, 1956 on fixed assets, other than expenditure incurred on
improvements of assets acquired on operating lease, which are written off evenly over the balance period
of the lease.
On revalued assets, depreciation is charged over the residual life and the additional charge of depreciation
is withdrawn from the Revaluation reserve.
L. FOREIGN EXCHANGE TRANSACTIONS:
Sales and other transactions in foreign currency are recorded at the Current rate of exchange in force at the
time the transactions are effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that related to fixed assets, is adjusted in the Profit & Loss Account.
Monetary Assets and Liabilities relating to foreign exchange transactions not settled as at the year end,
are translated at the rates prevalent on that date, and losses/profits, if any on such transactions are
recognised in the Profit and Loss Account.
Exchange difference on settlement/ translation of long-term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in
the carrying amount of fixed assets over the life of the contract.
M. DERIVATIVES TRANSACTIONS
Gain or Loss on derivative contracts entered into to hedge exposures to interest rate fluctuations are
recognised as and when the underlying transactions are settled. Accordingly proportionate amounts are
accrued/provided for the period between the last settlement date and the year-end.
N. INVENTORIES :
Inventories include:
a) Tickets & Airway Bills Stock
b) Unutilised Inflight Service Amenities
c) Expendable Aircraft Spares
d) Aircraft Fuel in the Aircraft
e) Rotables, Galley Equipment and Tooling
Inventories are valued at cost or Net Realisable Value (NRV) whichever is lower. Cost includes custom
duty, freight and other charges as applicable and is determined using the Weighted Average formula. In
respect of reusable items such as rotables, galley equipment & tooling under (e) above, NRV takes into
consideration provision for obsolescence and wear & tear based on the estimated useful life of the aircraft
218
derived from Schedule XIV of the Companies Act, 1956 & also includes provisioning for non-moving
/slow moving items.
O. REDELIVERY EXPENSES :
Aircraft Redelivery Expenses have been provided in proportion to the expired lease period.
P. AIRCRAFT MAINTENANCE & REPAIRS COST :
Aircraft Maintenance, Auxiliary Power Unit (APU) and Engine maintenance and repair costs are expensed
as incurred except where such overhaul cost in respect of Engines/ APU covered by third party
maintenance agreement and accounted in accordance therewith.
Q. FREQUENT FLYER EXPENSES :
The cost of allowing free travel to members of the Frequent Flyer Programme is accounted considering the
members’ accumulated mileage.
R. TAXATION
Provision for current tax is made after taking into consideration benefits admissible under the provisions of
the Income Tax Act, 1961.
Deferred tax resulting from “timing differences” between book and taxable profit is accounted for using
the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent that there is a reasonable/virtual
certainty that the asset will be realised in future.
S. CONTINGENT LIABILITY
These are disclosed by way of Notes to the Accounts. Provision is made in the accounts in respect of those
contingencies which are likely to materialise into liabilities after the year end, till the finalisation of
accounts and have material effect on the position stated in the Balance Sheet.
219
ANNEXURE V : SUMMARY OF ACCOUNTING RATIOS
Year Ended Year Ended Year Ended Year Ended Year Ended Six months ended
Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 Mar 31, 2003 Mar 31, 2004 Sep 30, 2004
Cash Earnings per Share (Rs.)
32.50 41.75
45.05
50.03
90.65 41.96
(Refer Note 5)
Basic Earnings per Share (Rs.) 2.66
4.25
(5.34) (17.84) 19.44 8.70
(Refer Note 5)
Diluted Earnings per Share (Rs.) N. A
2.23
(5.34)* (17.84)* 4.06 1.78
(Refer Note 5)
Return on Net Worth %
14.20 13.95
(16.67) (177.75) 68.93 24.01
Net Asset Value per Equity Share
18.73 21.97
16.20 (1.64) 17.81 26.46
Weighted Average Number of Diluted
Equity Shares Outstanding during the
year/period
-
142,738,899 284,646,095 430,948,542
452,447,245 484,897,504
Total Number of Equity Shares
Outstanding during the year/period 72,088,900 72,088,900 72,088,900 72,088,900
72,088,900 72,088,900
* Being anti - dilutive in nature, the basic and diluted EPS for these years remain the same
Notes :-
1) The ratios have been computed as per the following formulae :
Cash Earnings per Share (Rs.) = Net Profit after tax and annualised return on Preference Capital but
before depreciation & Provision for stock Obsolescence
____________________________________________________
Total No of Equity Shares outstanding during the year/ period
Basic Earnings per Share (Rs.) = Net Profit attributable to Equity Shareholders
____________________________________________________
Total No of Equity Shares outstanding during the year/ period
Diluted Earnings per Share (Rs.) = Net Profit attributable to Equity Shareholders
_____________________________________________________
Weighted Average No of Equity Shares outstanding during the year/ period
Return on Net Worth (%) = Net Profit after tax
____________________________________________________
Net worth excluding Revaluation Reserve at the end of the year/ period
Net Asset Value per Equity Share (Rs.) = Net worth excluding Revaluation Reserve, Preference Share Capital incl. annualised
return in arrears thereon at the end of the year/ period
__________________________________________________________________
Total No of Equity Shares outstanding during the year/ period
2) The weighted average number of diluted equity shares is derived after dividing the conversion amount of preference shares and subordinated
debt as at end of each year/ period.
3) Net Profit, as restated and appearing in the statement of Profits and losses has been considered for the purpose of computing the above ratios.
These ratios are computed on the basis of the restated financial statements of the Company.
4) Earnings per share calculations have been done in accordance with Accounting Standard 20 - "Earnings per share" issued by the Institute of
Chartered Accountants of India.
5) Earnings per share for the six months ended September 30, 2004 are not comparable with that of other financial years presented above as they
are not annualised.
6) Net Worth computations in the above workings include 'Cumumlative Convertible Redeemable Preference Shares'.
220
ANNEXURE VI - TAX SHELTER STATEMENTS
INR 000s
As on As on As on As on As on As on
Mar 31, 2000 Mar 31,
2001
Mar 31, 2002 Mar 31, 2003 Mar 31,
2004
Sep 30, 2004
Tax rate (including surcharge) 38.50 39.55 35.70 36.75 35.88 36.59
Net profit/(loss) before tax as restated 507,368 647,895 (396,965) (2,060,343) 2,244,183 1,572,352
Tax at notional rates (A) 195,337 256,243 - - 805,101 575,324
Book Depreciation 2,102,361 2,621,617 3,503,098 4,740,086 5,153,724 2,291,438
Tax Depreciation 3,593,729 3,615,867 4,198,500 6,846,802 5,877,042 2,201,308
Difference between tax and book depreciation (B) (1,491,368) (994,250) (695,401) (2,106,716) (723,319) 90,130
Other adjustments (C) 22,470 61,071 (939,010) (212,948) (475,815) (27,195)
Net adjustments (B + C) (1,468,898) (933,179) (1,634,411) (2,319,664) (1,199,134) 62,935
Tax Savings thereon (565,526) (369,072) (583,485) (852,476) (430,189) 23,028
Profit/(Loss) as per Income tax return (1,339,936) (800,534) (1,775,289) (4,740,317) 605,210 1,660,688
Less : Set/off of B/f unabsorbed depreciation - - - - (605,210) (1,660,688)
Taxable Income as per Tax Return under MAT 37948 136414 - - 1,764,977 1,553,722
Tax as per Income Tax Return (MAT) incl int 14610 11561 - - 140,443 121,831
Tax on restated profits under MAT (D) 58,601 54,875 - - 171,257 124,184
Tax provision made in books (E) 17,000 11,600 - - 150,000 122,000
Current tax impact of adjustments (D - E) 41,601 43,275 - - 21,257 2,184
221
ANNEXURE VII :- CAPITALISATION STATEMENT AS AT SEPTEMBER 30, 2004
INR '000s
Pre Issue Post Issue *
Short Term Debt 600,000 -
Long Term Debt 27,539,790 -
Subordinated Debt 3,341,100 -
Total Debt 31,480,890 -
Share Holders' Funds
- Share Capital 1,419,177 -
- Reserves (excluding Revaluation Reserve 1,429,159 -
Total Share Holders' Funds 2,848,336 -
Long Term Debt/Equity 10.84 -
* Share Capital and Reserves post - issue can be ascertained only after the conclusion of the book building process
Notes:-
1) Long term debt represents outstanding hire purchase/ finance lease instalments for aircraft and other assets
2) Long term debt includes current portion of the long term debt payable over the next twelve months
3) The Long term debt/ Equity ratio has been calculated as per the following formula :-
Long term Debt + Subordinated Debt
Shareholders' Funds
222
Deloitte Haskins & Sells Chaturvedi & Shah
Chartered Accountants Chartered Accountants
12, Dr. Annie Besant Road, A-3 Laxmi Towers, 1
st
Floor
Opposite Shiv Sagar Estate, Bandra Kurla Complex,
Worli Bandra (East)
Mumbai 400 018 Mumbai 400 051
AUDITORS' REPORT TO THE BOARD OF DIRECTORS
1. We have audited the attached Balance Sheet of Jet Airways (India) Private Limited, as at 30
th
September, 2004
and also the Profit and Loss Account and the Cash Flow Statement for the six months period ended on that date
annexed thereto. These financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. We report that:
a) we have obtained all the information and explanations, which to the best of our knowledge and belief
were necessary for the purposes of our audit;
b) in our opinion, proper books of account as required by law have been kept by the Company so far as
appears from our examination of the books;
c) the Balance Sheet, Profit and Loss Account and Cash flow statement dealt with by this Report are in
agreement with the books of account;
d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash flow statement dealt with by this
Report comply with accounting standards referred to in sub-section (3C) of Section 211 of the
Companies Act, 1956;
e) in our opinion, and to the best of our information and according to the explanations given to us, the said
accounts give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 30 th September,
2004;
(ii) in the case of the Profit and Loss Account, of the Profit of the Company for the six months
period ended on that date; and
(iii) in the case of cash flow statement, of the cash flows for the six months period ended on that date.
