Etihad Airways (EY, Abu Dhabi International) has held talks with Jet Airways (JAI, Mumbai International) over the proposed acquisition of a further 25% stake in the Indian carrier.

Sources who spoke to India's Financial Express indicate the two sides have now reached a tentative deal after agreeing on a valuation of the shareholding.

Jet, whose total debt stands at INR119.2 billion (USD1.734 billion), reportedly plans to raise USD300-400 million through the issuance of convertible bonds to which Etihad would subscribe. Once the conversion takes place, Etihad’s stake will increase to 49%.

India's FDI laws cap foreign investment in locally-based carriers at 49%.

Etihad acquired a 24% stake in Jet Airways in early 2013 for USD379 million and since then has worked to restructure the carrier into a profitable entity following years of continuous losses.

Buoyed by strong demand and low oil prices, India's second largest carrier by market share posted a record quarterly profit of INR4.67 billion (USD68.88 million) for the October-December period of last year.