Jet Airways debacle: Satyam-style model worked with Tech Mahindra but will not be answer to cash-strapped airline's fortunes

It is believed with a huge sliver of naiveté that the Satyam-style rescue is the template or panacea for putting back every ailing company on its legs especially if it happens to be of the too-big-to-fall genre. The truth is Satyam rescue was a one-off phenomenon. The Narendra Modi government naively believed that it would successfully enact an encore for the beleaguered IL&FS by once again superseding the board of directors of the company in the dock and dire straits. Uday Kotak, the founder of Kotak Mahindra Bank, was anointed its chairman to preside over its rehabilitation but soon found that IL&FS was a different kettle of fish with as many as 349 subsidiaries and associates, many of them Special Purpose Vehicles (SPVs), cast in a manner of wheel within wheels. IL&FS as a group owes a mind-boggling Rs 91,000 crore to banks, non-banking finance companies (NBFCs), PF trust, mutual funds and who have you! Kotak believes IL&FS may require hundreds of suitors for each vertical or SPV. Be that as it may. [caption id=“attachment_94954” align=“alignleft” width=“380”] Jet Airways aircraft. Reuters[/caption] Satyam Computers Ltd, on the other hand, brought a lot to the table. So much so, Tech Mahindra happily lapped it up at a bargain price of just one share for every 8.5 of Satyam on merger with it. Indeed, Tech Mahindra laughed all the way to the bank with the merger catapulting it to the fifth spot among the IT-enabled services companies (ITeS) in India. Thanks to the formidable skills of 50,000-strong Satyam workforce coupled with its rich order book, Tech Mahindra lost no time in scaling up its operations. Yes, it did have to pay up $212 million to the American Depository Receipts (ADR) investors of Satyam in the US to settle their class action suit. They, in fact, had earlier triggered the collapse of Satyam by voting with their feet in the US market in 2008 on getting a whiff of Ramalinga Raju’s accounting shenanigans in Satyam that consisted of booking fictitious sales and matching them with fictitious fixed deposits with banks and auditors blinking at it! Tech Mahindra has taken this in its stride just as it had the Enforcement Directorate (ED) freezing more than Rs 800 crore of fixed deposits as being proceeds of crime built by Satyam promoter Raju. Therefore, Satyam simply cannot be the template or quick-fix for every corporate failure in this country. Tech Mahindra would not have touched it with a barge pole had it not got a sound company on a platter. Contrast this with Jet Airways, which owes upwards of Rs 8,500 crore to banks, 6 months’ salary to about 20,000 staff, lease rentals to aircraft lessors, etc. With virtually nothing brought to the table, potential suitors, small wonder, are looking askance at it. State Bank of India (SBI) and Punjab National Bank (PNB) may be left holding the can. They naively assumed the honor of being the major shareholder of Jet Airways little realising that such an honor was a grand self-deception bordering on delusion. Once smitten twice shy. But SBI didn’t seem to have learnt any lessons from the Kingfisher Airline fiasco where too it blithely converted a part of its loan with interest into shares. Remember Tech Mahindra did not pay any cash to Satyam. It was a case of amalgamation whereas Jet Airways creditors are thirsting for cash. So much so, even if IndiGo, for example, agrees to take Jet Airways on its wide wings upon merger, it would not be enough because the cash crunch would spread from Jet Airways to Indigo. So let us not make a clamor for a Satyam-type rescue for every corporate crisis. Nobody covets a dud or wants to buy trouble with jet speed. Etihad alone may relent and pump in money enticed by the promise of flying Jet Airways passengers to international destinations via Abu Dhabi. (The writer is a senior columnist and tweets @smurlidharan)