FOR DELOITTE HASKINS & SELLS. FOR CHATURVEDI & SHAH
CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS
R. SALIVATI C.D. LALA
PARTNER PARTNER
M. No. 34004 M. No. 35671
Mumbai
Dated: December 20, 2004
223
BALANCE SHEET AS AT SEPTEMBER 30,2004
As at As at
Schedule Sep 30,2004 Mar 31,2004
No. Rs'000 Rs'000
I SOURCES OF FUNDS
1Shareholders' Funds :
a)Share Capital A
Equity 720,889 720,889
Preference 698,288 698,288
Capital 1,419,177 1,419,177
b)Reserves and Surplus B 3,184,357 3,934,993
4,603,534 5,354,170
2 Subordinated Debt (Ref. Note 10 of Schedule S) 3,341,100 3,080,775
3 Loan Funds :
a) Secured Loans C 600,000 603,433
b) Unsecured Loans D 27,539,790 28,415,657
28,139,790 29,019,090
Deferred Tax Liability (Ref. Note 17 of Schedule S) 673,552 507,450
Total 36,757,976 37,961,485
Fixed Assets : E
a) Gross Block 52,012,943 51,618,067
b) Less : Depreciation 23,245,805 20,502,101
c) Net Block 28,767,138 31,115,966
d) Capital Work-in-progress 124,904 151,901
28,892,042 31,267,867
Investments F 5,008,292 2,334,164
Current Assets, Loans and Advances :
a) Inventories G 3,420,493 3,474,355
b) Sundry Debtors H 2,675,785 2,344,375
c) Cash And Bank Balances I 3,886,425 3,699,412
d) Loans and Advances J 1,947,005 1,803,409
11,929,708 11,321,551
Less : Current Liabilities and Provisions
a) Current Liabilities K 6,142,101 5,356,847
b) Provisions L 2,929,965 2,785,378
9,072,066 8,142,225
Net Current Assets 2,857,642 3,179,326
4) Profit & Loss Account - 1,180,128
Total 36,757,976 37,961,485
FOR DELOITTE HASKINS &
SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
224
PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS PERIOD ENDED SEPTEMBER 30,2004
Schedule For the Six
months period
ended Sep 30,2004
For the Six months
period ended Sep
30,2003
No. Rs.'000 Rs.'000 Rs.'000
INCOME :
Operating Revenues M 19,264,181 16,344,486
Non - Operating Revenues N 402,545 457,026
Total 19,666,726 16,801,512
EXPENDITURE :
Employees Remuneration and Benefits O 1,738,827 1,399,394
Aircraft Fuel Expenses 4,713,116 3,554,376
Selling & Distribution Expenses P 2,527,210 1,983,440
Other Operating Expenses (including Maintenance,
Airport Charges, etc)
Q 4,575,707 4,700,001
Aircraft Lease Rentals (Refer Note 6 of Schedule S) 1,006,666 1,205,254
Depreciation 2,774,117 3,092,847
Less : Depreciation on amount added on
Revaluation charged to Revaluation Reserve
483,256 547,285
2,290,861 2,545,562
Interest R 1,232,231 1,568,238
Total 18,084,618 16,956,265
PROFIT / (LOSS) BEFORE TAXATION 1,582,108 (154,753)
Provision for Taxation
Current Tax ( including provision for Wealth Tax
Rs. 410 , Previous Period Rs. 270 )
122,410 270
Deferred Tax 166,101 -
PROFIT / (LOSS) AFTER TAXATION 1,293,597 (155,023)
Balance Brought Forward
As on 01.04.2004 (1,180,128) -
As on 01.04.2003 - (2,811,223)
BALANCE CARRIED TO BALANCE SHEET 113,469 (2,966,246)
Earnings per share of Rs 10 each
(Ref. Note 16 of Schedule S)
Basic (in Rupees) 17.15 (2.86)
Diluted (in Rupees) 3.04 (2.86)
Significant Accounting Policies and Notes to Accounts S
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
225
As at As at
Sep 30,2004 Mar 31,2004
Rs'000 Rs'000
SCHEDULE A :
CAPITAL
AUTHORISED
100,000,000 Equity Shares of Rs.10/- each 1,000,000 1,000,000
100,000,000 Preference Shares of Rs 10/- each 1,000,000 1,000,000
2,000,000 2,000,000
ISSUED, SUBSCRIBED AND PAID-UP
72,088,900 Equity Shares of Rs. 10/- each fully paid up
(Entirely held by the Holding Company - Tail Winds Limited and its nominee)
(Of the above, 9,402,900 shares are allotted as fully paid Bonus shares by
Capitalization of Profit) 720,889 720,889
5%, 69,828,750 Cumulative Convertible Redeemable Preference Shares of Rs.
10/- each . Fully paid up (Refer Note No. 5 of Schedule S) 698,288 698,288
Total 1,419,177 1,419,177
SCHEDULE B :
RESERVES and SURPLUS
Capital Reserve
Balance as per Last Balance Sheet * *
Nominal Value of investments in SITA received free of cost *
(See Note 1 of Schedule 'F' - Investments ) (*Re. 2/-) * *
Revaluation Reserve
Balance as per Last Balance Sheet 3,875,685 5,408,697
Less : Adjustment /Reversal during the period 380,850 359,832
Less : Depreciation for the period on amount added on Revaluation transferred
to Profit & Loss Account 483,256 1,173,180
3,011,580 3,875,685
Contingency Reserve
Balance as per Last Balance Sheet 59,308 59,308
Surplus Balance in Profit and Loss Account 113,469 -
Total 3,184,357 3,934,993
SCHEDULE C :
SECURED LOANS
From Banks
Corporation Bank - 3,433
(Loans from Banks are hypothecation of Stocks and Debtors and/or by pledge
of Fixed Deposits)
From Others
HDFC Ltd (Secured by hypothecation of Simulator & other accessories
thereto) 600,000 600,000
Total 600,000 603,433
SCHEDULE D :
UNSECURED LOANS
From Banks
Outstanding Hire Purchase/Finance Lease Instalments 16,187 35,352
From Others
Outstanding Hire Purchase/Finance Lease Instalments
[Instalments due within one year Rs. 2,789,552 (Previous Year - Rs.2,704,985
)] 27,523,603 28,380,305
Total 27,539,790 28,415,657
226
Schedule E: Fixed Assets
G R O S S B L O C K (At Cost /Valuation)
D E P R E C I A T I O N N E T B L O C K
As at Additions Deduction/ As at Upto For the Upto As on As on
N A T U R E O F A S S E T S 01.04.2004 during Adjustment 30.09.2004 31.03.2004 Period Deduction 30.09.2004 30.09.2004 31.03.2004
the period
Furniture and fixtures 142,637 3,444 337 145,744 89,888 5,853 187 95,554 50,190 52,749
Electrical fittings 120,052 6,808 1,541 125,319 57,035 5,253 1,037 61,251 64,068 63,017
Data processing equipment 443,123 47,427 - 490,550 339,965 25,815 - 365,780 124,770 103,158
Office equipment 231,822 7,248 611 238,459 114,870 8,761 344 123,287 115,172 116,952
Ground support equipment 392,387 23,181 10,836 404,732 194,445 13,832 5,631 202,646 202,086 197,942
Vehicles 65,251 1,540 3,618 63,173 38,446 3,572 2,977 39,041 24,132 26,805
Ground support vehicles 317,424 5,739 743 322,420 219,665 15,129 671 234,123 88,297 97,759
Aircraft & spare engine 49,043,802 630,697 431,050 49,243,449 19,089,493 2,630,267 19,569 21,700,191 27,543,258 29,954,309
Capital expenditure on leased aircraft 217,917 57,864 - 275,781 92,760 23,517 - 116,277 159,504 125,157
Capital expenditure on leased property 91,444 8,083 - 99,527 64,755 6,850 - 71,605 27,922 26,689
Simulator 513,755 - 513,755 199,731 25,506 - 225,237 288,518 314,024
Intangible asset
Software 38,453 51,581 - 90,034 1,051 9,762 - 10,813 79,221 37,402
Total 51,618,067 843,612 448,736 52,012,943 20,502,104 2,774,117 30,416 23,245,805 28,767,138 31,115,963
Previous year 50,097,648 3,649,732 2,129,313 51,618,067 15,298,284 6,324,723 1,120,906 20,502,101 31,115,966 34,799,364
Capital work in progress including capital
advance 124,904 151,901
NOTE :
1) All the Aircraft are acquired on Hire-purchase/Finance Lease basis and do not include Aircraft taken on Operating lease. Such Aircraft are charged against financing arrangements
obtained by the Hirers/Lessor.
2) Additions to Aircraft is net of Rs. 495 million (Previous Year Rs. 757 million) on account of exchange difference during the period.
3) Net Block of Vehicles and Ground Support Vehicles include Rs.27 million (Previous Year Rs 78 million) on account of vehicles taken on Hire Purchase.
4) Aircraft were revalued on 31st March, 2002 with reference to the current prices; amount added on revaluation was Rs. 7,300 million; the revalued amount substituted for historical cost
on 31st March, 2002 was Rs. 34,286 million
227
As at As at
Sep 30,2004 Mar 31,2004
Rs'000 Rs'000
SCHEDULE F :
INVESTMENTS
Long Term
18 Shares (Previous Year 15 Shares) held with Societe Internationale de
Telecommunications Aeronautiques (S.I.T.A S.C) * (Re. 2/-) * *
1)
Notes:
These investments have been received free of cost from SITA SC for
participation in their Computer Reservation System and have been accounted at
a nominal value of Rs. 1/- by crediting to Capital Reserve
2) The transfer of this investment is restricted to other Depository Certificate
holders for e.g. Air Transport members, etc.
Current
Investments in Mutual Funds – Traded
Schemes No. of Units
Face Value /
Unit (Rs)
As at Sep
30,2004
Rs'000
As at Mar 31,
2004
Rs'000
Growth Plan
Kotak Mahindra Mutual Fund 83,866,379 10.00 1,013,051 -
Principal Mutual Fund 33,753,282 10.00 350,000 -
Deutsche Mutual Fund 24,742,237 10.00 250,000 -
HDFC Mutual Fund 32,479,754 10.00 398,505 -
JM Mutual Fund 58,202,121 10.00 585,000 -
Prudential ICICI Mutual Fund 55,882,454 10.00 651,563 -
Alliance Capital 219,444 10.00 173 -
Birla Sun Life Mutual Fund 20,000,000 10.00 200,000 -
HSBC Mutual Fund 11,824,641 10.00 120,000 -
Reliance Mutual Fund 61,393,579 10.00 615,000 -
Franklin Templeton Investments 197,956 1,000.00 200,000 -
Tata Mutual Fund 57,146,637 10.00 625,000 -
Dividend Plan
Kotak Mahindra Mutual Fund 46,473,451 10.00 568,282
Principal Mutual Fund 20,000,000 10.00 200,000
Deutsche Mutual Fund 21,284,159 10.00 219,093
HDFC Mutual Fund 16,720,663 10.00 177,848
JM Mutual Fund 35,949,950 10.00 359,499
Prudential ICICI Mutual Fund 8,736,859 10.00 103,544
Alliance Capital 7,011,068 10.00 70,111
Birla Sun Life Mutual Fund 15,333,430 10.00 165,373
ING Vysya Mutual Fund 15,332,713 10.00 165,162
DSP Merrill Lynch Mutual Fund 9,996,004 10.00 100,060
Standard Chartered Mutual Fund 19,391,321 10.00 205,192
5,008,292 2,334,164
Market Value
Growth Plan
Kotak Mutual Fund 1,022,893
Principal Mutual Fund 351,097
Deutsche Mutual Fund 250,413
HDFC Mutual Fund 401,944
JM Mutual Fund 587,664
Prudential Mutual Fund 657,126
Alliance Mutual Fund 2,357
Birla Mutual Fund 201,482
HSBC Mutual Fund 120,031
Reliance Mutual Fund 615,838
Templeton Mutual Fund 200,460
Tata Mutual Fund 626,876
Dividend Plan
Kotak Mutual Fund 568,282
Principal Mutual Fund 200,380
Deutsche Mutual Fund 219,093
HDFC Mutual Fund 177,848
JM Mutual Fund 359,629
Prudential Mutual Fund 103,544
Alliance Mutual Fund 70,111
Birla Mutual Fund 165,373
ING Vysya Mutual Fund 165,162
DSP Mutual Fund 100,060
Standard Chartered Mutual Fund 205,192
5,038,181 2,334,674 5,008,292 2,334,164
Note : The market price is based on the repurchase price declared by the respective funds
228
As at As at
Sep 30,2004 Mar 31,2004
SCHEDULE G :
INVENTORIES (At Lower of Cost or Net Realisable Value)
i) Spare Parts, Consumable stores and tools 3,991,784 4,016,327
Less : Provision for Obsolescence /Slow & Non-Moving items
(Refer Note 1 (N) of Schedule S) 674,517 639,836
3,317,267 3,376,491
ii) Fuel 6,375 4,458
iii) Other Stores Items 96,851 93,406
Total 3,420,493 3,474,355
SCHEDULE H :
SUNDRY DEBTORS
(Unsecured) 68,579 66,905
a) Debts (Outstanding for a period exceeding six months) 2,645,588 2,304,633
b) Other Debts 2,714,167 2,371,538
Less : Provision for Doubtful Debts 38,382 27,163
2,675,785 2,344,375
NOTE : As at Previous
30.09.04 Year
1) Considered good 2,675,785 2,344,375
Considered doubtful 38,382 27,163 2,675,785 2,344,375
2) Debtors include Rs.12,112 (Previous
Year Rs 5,720) due from private company
in which the company's director is a
director/member. 2,714,167 2,371,538
SCHEDULE I :
CASH AND BANK BALANCES
Cash on hand (includes cheques on hand Rs. 1,245 2,899 63,431
Previous Year Rs. 61,558)
Balance with Scheduled banks :
a) In Current Account 80,962 54,650
b) In Fixed Deposit Account
[including margin deposit Rs.995,217 and Rs.Nil given as collateral for
overdraft and other loans (Previous Year Rs. 1,814,009 and Rs.641,915
respectively)] 3,735,170 3,539,733
Add : Interest accrued 46,097 34,404
3,865,128 3,692,218
Balance with other banks :
In Current Account :
a) Citibank N.A, Johannesberg South Africa Maximum balance outstanding
during the year Rs. 6,018 (Previous Year Rs. 9,889) 1,907 5,562
b) National Bank of Kuwait
Maximum balance outstanding during the year Rs. 3,029
(Previous Year 1,877) - -
c) Barclays Bank, London
Maximum balance outstanding during the year Rs.13,518
(Previous Year 13,152) 1,989 1,632
d) Barclays Bank – PLC - USD
Maximum balance outstanding during the year Rs.1,096
(Previous Year Nil) - -
e) HSBC CCF – Maximum balance outstanding during the year Rs.10,131
(Previous Year Nil) 10,131 -
f) Deutsche Bank AG - FRF
Maximum balance outstanding during the year Rs.7,194
(Previous Year Nil) 7,193 -
g) Barclays Bank - PLC - Euro
Maximum balance outstanding during the year Rs.79
(Previous Year Nil) 77 -
21,297 7,194
Total 3,886,425 3,699,412
229
As at As at
Sep 30,2004 Mar 31,2004
SCHEDULE J :
LOANS and ADVANCES
( Unsecured and Considered Good )
Advances Recoverable in Cash or in kind for Value to be Received 719,602 732,130
Deposits with Airport Authorities & others (Including margin deposit
Rs.382,739 (Previous Year Rs. 288,377) 849,693 769,464
Balances with Customs Authorities 342 867
Advance Tax & Tax deducted at Source 369,230 258,423
Other assets 8,138 42,525
Total 1,947,005 1,803,409
Note : Deposits & Advances include Rs.164,837 (Previous Year Rs 167,837)
placed with a private company in which the company's director
is a director/member.
