The principal business
of Tail Winds is its investment in the flagship Jet Airways. Its income
is primarily dependent on dividends paid by the company. Since the flagship
didn’t declare any dividends in the fiscal years 2003 and 2004,
Tail Winds was unable to meet its expenses fully. It recorded a US $
615,860 loss after tax in fiscal 2003 and US $ 984,420 loss after tax
in fiscal 2004.
While Tail Winds
Limited is the principal shareholder in Jet Airways, Goyal owns 18 other
smaller companies, some registered in India, and some abroad. This is
a typical labyrinth of corporate finance; activity spanning several
countries seems to connect back to Goyal because Jet Airways provides
assured business to these smaller companies.
The 14 companies,
registered in India, listed as promoter group companies, are involved
in a range of activities. Sample a few:
•
Jetair Private Limited, International Cargo Carriers, France Air and
National Travel Service (a partnership firm) are General Sales Agents
(GSAS)
•
Jet Hotels Private Limited owns immoveable property in Mumbai
•
Jetair Tours Private Limited is a tour operator
•
India Capitol Resource Services Private Limited and Silo Trading Company
Private Limited are trading companies
•
ups Jetair Express Private Limited is in the courier business
•
Vimpal Holdings Private Limited is a holding and an investment company
•
Transmodal Services Private Limited provides ground transportation services
to Jet Airways
This is a complex
web of shareholding, the net result of which is that Goyal owns all
of them directly or indirectly. Consider, Jetair Pvt. Ltd., a gsa for
15 international airlines in India, and significantly, also for Jet
Airways. Jetair Pvt. Ltd was one of Goyal’s relatively early forays
into the airline business, incorporated as a company way back in 1974.
In two decades, it’s grown to enjoy profit after tax of Rs 33.2
million in 2004.
The shares of Jetair
Private Limited are held by Goyal, his family members and three other
promoter companies:
•
International Cargo Carriers Private Limited, which in turn has Jetair
Private Limited as one of its shareholders;
•
France Air, which is again held by Jetair and International Cargo Carriers,
is a gsa for Air France; and
•
Jet Enterprises Private Limited, which owns trademarks licensed to Jet
Airways and which is held by Naresh Goyal and Hasmukh Gardi.
Goyal loves control.
Once when discussing his wife’s role in the company, Goyal confided:
“I think the last word is mine on the board.” Today, his
wife, who doesn’t report to him, supports his business looking
after pricing, scheduling, networks, new management, sales and marketing,
besides serving as a channel for picking up grassroots worker sentiments.
If Jetair Private
Limited is one of Goyal’s outfits earning lucrative commissions,
its benefits link back to promoter companies owning it.
Most of these companies
don’t seem to show huge profits relative to the flagship Jet Airways
business. For instance, France Air showed a post-tax profit of Rs 0.26
million in 2004 while Jet Enterprises, which held the crucial trademarks,
earned profit after tax of Rs 23.85 million. India Capitol Resource
Services, its only source of income now being interest from bank deposits,
recorded a post-tax loss of Rs 0.07 million in 2003 and a minor profit
of Rs 0.30 million in 2004.
One of the contentious
issues has been that Jet Airways didn’t own the brand “Jet
Airways” initially. It was owned by Jet Enterprises Pvt Ltd, a
company ‘substantially owned by Naresh Goyal’. The flagship
company was bound to pay out a flat fee varying between 0.1-0.2 percent
of gross revenues as license fees to Jet Enterprises. But this issue
was resolved in July 2005 with Jet Enterprises being paid US$ 7 million
to transfer its interest in the Jet Airways trademarks. Also, Jet Air,
the sales agent, seems to recover most of its infrastructure and employee
costs from Jet Airways through a charge-back agreement.
In addition to
these 14 companies, Goyal also owns four promoter group companies outside
India, which also don’t seem to have registered an exceptional
financial performance. Jet Airways llc, is incorporated in Dubai, and
with its two wholly-owned subsidiaries — Jet Airways of India
Inc, incorporated in California, USA and India Jet Airways (Pty) Ltd
incorporated in South Africa — is tasked to provide marketing
services. It has agreements with Jet Airways for providing global marketing
coordination services. It showed a profit after tax of Rs122,918,000
in 2004 and only of Rs 68,599,000 in 2003. Besides these three, Goyal
also owns Jetair Worldwide ag, based in Switzerland which is in the
business of tourism.
The company itself
has admitted that some of the business arrangements between the various
companies could cause a conflict between Naresh Goyal with his promoter
group on the one hand, and the interests of the airline on the other.
This complex web
of companies might well have fuelled Naresh Goyal’s success as
a corporate tycoon, which today allows him to navigate Indian aviation
with very real global ambitions.
Most governments
have to now tread carefully when dealing with issues like international
terrorism. Even tax havens are tuning into global concerns. Since October,
2001, the Isle of Man is governed by ‘The Terrorism (United Nations
measures) Isle of Man Order 2001’, which stipulates that where
the “Treasury have reasonable grounds for suspecting that any
person, or even body corporate has been facilitating the commission
of terrorism” it may direct that the funds aren’t made available.
The rider is: except under the authority of a license granted by the
Treasury under this article.
This raises a larger
issue relating to international security and corporate governance, which
is that the Indian regulatory authorities can today be seemingly blockaded
by denial of business information under the cover of nri status even
as known offshore funds can ease out of confidentiality conditions in
such situations. Perhaps, it ordains greater requirements for corporate
transparency and public disclosure norms in India. As of now, even if
Naresh Goyal refuses to divulge corporate information in India, can
he be asked for such disclosures in other countries abroad where he
does business?
With inputs from Vineet Khare