SCHEDULE K :
CURRENT LIABILITIES
Sundry Creditors
Outstanding dues to small scale industries - -
Others 1,872,313 1,698,006
1,872,313 1,698,006
Other Current Liabilities 1,815,290 1,285,270
Interest Accrued but not due on loans 131,524 314,192
Forward Sales (net) (Passenger/Cargo) 2,068,603 1,493,360
Balance with Scheduled Bank in Current Account overdrawn as per books 254,371 566,019
Note : No amounts are due to the Investor Education & Protection Fund
Total 6,142,101 5,356,847
SCHEDULE L :
PROVISIONS
Wealth Tax 1,171 761
Income Tax 351,243 229,243
Gratuity 134,290 109,713
Leave Encashment 32,470 25,732
Others 2,410,791 2,419,929
Total 2,929,965 2,785,378
230
For the Six months
period ended Sep
30,2004
For the Six months
period ended Sep
30,2003
SCHEDULE M :
OPERATING REVENUE
Passenger 18,068,701 15,208,634
Excess Baggage 173,753 118,534
Cargo 886,128 849,374
Other Revenue 135,599 167,944
Total 19,264,181 16,344,486
SCHEDULE N :
NON-OPERATING REVENUE
Interest on Bank & Other Deposits
[Tax Deducted at Source Rs.48,631 (Previous Year Rs 58,368)] 106,385 136,971
Exchange difference (Net) - 156,839
Profit on Sale and Hire Purchase of Engines carried forward - 85,377
Profit on sale of Current Investments (Net) - 15,945 13,389
Dividend on Investments - -
Long Term - 962
Short Term 27,977 -
27,977 962-
Excess Provision no longer required 182,199 5,358
Provision for Doubtful Debts no longer required 151 -
Other Income (including Interest on Income Tax Refund of Rs.5,005,
Previous year Rs. Nil) 69,888 58,130
Total 402,545 457,026
231
For the Six months
period ended Sep
30,2004
For the Six months
period ended Sep
30,2003
SCHEDULE O :
EMPLOYEES REMUNERATION AND BENEFITS (Net)
Salaries, Wages, Bonus & Allowances 1,575,569 1,252,923
Contribution to Provident Fund & ESIC 49,820 40,299
Provision for Gratuity 30,958 21,826
Provision for Leave Encashment 10,266 1,836
Staff Welfare Expenses 67,906 73,055
Staff training 4,308 9,455
Total 1,738,827 1,399,394
SCHEDULE P : 512,900 437,735
CRS Cost (Net) 1,834,992 1,426,485
Commission 179,318 119,220
Others 2,527,210 1,983,440
SCHEDULE Q
OPERATING EXPENSES
Aircraft Variable Rentals 334,924 550,799
Aircraft Insurance & Other Insurance 199,409 179,129
Landing, Navigation & Other Airport Charges 1,091,812 1,036,243
Aircraft Maintenance (including Customs Duty and Freight, where applicable)
Component Repairs, Recertification, Exchange, 911,365 1,258,559
Consignment Fees and Aircraft Overhaul 44,011 48,229
Lease of Aircraft Spares incl. Engine 329,716 269,648
Consumption of Stores & Spares (net) (including items scrapped Rs.
131,974 , Previous Period Rs. 117,102) 106,736 91,998
Provision for Spares Obsolescence 1,391,828 1,668,434
Inflight & Other Pax Amenities 664,507 544,085
Communication Cost 66,272 71,391
Travelling & Subsistence 160,508 138,589
Rent 131,371 138,288
Rates & Taxes 9,956 10,230
Repairs & Maintenance
Leased Premises 2,518 2,946
Others 91,450 68,498
93,968 71,444
Electricity 40,248 37,458
Director's Sitting Fees 70 115
Miscellaneous Expenses (Including Printing & Stationery, Bank Charges etc.) 195,187 244,270
Provision for Bad & Doubtful Debts 11,370 9,041
Loss on scrapping of Fixed Asset 30,630
Loss on sale of Fixed Assets other than Aircraft (Net) 4,250 485
Exchange difference (Net) 149,397
Total 4,575,707 4,700,001
SCHEDULE R
INTEREST 1,005,528 1,320,074
Hire Purchase - Finance Charges 194,716 180,513
Interest on Subordinated Debt 27,074 27,066
Interest on Fixed Loan 712 3,410
Interest on Bank overdraft 4,201 72,118
Other Interest 1,232,231 1,603,181
Less : Capitalised during the period - 34,943
Total 1,232,231 1,568,238
232
Schedule 'S'
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost convention, except for certain aircraft
which have been revalued, in accordance with the generally accepted accounting principles in India and
the provisions of the Companies Act, 1956.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted accounting principles
requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on
the date of the financial statements and the reported amount of revenue and expenses during the reporting
period. Differences between the actual result and estimates are recognised in the period in which the results
are known / materialised.
REVENUE RECOGNITION
Passenger and Cargo income is recognised on flown basis, i.e. when the service is rendered.
The net sales (sales net of refunds) are initially credited to the "Forward Sales Account". Income
recognised as indicated above is reduced from the Forward Sales Account and the balance is shown under
Current Liabilities.
Balances in Forward Sales are recognised as income where a claim for refund has not been made for two
years.
COMMISSION
As in the case of revenue, the commission paid / payable on sales including any over-riding commission
is recognised only on flown basis.
EMPLOYEE RETIREMENT BENEFITS
The company makes regular contribution to Provident Fund and this contribution is charged to Profit and
Loss Account. Provisions for Gratuity and Leave Encashment Benefit are made on the basis of actuarial
valuation and charged to Profit and Loss Account.
FIXED ASSETS
Fixed assets are stated at cost and includes amount added on revaluation less accumulated depreciation and
impairment loss, if any. All costs relating to acquisition & installation of fixed assets upto the time the
assets get ready for their intended use are capitalised.
Impairment loss (if any) is provided to the extent the carrying amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an asset's selling price or its Value in Use. Value in Use is the
present value of estimated future cash flows expected to arise from the continuing use of an asset and from
its disposal at the end of its useful life. Net Selling Price is the amount obtainable from the sale of an asset
in an arms length transaction between knowledgeable, willing parties, less the cost of disposal.
The cost of improvements to Leased Properties as well as customs duty/modification cost incurred on
aircraft taken on operating lease have been capitalised and disclosed appropriately.
233
ASSETS TAKEN ON LEASE
a) Operating Lease: Rentals are expensed with reference to the Lease Term and other
considerations.
b) Finance Lease (Hire Purchase): The lower of the fair value of the assets and the present value of
the minimum lease rentals is capitalised as Fixed Assets with corresponding amount shown as Lease
Liability (Outstanding Hire Purchase/Finance lease Instalments). The principal component of the lease
rentals is adjusted against the leased liability and interest component is charged to the Profit and Loss
Account.
INTANGIBLE ASSETS
Computer Software is amortised over 36 months on straight-line method.
INVESTMENTS
Current Investments are carried at lower of cost and quoted/fair value. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is made only if such a decline is other
than temporary in the opinion of the management.
BORROWING COSTS
Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part
of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are
incurred.
DEPRECIATION
Depreciation has been provided on Written Down Value method at the rates and in the manner prescribed
under the schedule XIV to the Companies Act, 1956 on fixed assets, other than expenditure incurred on
improvements of assets acquired on operating lease, which are written off evenly over the balance period
of the lease.
On revalued assets, depreciation is charged over the residual life and the additional charge of depreciation
is withdrawn from the Revaluation reserve.
FOREIGN EXCHANGE TRANSACTIONS
Sales and other transactions in foreign currency are recorded at the Current rate of exchange in force at the
time the transactions are effected. Accruals are recorded at the year-end rate. Exchange difference on
settlement, other than that related to fixed assets, is adjusted in the Profit & Loss Account.
Monetary Assets and Liabilities relating to foreign exchange transactions not settled as at the year end, are
translated at the rates prevalent on that date, and losses/profits, if any on such transactions are recognised
in the Profit and Loss Account.
Exchange difference on settlement/ translation of long-term liabilities incurred for acquisition of fixed
assets is adjusted in the carrying amount of fixed assets.
Difference between the forward exchange rates and the exchange rates prevalent at the inception of the
forward exchange contract in respect of liabilities incurred for acquisition of fixed assets is adjusted in the
carrying amount of fixed assets over the life of the contract.
DERIVATIVES TRANSACTIONS
Gain or Loss on derivative contracts entered into to hedge exposures to interest rate fluctuations are
recognised as and when the underlying transactions are settled. Accordingly proportionate amounts are
accrued/provided for the period between the last settlement date and the year-end.
234
INVENTORIES
Inventories include:
a) Tickets & Airway Bills Stock
b) Unutilised Inflight Service Amenities
c) Expendable Aircraft Spares
d) Aircraft Fuel in the Aircraft
e) Rotables, Galley Equipment and Tooling
Inventories are valued at cost or Net Realisable Value (NRV) whichever is lower. Cost includes custom
duty, freight and other charges as applicable and is determined using the Weighted Average formula. In
respect of reusable items such as rotables, galley equipment & tooling under (e) above, NRV takes into
consideration provision for obsolescence and wear & tear based on the estimated useful life of the aircraft
derived from Schedule XIV of the Companies Act, 1956 & also includes provisioning for non-moving/
slow moving items.
REDELIVERY EXPENSES
Aircraft Redelivery Expenses have been provided in proportion to the expired lease period.
AIRCRAFT MAINTENANCE & REPAIRS COST
Aircraft Maintenance, Auxiliary Power Unit (APU) and Engine maintenance and repair costs are expensed
as incurred except where such overhaul cost in respect of Engines/ APU covered by third party
maintenance agreement and accounted in accordance therewith. (Refer Note – 18)
FREQUENT FLYER EXPENSES
The cost of allowing free travel to members of the Frequent Flyer Programme is accounted considering the
members’ accumulated mileage.
TAXATION
Provision for current tax is made after taking into consideration benefits admissible under the provisions of
the Income Tax Act, 1961.
Deferred tax resulting from “timing differences” between book and taxable profit is accounted for using
the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent that there is a reasonable/virtual
certainty that the asset will be realised in future.
CONTINGENT LIABILITY
These are disclosed by way of Notes to the Accounts. Provision is made in the accounts in respect of those
contingencies which are likely to materialise into liabilities after the year end, till the finalisation of
accounts and have material effect on the position stated in the Balance Sheet.
2. Estimated amount of Contracts remaining to be executed on capital account net of advances, not provided for
Rs.234, 863 (‘000s) (Previous Year - Rs.433, 628 (‘000s)).
3. CONTINGENT LIABILITY :
A. Unprovided Income Tax demands which are disputed in appeals Rs.37, 499 (‘000s) (Previous Year Rs.20,
345 (‘000s)).
B. Unprovided claims against the Company, pending Civil and Consumer suits of Rs. 78,765 (‘000s)
(Previous Year Rs.71, 669 (‘000s)).
C. Unprovided claims for Octroi duty on aircraft by Bombay Municipal Corporation (BMC) not accepted by
the company amounts to Rs.289, 892 (‘000s) (Previous Year Rs. 289,892(‘000s)).
D. Disputed claims against the company towards Landing & Navigation Charges made by Airports Authority
of India amounts to Rs. 196,835 (‘000s). (Previous year Rs.187,312)
235
E. Disputed claims against the company towards Ground Handling charges levied by Air India at Cochin
International Airport amounting to Rs. 235,075 (‘000s) (Previous year Rs.208,175). Presently the matter is
under sub-judice before the MRTP Commission.
F. Letters of Credit outstanding are Rs.1,629,323 (‘000s) (Previous Year Rs. 1,612,995 (‘000s)) and Bank
Guarantees outstanding are Rs. 1,572,474 (‘000s) (Previous Year Rs. 1,496,686 (‘000s)).
4. ARREARS OF PREFERENCE DIVIDEND :
Dividend payable of Rs.87,577 (‘000s) (Previous Year Rs.69,829 (‘000s)) on the Cumulative Convertible
Redeemable Preference Shares (CCRPS) from Financial Year 2002-03 to 30
th
September 2004.
5. The Company allotted 69,828,750 5% Cumulative Convertible Redeemable Preference Shares (CCRPS) of Rs.
10 each to International Finance Corporation (IFC), Washington in 2000-2001. IFC has an option to convert
these CCRPS together with an annualised return of 12% (less dividend declared) into equity shares at the time
of the initial public offering (IPO). In the event IFC does not exercise the option, the CCRPS would be
redeemed within 3 months from the IPO date. IFC also has an option for an early redemption before March 31,
2008 if certain terms laid down in the Subscription Agreement are not complied with. The Company also has
an option for early redemption after February 15, 2003 if the Company feels that it would not come out with an
IPO due to market conditions or any other reasons. In the event of redemption, IFC would receive an annual
return of 18% (less dividend declared). The exchange difference on repatriation/ at the time of conversion of
the CCRPS together with the assured return (less dividend declared) is to the account of the Company.
The company has since intimated IFC about its desire to come out with an IPO; IFC in turn has exercised its
option not to convert but to redeem. Accordingly the company proposes to redeem the CCRPS together with
the annualised return of 18% less the dividend so far declared and paid out amounting to Rs. 455,904 (‘000s)
out of the proceeds of the IPO. The annualised return less the dividend so far declared and paid out will be
adjusted against ‘Share Premium Account’ expected to be raised in the IPO.
6. Aircraft Lease Rentals are stated net of sub-lease rentals of Rs. 79,011 (‘000s) (Previous Year Rs. 26,668
(‘000s)).
7. No credit was taken in the previous accounting year 2003-04 from Forward Sales where a claim for refund has
not been made for two years (Refer accounting policy 1 (C)) pending reconciliation of the Forward Sales
Account with the subsidiary register. During the current six months period, the Forward Sales balance has
substantially been utilised and credit has been taken for expired tickets of Rs. 228,467 (‘000s) on the basis of
estimation of pattern and trend of utilization.
From March 1,2004 the company has shifted to a new accounting package for Passenger and Cargo Revenue.
8. During the period ended 30
th
September,2004 the Company has purchased and sold Current Investments in
liquid plans of various Mutual Funds detailed below:
MUTUAL FUND NO. OF UNITS ( in ‘000s) COST (Rs. ‘000s)
Kotak Mahindra Mutual Fund 170,720 2,151,460
Deutsche Mutual Fund 93,957 956,036
HDFC Mutual Fund 62,903 780,500
JM Mutual Fund 66,206 665,220
Prudential ICICI Mutual Fund 78,673 1,189,298
ING Vysya Mutual Fund 53,339 553,500
SBI Mutual Fund 99,031 1,032,229
HSBC Mutual Fund 71,003 711,822
Principal Mutual Fund 129,329 1,296,172
Alliance Capital Mutual Fund 59,176 618,055
Birla Sun Life Mutual Fund 44,111 497,027
Standard Chartered Mutual Fund 159,245 1,598,818
Reliance Mutual Fund 68,760 855,129
Franklin Templeton Mutual Fund 401 400,548
Tata Mutual Fund 88,971 1,016,475
Chola Mutual Fund 8,747 100,000
236
9. A. Prior Period credits included in the determination of the net profit are towards Aircraft Maintenance Rs. Nil ('000s)
(Previous Year Rs. 18,756 (‘000s)).
B. Prior Period debits included in the determination of the net profit are Interest on Rupee loans of Rs. 4,120 (‘000s)
(Previous Year Rs. Nil), and provision for disputed damage charges levied by Airports Authority of India amounting to
Rs. 24,386 (‘000s) (Previous Year Rs. Nil).
10. The Company raised a Subordinated Rupee Debt of Rs.2, 640,000 (‘000s) equivalent to USD 55.6 Million from
Infrastructure Development Finance Company Ltd. (IDFC) in 2001-2002. As per the terms of the borrowings, interest @
4% p.a. is payable every year and a further interest @ 8.45% p.a. is to be cumulated and compounded every year payable at
the end of 8 years i.e. August 23, 2009 or any prepayment date. The principal amount along with the accumulated interest
is repayable in lump sum at the end of 8 years. Accordingly an amount of Rs. 701,100 ('000s) has been cumulated and
compounded upto August 23, 2004 and included in the debt and the interest accrued from August 23, 2004 to the period
ended 30
th
September 2004 is provided for. The Company has an option to prepay the entire amount outstanding on the
fourth anniversary of the debt drawdown i.e. August 23, 2005, failing which IDFC shall have the right to reset the interest
rate for the balance term of the debt. The Company has maintained a Bank Guarantee of Rs.1,170,000 (‘000s) (Previous
year Rs. 1,120,000 (‘000s)) equal to 35% of the debt.
As per the terms and conditions of the document, until all US Exim supported obligations are repaid or discharged in full,
the subordinated debt, shall, in all respects, be subordinated to all the present and future indebtedness of the Company,
whether secured or unsecured.
In the event of default by the Company in payment of the annual interest or the payment of the cumulative loan or
maintaining adequate security deposit/ bank guarantee, IDFC has the right to seek conversion of the amounts due into
equity shares of the Company. However, the Company has the option to buy back these shares subject to the prevailing
law.
11. PAYMENTS TO AUDITORS FOR THE PERIOD ENDED :
Amount (Rs.'000s)
30-Sep-04 30-Sep-03
a) As Audit Fees
2,865
972
b) As Advisor or in any other capacity in respect of :
Company Law Matters
Taxation
-
2,250
945
1,570
c) In any other manner (certification, etc.) 2,865
1,133
d) For reimbursement of expenses
-
1
Total 7,980 4,621
12. MANAGERIAL REMUNERATION :
Amount (Rs.'000s)
30-Sep-04 30-Sep-03
i. Salary 1,541 1,434
ii. Contribution to Provident Fund and Provision for
Gratuity
178 177
iii. Perquisites 346 357
Total 2,065 1,968
13. SEGMENT REPORTING :
The proportion of international operations revenue to the total revenue is insignificant, therefore has not been reported
separately.
As such all other related activities revolve around the main business. Hence there are no such separate reportable segments,
as required by the Accounting Standard - 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of
India.
237
14. RELATED PARTY TRANSACTIONS :
As per Accounting Standard - 18 on “Related Party Disclosures” issued by the Institute of Chartered Accountants of India,
the disclosure of transactions with the related party as defined in the Accounting Standard are given below:
i. List of Related Parties with whom transactions have taken place and Relationships :
Sr. No. Name of the related party Nature of relationship
1 Tailwinds Ltd. Holding Company
2 Naresh Goyal Controlling Shareholder of Holding Company
3 Anita Goyal Relative of Naresh Goyal
4 Saroj K Datta Executive Director
5 Jetair Pvt. Ltd. Associate Companies
6 Jet Enterprises Pvt. Ltd
7 Jet Airways LLC
8 Jet Airways of India Inc.
9 Jetair Tours Pvt. Ltd.
10 Vimpal Holding Pvt. Ltd.
11 International Cargo Carriers Pvt. Ltd.
12 National Travel Services Associate Partnership firm
ii. Transactions during the period ended 30
th
September, 2004 and balances with related parties :
Amount (Rs. ‘000s)
Associated
Companies
Sr.
No.
Nature of Transactions Holding
Company
Relative of
Naresh Goyal
Executive
Director
Jetair Pvt.
Ltd.
Others
A) Remuneration 43 2,065
(2,109) (1,968)
B) Agency Commission 551,914 76,575
(376,782) (72,995)
C) Rent paid 2,178
(2,178)
3,000
(10,500)
D) Expenses Reimbursed (Staff
Costs / Communication Costs,
Rent)
-313,423
(-218,104)
E) Trademark Fees 36,588
*(29,704)
(Figures in brackets indicates September 30, 2003 figures)
*with Jet Enterprise Pvt. Ltd.
Associated
Companies
Sr.
No.
Nature of Transactions Holding
Company
Relative of
Naresh Goyal
Executive
Director
Jetair Pvt.
Ltd.
Others
A) Deposits & Advance for Leased
Premises
126,837
(126,837)
38,000
(41,000)
B) Sundry Creditors 95,256
(Nil)
13,302
(13,014)
C) Sundry Debtors Nil
(122)
Nil
(13,129)
D) Share Capital
(Equity Contribution)
720,889
(720,889)
(Figures in brackets indicates March 31, 2004 figures)
238
15. The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on
‘Leases’ issued by the Institute of Chartered Accountants of India, the future minimum lease payments on account of each
type of lease are as follows: -
A) Finance Leases/ Hire Purchase
Amount (Rs. ‘000s)
Particulars Future Minimum Lease
Payments
Present Value of
Future Minimum
Finance Charges
As at Lease Payments
30
th
Sep’04
As at
30
th
Sep’04
Aircraft
Less than 1 year
4,649,681
(4,565,856)
2,781,812
(2,676,372)
1,867,869
(1,889,484)
Between 1 and 5 years 17,709,378
(17,488,765)
11,960,993
(11,546,832)
5,748,385
(5,941,933)
More than 5 years 14,777,773
(16,668,869)
12,780,798
(14,150,477)
1,996,975
(2,518,392)
Total
37,136,832
(38,723,490)
27,523,603
(28,373,681)
9,613,229
(10,349,809)
Vehicles
Less than 1 year
9,013
(31,202)
7,740
(28,613)
1,273
(2,589)
Between 1 and 5 years
9,210
(14,712)
8,447
(13,363)
763
(1,350)
More than 5 years (-)
(-)
(-)
(-)
(-)
(-)
Total 18,223
(45,914)
16,187
(41,976)
2,036
(3,939)
Grand Total 37,155,055
(38,769,404)
27,539,790
(28,415,657)
9,615,265
(10,353,748)
(Figures in brackets indicates March 31, 2004 figures)
The salient features of a Hire Purchase/ Finance Lease Agreement are:
• Option to purchase the aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount
or at the end of the Hire Purchase term on payment of a nominal option price.
• In the event of default, the Hirer/ Lessee is responsible for payment of all costs of the Owner including the financing cost,
and other associated costs. Further a right of repossession is available to the Owner/ Lessor.
• The Hirer/ Lessee is responsible for maintaining the aircraft as well as insuring the same.
• In the case of Hire Purchase/Finance Lease the property passes to the Hirer/Lessee, on the payment of a nominal option
price at the end of the term.
B) Operating Leases
Amount (Rs.’ 000s)
Particulars Total Lease Payments
30-Sep-04
Aircraft & Spare Engines
Less than 1 year 2,131,531
(2,265,668)
Between 1 and 5 years 4,093,612
(6,182,363)
More than 5 years (-)
(-)
Grand Total 6,225,143
(8,448,031)
239
Amount (Rs.’ 000s)
Particulars Total Lease Payments
30-Sep-04
Aircraft given on sub – lease
Less than 1 year -163,013
(-159,610)
Between 1 and 5 years -499,853
(-661,022)
More than 5 years (-)
(-)
Grand Total -662,866
(-820,632)
(Figures in brackets indicates September 30, 2003 figures)
The Salient features of an Operating Lease agreement are:
• Monthly rentals paid in form of fixed and variable rental. Variable Lease Rentals are payable on a pre determined
rate payable on the basis of actual flying hours. Additionally, the predetermined rates of Variable Rentals are
subject to the annual escalation as stipulated in the respective leases.
• The Company does not have an option to buyback nor does it generally have an option to renew the leases.
• In case of delayed payments, penal charges are payable as stipulated.
• In case of default, in addition to repossession of the aircraft, damages including liquidated damages as stipulated
are payable.
• The Lessee is responsible for maintaining the aircraft as well as insuring the same. The Lessee is eligible to claim
reimbursement of costs as per the terms of the lease agreement.
• The leases are non-cancellable.
16. EARNINGS PER SHARE (EPS) :
The earnings per equity share, computed as per the requirements of Accounting Standard – 20 “Earnings Per Share”
issued by the Institute of Chartered Accountants Of India, is as under:
Amount (Rs. ‘000s)
30-Sep-04 30-Sep-03
Net Profit/ (Loss) after tax
Less: Annualised return on Cumulative Preference Shares
1,293,597
57,023
(155,023)
50,863
Balance Profit attributable to Equity Shareholders A 1,236,574 (205,886)
Add : Return on Preference Shares (See above)
Add : Interest (net) on Institutional Loan with
convertibility clause
57,023
179,448
50,863
166,636
Adjusted Net Profit for Diluted Earnings per Share B 1,473,045 11,613
Weighted no. of Equity Shares outstanding during C
the period
No of Equity Shares resulting from the conversion of
Institutional Loan
No of Equity Shares resulting from the conversion of
CCRPS
72,088,900
313,625,375
99,183,229
72,088,900
289,188,912
88,468,128
Weighted no. of Diluted Equity Shares outstanding during the period
(Nos.) D
484,897,504 449,745,940
Nominal Value of Equity Shares (Rs.) 10 10
Basic EPS (INR) (E = A/C)
(not annualised)
17.15 (2.86)*
Diluted EPS (INR) (F = B/D)
(not annualised)
3.04 (2.86)*
* Being anti-dilutive the Basic & Diluted EPS are the same.
240
17. The Deferred Tax Liability as at 30
th
September 2004 comprises of the following:
Amount (Rs. ‘000s)
Particulars 30-Sep-04 2003-04
Deferred Tax Liability
Related to Fixed Assets
3,436,098
3,173,054
Deferred Tax Asset
Unabsorbed Depreciation
Other Disallowances under Income Tax Act, 1961
2,684,860
77,686
2,581,722
83,882
Provision for Deferred Tax Liability (Net) 673,552 507,450
Deferred Tax Asset on account of unabsorbed tax depreciation has been recognised, as it can be realised against the reversal
of deferred tax liability on account of depreciation.
18. Hitherto costs associated with heavy aircraft maintenance checks (C/D check) and Engine repairs not covered by third party
maintenance agreement were provided for on the basis of a predetermined amount for each block hour flown. The costs of
such maintenance were charged against these provisions. However, in view of mandatory Accounting Standard –29 on
“Provisions, Contingent Liabilities and Contingent Assets” issued by the Institute of Chartered Accountant of India,
applicable for period commencing from 1-4-2004, the company has for the six months ended 30
th
September 2004,
accounted for said expenses on an incurred basis, applying the standard prospectively. Consequently, charge on account of
said expenses for the six months ended 30
th
September 2004 is lower by Rs. 411,035(‘000s) and profit for the period is
higher by the like amount.
19. The company has provided for the following types of expenditure:-
a) Frequent Flyer Programme: -
The Company has a Frequent Flyer Programme named ‘Jet Privilege’, wherein the passengers who frequently use the
services of the Airline become members of ‘Jet Privilege’ and accumulate miles to their credit. Subject to certain terms and
conditions of ‘Jet Privilege’, the passenger is eligible to redeem such miles lying to their credit in the form of free tickets.
The cost of allowing free travel to members as contractually agreed under the Frequent Flyer Programme is accounted
considering the members’ accumulated mileage on an incremental cost basis. The movement in the provision during the
period is as under: -
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 118,400
Add: - Additional Provisions during the period 63,136
181,536
Less: - Amounts used during the period 26,401
155,135
Less: - Unused Amounts reversed during the period -
Closing Balance as at 30/09/2004 155,135
b) Redelivery of Aircraft: -
The company has in its fleet few aircraft on operating lease. As contractually agreed under the lease agreements, the aircraft
have to be redelivered to the lessors at the end of the lease term in the stipulated technical condition. Such redelivery
conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and the
cost of ferrying the aircraft to the location as stipulated under the lease agreement.
The company therefore provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease
period.
241
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 153,472
Add:- Additional Provisions during the period
(Net of Exchange Fluctuation of Rs. 5,016 (‘000s))
14,223
167,695
Less:- Amounts used during the period -
167,695
Less:- Unused Amounts reversed during the period 27,199
Closing Balance as at 30/09/2004 140,496
The cash outflow out of the above provisions as per the current terms under the lease agreements are as under: -
Year No of Aircraft Amount (Rs.‘ 000s)
2004-05 1 8,812
2005-06 4 31,709
2006-07 3 34,028
2007-08 7 42,773
2008-09 2 23,174
Total 140,496
c) Aircraft Maintenance Costs: -
Certain heavy maintenance checks including overhaul of Auxiliary Power Units need to be performed at specified intervals
as enforced by the Director General of Civil Aviation in accordance with the Maintenance Program Document laid down by
the manufacturers. The movements in the provisions for such costs are as under: -
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 1,725,308
Add: - Addition due to Exchange Fluctuation (Refer Note No.18) 93,560
1,818,868
Less: - Amounts used during the period 49,110
1,769,758
Less: - Unused Amounts reversed during the period 99,516
Closing Balance as at 30/09/2004 1,670,242
d) Engine Repairs Cost: -
The aircraft engines have to undergo shop visits for overhaul and maintenance at specified intervals as per the Maintenance
Program Document. The same is provided for on the basis of hours flown at a pre-determined rate.
Amount (Rs. ‘000s)
Particulars 30-Sep-04
Opening Balance as at 01/04/2004 422,748
Add: - Addition due to Exchange Fluctuation (Refer Note No.18) 22,168
444,916
Less: - Amounts used during the period -
444,916
Less: - Unused Amounts reversed during the period -
Closing Balance as at 30/09/2004 444,916
20. Previous Year’s figures have been re-grouped, wherever necessary to correspond with figures of current year.
242
21. Comparative figures in the case of Balance Sheet items and related notes have been provided as at March 31,2004, while in
the case of Profit & Loss items and related notes they have been provided for corresponding six months of the last Financial
Year.
Signatures to Schedules 'A' to 'S’
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
243
Statement of Cash Flow for the Six months period ended 30
th
September 2004
April 04- Sept 04 Apr 03- Sep 03
Rs. ‘000s Rs. ‘000s
A Cash Flow from Operating Activities
Net Profit / (Loss) before tax 1,582,108 (154,753)
Adjustments for :
Depreciation & Stock Obsolescence 2,397,597 2,637,560
Loss/(Profit) on sale of Fixed assets 34,880 (84,892)
Profit on sale of Investments (15,945) (13,389)
Interest expense 1,232,231 1,568,238
Provision for doubtful debts 11,370 9,041
Operating profit before working capital
changes
5,242,241 3,961,805
Changes in Inventories (52,874) (185,163)
Changes in Sundry Debtors (342,780) 156,632
Changes in Fixed Deposits with Banks (Refer
Foot note)
517,006 880,022
Changes in Loans & Advances (32,789) (9,847)
Changes in Current Liabilities and Provisions 990,099 (197,045)
Cash generated from operations 6,320,903 4,606,404
Income tax paid (110,807) 56,178
Net cash from operating activities A 6,210,096 4,662,582
B Cash Flow from Investing Activities
Capital Expenditure - Aircraft & Others (816,614) (1,662,667)
Proceeds from sale of fixed assets 2,590 1,793
Purchase of Investments (19,329,889) (13,262,500)
Sale of Investments 16,671,706 12,852,889
Net cash from investing activities B (3,472,207) (2,070,485)
C Cash flows from Financing Activities
Decrease in Term Loans (879,300) (1,487,704)
Interest paid (1,154,574) (1,527,363)
Net cash used from financing activities C (2,033,874) (3,015,067)
Net change in cash (A+B+C) 704,015 (422,970)
Cash and cash equivalents at beginning of
period
135,563 634,788
Cash and Bank equivalents at end of period 839,578 211,818
Note: Fixed Deposits with banks with maturity period of more than 3 months including interest
accrued thereon and Fixed Deposits under lien are not included in Cash and Cash equivalents
As per our attached report of even date
FOR DELOITTE HASKINS & SELLS.
R. SALIVATI
PARTNER
FOR CHATURVEDI & SHAH
C.D.LALA
PARTNER
FOR AND ON BEHALF OF THE BOARD
CHAIRMAN
DIRECTOR
COMPANY SECRETARY
MUMBAI
DATED: December 20, 2004
244
STATEMENT OF TAX BENEFITS
The Board of Directors
Jet Airways (India) Limited
Dear Sirs,
We hereby certify that the enclosed annexure states the tax benefits available to Jet Airways (India) Ltd. (the
“Company”) and to the Shareholders of the Company under the provisions of the Income Tax Act, 1961 and other
direct tax laws presently in force.
The contents of this annexure is based on information, explanations and representations obtained from the Company
and on the basis of our understanding of the business activities and operations of the Company.
A shareholder is advised to consider in his/her/its own case, the tax implications of an investment in the equity
shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal precedent
or may have a different interpretation on the benefits, which an investor can avail.
For Chaturvedi & Shah
Chartered Accountants
C.D. Lala
Membership No.: 35671
Place: Mumbai
Date : December 31, 2004
245
ANNEXURE TO THE CERTIFICATE DATED DECEMBER 31, 2004
(A) Benefits to the Company Under Income-Tax Act, 1961:
1. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of any company is
exempted from the tax.
2. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
3. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
4. Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve
months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long
term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed
cost of acquisition.
5. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of investment in
shares will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
6. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of investment in shares
will be exempt from capital gains tax if the capital gains are invested in shares of an Indian Company
forming part of an eligible public issue, within a period of 6 months after the date of such transfer and held
for a period of at least one year. Eligible public issue means issue of equity shares which satisfies the
following conditions, namely -
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
7. Under section 112 of the Act and other relevant provisions of the Act, Long term capital gains, (i.e. if
shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act),
arising on transfer of investment in shares, shall be taxed at a rate of 20% (plus applicable surcharge) after
indexation as provided in the second proviso to section 48. The amount of such tax should however be
limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder.
246
8. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if
shares are held for a period not exceeding 12 months), arising on transfer of investment in shares on a
recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge).
(B) Benefits to the Shareholders of the Company under the Income Tax Act, 1961:
Resident Shareholders
9. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of the company is
exempted from the tax.
10. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
11. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
12. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
13. In terms of section 10(23D) of the Act, all Mutual Funds set up by Public Sector Banks or Public Financial
Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized by
the Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from
income tax on all their income, including income from investment in the shares of the company.
14. Under section 48 of the Act, if the company’s shares are sold after being held for not less than twelve
months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long
term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed
cost of acquisition.
15. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of shares of the
Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by:
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
16. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of shares of the
Company, as and when it is listed, will be exempt from capital gains tax if the capital gains are invested in
shares of an Indian Company forming part of an eligible public issue, within a period of 6 months after the
date of such transfer and held for a period of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely -
247
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
17. Under section 54F of the Act, long term capital gains (in cases not covered under section 10(38) of the
Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the net consideration from such shares are
used for purchase of residential house property within a period of one year before and two years after the
date on which the transfer took place or for construction of residential house property within a period of
three years after the date of transfer.
18. Under section 112 of the Act and other relevant provisions of the Act, Long term capital gains, (i.e. if
shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act),
arising on transfer of shares in the Company, shall be taxed at a rate of 20% (plus applicable surcharge)
after indexation as provided in the second proviso to section 48. The amount of such tax should however
be limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder, if the
transfer is made after listing of shares.
19. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., if
shares are held for a period not exceeding 12 months), arising on transfer of shares in the Company on a
recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge).
Non-Resident Indians/Non Residents Shareholders (Other than FIIs and Foreign venture capital investors.
20. In terms of section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received by a non-resident Indian
shareholder (i.e. an individual being a citizen of India or person of Indian origin who is not a ‘resident’) on
the shares of the company is exempted from the tax.
21. In terms of section 10(38) of the Act, any long term capital gains arising to a shareholder from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
shareholder if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax.
22. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
23. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder,
shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase
and sale of equity share in a company through the recognized stock exchange is liable to securities
transaction tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale
transactions are liable to tax @ 0.015% of the value payable by the seller.
24. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of shares of the
company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months
after the date of such transfer for a period of at least 3 years in bonds issued by
a) National Bank for Agriculture and Rural Development established under section 3 of The
National Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of The National Highway
Authority of India Act, 1988;
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
248
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989;
25. Under Section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) of the Act) on the transfer of shares of the
company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in
shares of an Indian company forming part of an eligible public issue, within a period of 6 months after the
date of such transfer and held for a period of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely-
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
26. Under section 54F of the Act, long term capital gains (in cases not covered under section 10(38) of the
Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the net consideration from such shares are
used for purchase of residential house property within a period of one year before and two year after the
date on which the transfer took place or for construction of residential house property within a period of
three years after the date of transfer.
27. Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains (i.e. if shares
are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising
on transfer of shares in the company, shall be taxed at a rate of 20% (plus applicable surcharge) after
indexation as provided in the second proviso to section 48. The amount of such tax should however, be
limited to 10% (plus applicable surcharge) without indexation, at the option of the shareholder, if the
transfer is made after listing of shares.
28. Under section 115-I of the Act, the non-resident Indian shareholder has an option to be governed by the
provisions of Chapter XII-A of the Income Tax Act, 1961 viz. “Special Provisions Relating to Certain
Incomes of Non-Residents” which are as follows:-
a) Under section 115E of the Act, where shares in the company are acquired or subscribed for in
convertible Foreign Exchange by a Non Resident Indian, capital gains arising to the non-resident
on transfer of shares held for a period exceeding 12 months on a recognized stock exchange, shall
(in cases not covered under section 10(38) of the Act) be concessionally taxed at the flat rate of
10% (plus applicable surcharge) (without indexation benefit but with protection against foreign
exchange fluctuation).
b) Under provisions of section 115F of the Act, long term capital gains (in cases not covered under
section 10(38) of the Act) arising to a non-resident Indian from the transfer of shares of the
company subscribed to in convertible Foreign Exchange (in cases not covered under section 115E
of the Act) shall be exempt from Income tax, if the net consideration is reinvested in specified
assets within six months of the date of transfer. If only part of the net consideration is so
reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be
chargeable to tax subsequently, if the specified assets are transferred or converted into money
within three years from the date of their acquisition.
Foreign Institutional Investors (FIIs)
29. In terms of section 10(34) of the Act, any income by way of dividends referred to in section 115-O (i.e.
dividends declared, distributed or paid on or after 1 April 2003) received on the shares of the company is
exempted from the tax.
30. In terms of section 10(38) of the Act, any long term capital gains arising to an investor from transfer of
long term capital asset being an equity shares in a company would not be liable to tax in the hands of the
investor if the following conditions are satisfied:
a) The transaction of sale of such equity share is entered into on or after 10th September, 2004
b) The transaction is chargeable to such securities transaction tax as explained below.
249
31. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,
transactions for purchase and sale of the securities in the recognized stock exchange by the investor, shall
be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and
sale of equity share in a company through the recognized stock exchange is liable to securities transaction
tax @ 0.075% of the value payable by both buyer and seller. The non-delivery based sale transactions are
liable to tax @ 0.015% of the value payable by the seller.
32. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business would be eligible for rebate from
the amount of income-tax on the income chargeable under the head “Profit and gains of business or
profession” arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, such amount paid on account of securities
transaction tax.
33. The income by way of short term capital gains or long term capital gains (in cases not covered under
section 10(38) of the Act) realized by FIIs on sale of shares in the company would be taxed @ 10% as per
section 115AD of the Act. However in case of such long term capital gains, the tax is levied on the capital
gains computed without considering the cost indexation and protection against foreign exchange
fluctuation).
34. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gain (in cases not covered under section 10(38) of the Act) arising on the transfer of share of the
company will be exempt from capital gain tax if the capital gain are invested within a period of 6 month
after the date of such transfer for a period of last 3 year in bond issued by:-
a) National Bank for agriculture and Rural Development established under section 3 of The National
Bank for Agriculture and Rural Development Act, 1981;
b) National Highway Authority of India constituted under section 3 of the National Highway
Authority of India Act, 1988.
c) Rural Electrification Corporation Limited, the company formed and registered under the
Companies Act, 1956;
d) National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987;
and
e) Small Industries Development Bank of India established under section 3(1) of the Small
Industries Development Bank of India Act, 1989.
35. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term
capital gains (in cases not covered under section 10(38) o the Act) on the transfer of shares of the
company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in
shares of an Indian company forming part of at least one year. Eligible public issue means issue of equity
shares which satisfies the following conditions, namely -
a) the issue is made by a public company formed and registered in India;
b) the shares forming part of the issue are offered for subscription to the public;
Venture Capital Companies/Funds
In terms of section 10(23FB) of the Act, all Venture capital companies/funds registered with Securities and
Exchange of India, subject to the conditions specified, are eligible for exemption from income tax on all their
income, including dividend from and income from sale of shares of the company.
250
(C) Benefits to Members of the Company under the Wealth Tax Act, 1957
Shares of company held by the shareholder will not be treated as an asset within the meaning of section
2(ea) of Wealth Tax Act 1957, hence shares are not liable to Wealth Tax Act, 1957
(D) Benefits to Members of the Company under the Gift Tax Act, 1958.
Gift made after 1st October 1998 is not liable for any gift tax and hence gift of shares of the company
would not be liable for any gift tax.
Notes:
1. All the above benefits are as per the current tax law as amended by the Finance (No.2) Act, 2004.
2. The stated benefits will be available only to the sole/first named holder in case the shares are held by joint
holders.
3. In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further
subject to any benefits available under the Double Taxation Avoidance Agreements, if any, between India
and the country in which the non-resident has fiscal domicile.
4. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax
advisor with respect to specific tax consequences of his/her participation in the scheme.
251
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP, IFRS AND U.S. GAAP
The Company’s financial statements are prepared in conformity with the generally accepted accounting principles
followed in India (“Indian GAAP”), which differ in certain significant respects from International Accounting
Standards/International Financial Reporting Standards (IAS/IFRS) and generally accepted accounting standards in
the United States of America (US GAAP). Such differences involve methods for measuring the amounts shown in
the financial statements of the Issuer, as well as additional disclosures required by IAS/IFRS and US GAAP, which
the Company has not made.
The following summarizes the areas in which differences between Indian GAAP, IAS/IFRS, and US GAAP could
be significant to the financial position and results of operations of the Company. The summary below should not be
construed to be exhaustive as no attempt has been made by management of the Company to quantify the effects of
those differences, nor has a complete reconciliation of Indian GAAP to IAS/IFRS or US GAAP been undertaken by
management. Had any such quantification or reconciliation been undertaken by the management of the Company,
other potential significant accounting and disclosure differences may have come to its attention, which is not
identified below.
Further, no attempt has been made to identify future differences between Indian GAAP and IAS/IFRS or US
GAAP as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate Indian GAAP,
IAS/IFRS, and US GAAP have significant projects ongoing that could affect future comparisons such as this one.
Finally, no attempt has been made to identify future differences between Indian GAAP and IAS/IFRS or US
GAAP that may affect the financial information as result of transactions or events that may occur in the future.
Potential investors should consult their own professional advisors for an understanding of the principal differences
between Indian GAAP, IAS/IFRS, and US GAAP and how these differences might affect the financial statements
of the Company set out in pages 196 to 243 of this Draft Red Herring Prospectus.
Elements of the Company’s accounting principles followed in the preparation of the Indian GAAP financial
statements, which differ significantly from IAS/IFRS and U.S. GAAP are described below:
Indian GAAP IAS/IFRS US GAAP
Changes in Accounting Policy
Any change in an accounting policy, which has
a material effect, should be disclosed. The
impact of, and the adjustments resulting from,
such change, if material, should be shown in the
financial statements of the period in which such
change is made, to reflect the effect of such
change. Where the effect of such change is not
ascertainable, wholly or in part, the fact should
be indicated. If a change is made in the
accounting policies which has no material effect
on the financial statements for the current period
but which is reasonably expected to have a
material effect in later periods, the fact of such
change should be appropriately disclosed in the
period in which the change is adopted.
Policy changes made on the adoption of a new
standard must be accounted for in accordance
with that standard’s transition provisions
Changes in accounting policy should be
accounted for retrospectively, with
comparative information restated and the
amount of the adjustment relating to prior
periods adjusted against the opening balance
of retained earnings of the earliest year
presented. An exemption applies when it is
impracticable to change comparative
information. Policy changes made on the
adoption of a new standard must be accounted
for in accordance with that standard’s
transition provisions. If transition provisions
are not specified, the method described above
must be used.
Requires recognition and disclosure of the
cumulative amount of the change in the
income statement for the period of the
change. The entity discloses pro-forma
comparatives as if the change had been
applied to those periods. However,
retrospective adjustments are required in
certain cases. Unlike IFRS, US GAAP
treats a change in the depreciation method
for previously recorded assets as a change
in accounting principle.
Revenue / Expenditure -- Frequent flyer
Passenger and Cargo income is recognised on
flown basis, i.e. when the service is rendered.
The cost of allowing free travel to members of
the Frequent Flyer Programme is accounted,
considering the members’ accumulated mileage.
Net Liability for free miles under Frequent flyer
programme determined based on the
incremental cost basis.
Similar to Indian GAAP.
Similar to Indian GAAP, save for
accounting for frequent flyer program as
described below.
Frequent flyer program obligations are
accounted by recording a liability for the
estimated incremental cost of flight awards
expected to be redeemed.
The Company would need to defer a portion
of the revenue in respect of mileage credits
that are likely to be redeemed through
participating partners such as other airlines,
hotels and car rental agencies and which
would require settlement in cash with these
parties. The revenue is recognized over the
period in which the credits are expected to
be redeemed.
252
Indian GAAP IAS/IFRS US GAAP
Retirement benefits
The liability for defined benefit plan is
actuarially determined. Several alternative
methodologies are considered acceptable for the
purposes of valuation and the actuary has
discretion over selection of the assumptions.
Compensated absences
Leave encashment or vacation accrual is viewed
as retirement benefit and is reported based on
actuarial valuation.
The liability for defined benefit plan is
reported at the present value of future benefits
using the projected unit cost method, with a
stipulated method to determine assumptions.
Actuarial gains and losses arising on periodic
valuation of liability would need to be
recognized based on certain criteria. As a
minimum, amortization of an unrecognized net
gain or loss shall be included as a component
of employee cost for a year if, as of the
beginning of the year, that unrecognized net
gain or loss exceeds 10 percent of the
projected benefit obligation Actuarial gains or
losses are amortized based on the expected
average remaining working lives of the
employees. Other systematic methods such as
immediate recognition of all gains and losses
is also permitted.
Compensated absences outstanding at the
balance sheet date are reported as liability and
is priced at the salary rate prevalent on the
balance sheet date.
Similar to IFRS except that immediate
recognition of actuarial gains or losses
immediately is not permitted.
Similar to IFRS.
Revaluation of Fixed Assets
Fixed assets are stated at historical cost or
revalued amount less accumulated depreciation
and accumulated impairment losses. If the
carrying amount is increased as a result of
revaluation, the increase is credited directly to
equity under the heading Revaluation Reserve.
However, the increase shall be credited in the
income statement to the extent that it reverses a
revaluation decrease of the same asset
previously recognized in the income statement.
If an asset’s carrying amount is decreased as a
result of revaluation, the decrease is recognized
in the income statement. However, the decrease
is directly debited to equity under the heading
Revaluation Reserve to the extent of any credit
balance existing in the revaluation reserve in
respect of that asset.
An entity that elects to revalue an item of
property, plant and equipment, the entire class
of property, plant and equipment to which the
asset belongs should be revalued. Revaluation
shall be made at sufficient regularity to ensure
that the carrying amount does not differ
materially from that which would be
determined using the fair value at the balance
sheet date.
Recognition of an increase or decrease in
revaluation is similar to Indian GAAP.
No upward revaluation of any class of fixed
assets is permitted.
Purchase Incentives
The assets that are received free of cost in
connection with the purchase of other assets are
carried at nil value.
Similar to Indian GAAP.
.
Credits issued by vendors for e.g. aircraft
manufacturers, which can be used for
purchase of spare parts, or other equipment
can be applied as reduction of purchase
price of the aircraft or amortised over the
life of the related aircraft.
Foreign Exchange Differences
Foreign exchange difference relating to
acquisition of fixed assets is adjusted to the
carrying cost of such assets. Other foreign
exchange differences are recognized in the profit
and loss account.
Premium or discount on forward exchange
contracts is amortized and recognized in the
income statement over the period of such
contract, except in respect of contracts relating
to liabilities for purchase of fixed assets where
the amortization is adjusted to the carrying value
of the fixed assets.
All gains or losses arising out of foreign
exchange differences are required to be
included in the determination of net income,
unless these differences are regarded as an
adjustment to interest costs, which are eligible
for capitalization as borrowing costs on fixed
assets.
Exchange differences relating to monetary
assets and liabilities are recorded through
the income statement and those on all non-
monetary assets are not recorded.
Borrowing Costs
Borrowing costs attributable to the acquisition
or construction of a qualifying asset is
capitalised as part of the cost of the asset. Other
borrowing costs are recognised as an expense in
the period in which they are incurred. Costs
considered include interest, and other upfront
fees paid in connection with the arrangement of
funds.
Borrowing costs are recognized as an expense
in the period in which they are incurred and
should be calculated using an effective
interest-rate method. Borrowing costs include
the amortization of transaction costs included
in the initial arrangement of borrowings An
acceptable alternative is to capitalize those
borrowing costs attributable to the acquisition,
construction or production of an asset.
Interest cost is capitalized as part of the cost
of an asset that is constructed or produced
for an entity’s own use. The capitalization
period begins when activities to ready the
asset for its use commences and ends when
the asset is ready for use.
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Indian GAAP IAS/IFRS US GAAP
Depreciation on fixed assets
The Company generally provides for
depreciation using the written down value
method as per rates prescribed in schedule XIV
of the Companies Act1956. These are the
minimum rates and companies are permitted to
charge depreciation at higher rates in order to
write-off the cost of the assets over their useful
lives, if shorter.
The depreciable amount of an item of
property, plant and equipment are allocated on
a systematic basis over its useful life.
Depreciation is provided on a systematic
and rational manner over the estimated
useful economic life of the asset.
Inventories
Under Indian GAAP inventories are carried at
the lower of cost or net realizable value
(“NRV”) and include aircraft rotables, galley
equipment and tooling. In respect of reusable
items such as rotables, galley equipment &
tooling NRV takes into consideration provision
for obsolescence and wear & tear based on the
estimated useful life of the aircraft derived from
Schedule XIV to the Companies Act, 1956
Similar to US GAAP. Rotables and assemblies of significant
values & other non-expendable parts are
classified along with flight equipment as
fixed assets & depreciated over the
estimated useful life.
AIRCRAFT OVERHAUL/MAINTENANCE
COSTS
Prior to April 1, 2004 heavy maintenance
expenses on C/D checks on aircrafts were
booked at a pre – determined rate. Consequent
to introduction of Accounting Standard 29
“Provisions, Contingent Liabilities and
Contingent Assets”,
Aircraft Maintenance, Auxiliary Power Unit
(APU) and Engine maintenance and repair costs
are expensed as incurred except where such
overhaul cost in respect of Engines/ APU is
covered by third party maintenance agreement
and accounted in accordance therewith. The
accounting standard has been applied
prospectively.
Overhaul expenditure is recognized as an
expense in the period when incurred.
However, in accordance with IAS 16 on
Property, Plant and Equipment, cost of major
inspection (distinct from physical parts) is
recognized in the carrying amount of property,
plant and equipment as replacement if it meets
the recognition criteria. Similarly cost of
replacing a part of property, plant and
equipment can be capitalized if the recognition
criteria are met. In order to capitalize an item
as property, plant and equipment it should be
probable that the future economic benefits
associated with that item will flow to the entity
and cost of the item can be reliably measured.
The carrying amount of any previous
inspection cost capitalized and the part
replaced should be derecognized as property,
plant and equipment and should be included in
determination of profit or loss in the period of
replacement.
Adopt an accounting method that
recognizes overhaul expenses in the
appropriate period. The following
accounting methods are most often
employed:
• Direct expensing method
• Built-in overhaul method
• Deferral method
• Accrual method
Direct Expensing Method. Recognize the
cost of overhauls as expenses as they are
incurred.
Built-in Overhaul Method. The built-in
overhaul method is based on segregation of
the aircraft costs into those that should be
depreciated over the useful life of the
aircraft and those that require overhaul at
periodic intervals. Thus, the estimated cost
of the overhaul component included in the
purchase price is set up separately from the
cost of the airframe and engines and is
amortized to the date of the initial overhaul.
The cost of the initial overhaul is then
capitalized and amortized to the next
overhaul, at which time the process is
repeated.
Deferral Method. Under the deferral
method, the actual cost of each overhaul is
capitalized and amortized to the next
overhaul.
Accrual Method. The accrual method
provides for estimating the cost of the initial
overhaul and accruing the cost, based on an
hourly rate, to the overhaul. At that time,
the actual cost of overhaul is charged to the
accrual, with any deficiency or excess
charged or credited to expense. The cost of
the next overhaul is then estimated, based
on the new rate, and accrued to that
overhaul, at which time the process is
repeated.
Derivative Contracts
Gain or Loss on derivative contracts entered into
to hedge exposures to interest rate fluctuations
are recognised as and when the underlying
transactions are settled. Accordingly
proportionate amounts are accrued/provided for
the period between the last settlement date and
the year-end
Similar to US GAAP.
The FASB issued SFAS No.137,
“Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective
Date of FASB Statement No.133, which
amends SFAS No.133, “Accounting for
Derivatives Instruments and Hedging
Activites”, with effect from April 1, 2001.
SFAS No.133 establishes accounting and
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Indian GAAP IAS/IFRS US GAAP
reporting standards for derivative
instruments and hedging activities,
including certain derivative instruments
embedded in other contracts, and requires
that an entity recognizes all derivatives as
assets or liabilities in the balance sheet and
measure them at fair values, with changes in
fair values being recognized in earnings,
unless it qualifies the criterion of an
effective hedge, as defined in SFAS
No.133, in which case the changes in fair
value is recognized as other comprehensive
income in under shareholders’ equity.
The gain or loss on derivative financial
instruments that is designated and effective
as hedges are generally recognized in
earnings in the same period as the
corresponding gain or loss on the
underlying transaction being hedged.
In a fair value hedge, a derivative
instrument is marked to its fair value
currently through earnings with an
offsetting partial mark-to-fair-value of the
hedged item (for the risk being hedged)
currently through earnings.
In a cash flow hedge, a derivative
instrument is first marked to its fair value
with the effective portion of the gain or loss
reported initially in comprehensive income
(equity) and the ineffective portion reported
currently in earnings. The gain or loss on
the derivative instrument is reclassified
from equity into earnings in the same period
as the loss or gain on the hedged cash flow.
Investments
Investments are classified as current or long
term.
Current Investments are carried at lower of cost
and quoted/fair value.
Long-term investments are stated at cost.
Provision for diminishing in the value of long-
term investments is made only if such decline is
other than temporary in the opinion of the
management.
Investments are classified as trading, held-to-
maturity or available-for-sale. Investments
acquired principally for the purposes of
generating profits from short-term price
fluctuations or dealers’ margins are classified
as trading. Held-to-maturity investments are
investments with fixed or determinable
payments and fixed maturity together with the
entity’s intent and ability to hold till maturity.
Available-for-sale investments are those that
do not qualify as either trading or held-to-
maturity investments. Changes in fair values
of trading investments are recognize as profit
or loss in the income statement. Held-to-
maturity investments are carried at amortized
cost. Changes in fair values of available-for-
sale investments can either be recognized in
the income statement or in the statement of
shareholder’ equity.
Similar to IFRS except that changes in fair
value of available-for-sale investments are
recognized as other comprehensive income
under shareholders’ equity and other than
temporary impairment of available-for-sale
securities and held to maturity securities,
cannot be reversed.
Other comprehensive income
All items of income are included in net income,
unless specifically permitted to be adjusted to
equity.
Certain foreign exchange differences, changes
in fair values of available-for-sale investments
and related amounts of taxes are recognized in
the statements of changes in shareholders’
equity.
Certain items of revenues, expenses, gains,
and losses that under generally accepted
accounting principles are included in
comprehensive income but excluded from
net income are classified as other
comprehensive income. Items included in
other comprehensive income shall be
classified based on their nature. For
example, under existing US accounting
standards, other comprehensive income
shall be classified separately into;
• foreign currency items,
• minimum pension liability
adjustments, and unrealized gains and
• losses on certain investments in debt
and equity securities
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Indian GAAP IAS/IFRS US GAAP
Deferred Income Taxes
Deferred tax resulting from “timing differences”
between accounting and taxable income is
accounted for using the tax rates and laws that
have been enacted or substantively enacted as
on the balance sheet date. Deferred tax assets
relating to carry forward losses and unabsorbed
depreciation should be recognized only to the
extent that there is virtual certainty supported by
convincing evidence that sufficient future
taxable income will be available against which
such deferred tax assets can be realized. All
other deferred tax assets should be recognized to
the extent that there is reasonable certainty that
future taxable income will be available for such
deferred tax assets will be realized.
Deferred income taxes are recognised for the
future tax effects of temporary differences
between accounting and tax basis of assets at
the enacted or substantively enacted tax rates.
Deferred tax assets and liabilities must be
recognized regardless of when the timing
difference is likely to reverse. Deferred tax
assets must be recognized when it is probable
that sufficient taxable profits /reversible
differences will be available against which the
deferred tax assets can be utilized.
Deferred tax liabilities and assets are
recorded for the tax effect of all temporary
differences between the accounting and tax
base of assets and liabilities, and operating
loss carry-forwards, at enacted rates.
Changes in tax rates are reported in the
income statements in the period of
enactment.
A valuation allowance is made against
deferred taxes if, based on the weight of
available evidence, it is more likely than not
the some portion or all of the deferred tax
asset will not be realized.
Dividend on preference shares
Dividend is recorded as an appropriation from
earnings and reflected as a liability when
declared.
Dividends relating to a financial instrument
classified, as liability should be reported in the
income statement as an expense. Such
dividends may be shown in the income
statement either as interest or as a separate
item.
Similar to IFRS except that dividends
should be presented separately in the
income statement from interest payments to
other creditors.
Premium on redemption of preference shares
Premium on redemption of preference shares
should be either provided for out of the profits
of the Company or adjusted against the
securities premium account
These shares would be classified as a liability,
and the return assured in the eventuality of
redemption would be accrued as interest
expense.
Similar to IFRS.
Sale and leaseback transactions
Gain on a sale and leaseback transaction where
the leaseback is an operating lease is recognized
immediately.
Similar to Indian GAAP. If the sale-leaseback transaction results in
an operating lease, the timing of the
recognition of a gain on the sale depends on
whether the seller has leased back a minor
portion of the asset or more than a minor
portion. If the present value of a reasonable
amount of rentals for the leaseback period
represents 10% or less of the fair value of
the asset sold, the seller-lessee has leased
back a minor portion. In such situations, the
seller should recognize any gain on the sale
of the asset at the time of the sale. If the
seller-lessee retains more than a minor
portion, but less than substantially all of the
use of the property, any gain in excess of
the present value of a reasonable amount of
rent should be recognized currently. The
remaining gain on the sale should be
deferred and recognized as a reduction of
rent expense over the term of the lease in
proportion to the related gross rentals. A
loss on the sale should be recognized
immediately.
Finance Leases
Requires recognition of an asset held under a
finance lease with a corresponding obligation to
pay future rentals, at an amount equal to the
lower of the fair value of the asset and the
present value of the minimum lease payments
(MLPs) at the inception of the lease. The asset is
depreciated over its useful life or the lease term
if shorter. However, the latter is only permitted
if there is no reasonable certainty of the lessee
obtaining ownership of the asset. The interest
rate implicit in the lease must normally be used
to calculate the present value of the MLPs. If the
implicit rate is unknown, the lessee’s
incremental borrowing rate may be used.
Similar to Indian GAAP. Similar to Indian GAAP, except that the
lessee’s incremental borrowing rate must be
used to calculate the present value of the
MLPs, excluding the portion of payments
representing executory costs unless it is
practicable to determine the rate implicit in
the lease and the implicit rate is lower than
the incremental borrowing rate. If the
incremental borrowing rate is used, the
amount recorded as the asset and obligation
is limited to the fair value of the leased
asset. Asset amortisation is consistent with
Indian GAAP.
•
Onerous contracts
An onerous contract is a contract in which the
unavoidable costs of meeting the obligations
under the contract exceed the economic benefits
expected to be received under it. Under Indian
GAAP, the Company does not recognize any
If the Company has a contract that is onerous,
the present obligation under the contract
should be recognised and measured as a
provision.
A liability for costs to terminate a contract
before the end of its term should be
recognised and measured at fair value when
the entity terminates the contract in
accordance with the contract terms. A
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Indian GAAP IAS/IFRS US GAAP
provision on account of onerous contracts. liability for costs that will continue to be
incurred under a contract for its remaining
term without economic benefit to the entity
should be recognized and measured at its
fair value when the entity ceases to use the
right conveyed by the contract.
Provisions
Discounting of liabilities is not permitted and all
provisions are carried at their full values.
Where the effect of the time value of money is
material, the amount of a provision may be the
present value of the expenditures expected to
be required to settle the obligation. The
discount rate should be pre-tax rate that
reflects current market assessments of the time
value of money and the risks specific to the
liability. The discount rate should not reflect
risks for which future cash-flow estimates
have been adjusted and, any change in present
value of Provision is recognized as Interest
Cost
Similar to IFRS. However, if a range of
estimates is present and no amount in the
range is more likely than any other amount
in the range, the ‘minimum’ (rather than the
mid-point) amount must be used to measure
the liability. A provision must only be
discounted when the timing of the cash
flows is fixed.
Impairment of assets
The standard requires the company to assess
whether there is any indication that an asset is
impaired at each balance sheet. Impairment loss
(if any) is provided to the extent the carrying
amount of assets exceeds their Recoverable
Amount. Recoverable Amount is higher of an
asset's selling price or its Value in Use. Value in
Use is the present value of estimated future cash
flows expected to arise from the continuing use
of an asset and from its disposal at the end of its
useful life.
An impairment loss for an asset in prior
accounting periods should be reversed if there
has been a change in estimates of cash inflows,
cash outflows or discount rates used to
determine the asset’s recoverable amount since
the last impairment loss was recognized. In this
case, the carrying amount of the asset should be
increased to its recoverable amount. The
reversal of impairment loss should be
recognized in the income statement.
Similar to Indian GAAP Long-lived assets should be tested for
impairment whenever events or changes in
circumstances indicate that the carrying
value of such assets may not be recoverable.
. For assets to be held and used, impairment
is first measured by reference to
undiscounted cash flows. If impairment
exists, the entity must measure impairment
by comparing the asset’s carrying value to
its fair value. Assets classified as held for
disposal must be measured at the lower of
the carrying amount or fair value less
selling costs.
The impairment loss is measured as the
excess of the carrying amount over the
asset’s fair value, being either market value
(if an active market for the asset exists), the
best information available in the
circumstances including the price for
similar assets, or the sum of discounted
future cash flows or other valuation
techniques, using market assumptions. For
assets to be disposed of, the loss recognised
is the excess of the asset’s carrying amount
over its fair value less cost to sell. Costs to
sell include incremental direct costs to
transact the sale that would not have been
incurred except for the decision to sell.
Such assets are not depreciated or amortised
during the selling period.
Impairment losses recognized cannot be
reversed if there is a subsequent increase in
the fair value of the asset.
257
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following contracts (not being contracts entered into in the ordinary course of business carried on by our
Company or entered into more than two years before the date of this Draft Red Herring Prospectus) which are or
may be deemed material have been entered or to be entered into by our Company. These contracts, copies of which
have been attached to the copy of this Draft Red Herring Prospectus, delivered to the Registrar of Companies,
Maharashtra at Mumbai for registration and also the documents for inspection referred to hereunder, may be
inspected at the corporate office of our Company situated at S.M. Centre, Andheri-Kurla Road, Andheri (E),
Mumbai – 400 059 from 10.00 am to 4.00 pm on working days from the date of this Draft Red Herring Prospectus
until the Bid/Offer Closing Date.
Material Contracts
1. Letter of appointment dated January 6, 2005 appointing BRLMs.
2. Letter of appointment dated December 30, 2004 appointing Registrars to the Offer.
3. Memorandum of Understanding among the Company, the Selling Shareholder and the BRLMs dated
January 6, 2005.
4. Memorandum of Understanding/ Agreements executed by our Company with Bankers to the Offer,
Registrar to the Offer, etc.
5. Escrow Agreement dated [•] entered into by the Company, the Registrar, BRLMs, the Syndicate
Member(s) and the Escrow Collection Bank(s) for collection of the Bid Amounts.
6. Syndicate Agreement dated [•] among the BRLMs, Syndicate Member(s), the Selling Shareholder and the
Company.
7. Underwriting Agreement dated [•] between the Company, the Selling Shareholder, the BRLMs and the
other Underwriters.
Material Documents
1. Our Memorandum and Articles of Association as amended from time to time.
2. Our certification of incorporation effective December 28, 2004.
3. Shareholders’ resolutions in relation to this Offer and other related matters such as appointment of
auditors, formation and reconstitution of Audit, Remuneration and other committees.
4. Board resolutions in relation to this Offer and other related matters.
5. Report of the Statutory Auditors dated December 20, 2004 prepared as per Indian GAAP and adjusted as
per SEBI Guidelines for the years ended March 31, 2000, 2001, 2002, 2003 and 2004 and for the six
months ended September 30, 2004 and as mentioned in the Draft Red Herring Prospectus.
6. Report of the Statutory Auditors dated December 20, 2004 prepared as per Indian GAAP for the six
months ended September 30, 2004 as mentioned in the Draft Red Herring Prospectus and Report of the
Statutory Auditors prepared as per Indian GAAP for the six months ended September 30, 2003.
7. Copies of annual reports of the Company for the years ended March 31, 2000, 2001, 2002, 2003 and 2004.
8. Copy of the tax benefit report dated December 31, 2004 prepared by Chaturvedi & Shah.
9. Consents of the Statutory Auditors for inclusion of their reports in the form and context in which they
appear in the Draft Red Herring Prospectus.
10. General Powers of Attorney executed by the Directors of our Company in favor of certain person(s) for
signing and making necessary changes to the Draft Red Herring Prospectus and other related documents.
11. General Power of Attorney executed by the Directors of the Selling Shareholder in favor of the Company
for signing and making necessary changes to the Draft Red Herring Prospectus and other related
documents.
258
12. Consents of Auditors, Bankers to the Company, BRLMs, Syndicate Member(s), Registrar to the Offer,
Escrow Collection Bank(s), Banker to the Offer, domestic legal counsel to the Underwriters, U.S. legal
counsel to the Underwriters, domestic legal counsel to the Company, U.S. legal counsel to the Company,
Directors of the Company, Company Secretary and Compliance Officer, as referred to, in their respective
capacities.
13. In-principle listing approval dated [•] and [•] from NSE and BSE respectively.
14. Initial listing applications dated [•] and [•] filed with NSE and BSE respectively.
15. In-principle listing approvals from NSE dated [•] and BSE dated [•].
16. Approval letter No. 9(24)/2004-FIPB dated November 5, 2004 received from FIPB in connection with the
Offer.
17. Letter from IFC to the Company dated December 6, 2004.
18. Letter from IDFC to the Company dated December 17, 2004.
19. Tripartite Agreement between NSDL, the Company and the Registrar to the Offer dated [•].
20. Tripartite Agreement between CDSL, the Company and the Registrar to the Offer dated [•].
21. Due diligence certificate dated January 6, 2005 to SEBI from the BRLMs.
22. SEBI observation letter No. [•] dated [•].
Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at
any time if so required in the interest of the Company or if required by the other parties, without reference to the
shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.
259
DECLARATION
All the relevant provisions of the Companies Act, 1956, as amended, and the guidelines issued by the Government
of India or the guidelines issued by the Securities and Exchange Board of India, established under Section 3 of the
Securities and Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement
made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, as amended,
the Securities and Exchange Board of India Act, 1992 or rules made thereunder or guidelines issued, as the case
may be. We further certify that all the statements in this Draft Red Herring Prospectus are true and fair.
SIGNED BY ALL THE DIRECTORS OF JET AIRWAYS (INDIA) LIMITED THROUGH THEIR
RESPECTIVE CONSTITUTED ATTORNEY
Mr. Naresh Goyal, Chairman
Mr. Ali Ismail Ghandour
Mr. J.R.Gagrat
Mr. Victoriano P. Dungca
Mr. Javed Akhtar
Mr. I.M. Kadri
Mr. Charles A. Adams
Mr. P.R.S. Oberoi
Mr. Aman Mehta
Dr. Vijay Laxman Kelkar
Mr. Satyan G. Pitroda
Mr. Saroj K. Datta
SIGNED BY CHIEF EXECUTIVE OFFICER OF JET AIRWAYS (INDIA) LIMITED
Mr. Wolfgang Prock-Schauer
SIGNED BY TAIL WINDS LIMITED THROUGH ITS CONSTITUTED ATTORNEY
Mr. Saroj K. Datta
(as representative of the constituted attorney, Jet Airways (India) Limited)
SIGNED BY CHIEF FINANCIAL OFFICER OF JET AIRWAYS (INDIA) LIMITED
Mr. Carl Saldanha
Date: January 4, 2005
Place: Mumbai, India
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