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Air India deal may be further sweetened
The government may ease some of the conditions for potential bidders of Air India in a renewed effort to privatise the loss-making national carrier, which is crucial to achieving its ambitious divestment goal for this fiscal.
The government may ease some of the conditions for potential bidders of Air India in a renewed effort to privatise the loss-making national carrier, which is crucial to achieving its ambitious divestment goal for this fiscal.
The revised bidding document for the airline, which is expected by this month-end, could either allow potential bidders to value Air India purely on its assets or substantially reduce the Rs 23,286 crore debt currently required to be absorbed by a successful bidder.
“At present, the debt offered is nearly equal to the value of Air India’s assets. So the bidding is supposed to take place over and above Rs 23,286 crore. But now the transaction adviser EY India has said that because of Covid-19, the assets, especially the aircraft which are sitting idle, have lost their value and have become a burden on the company. So, EY India says it doesn’t assign any value to the assets and let the bidding process discover its value,” a government official said on condition of anonymity.
The official said that a final decision could also steer towards reducing the existing debt burden for the potential bidders.
“A lot of discussion within the government has already taken place on it, but we are unable to come to a final decision yet. The proposal has to be first cleared by the core group on disinvestment headed by the cabinet secretary and finally by the Air India specific alternative mechanism (AISAM) headed by home minister Amit Shah. We expect a final decision before month-end,” he added.
An EY India official declined to comment and instead suggested waiting for a final decision by the government.
“It is difficult to say if a restructuring of the debt burden will be more attractive to the interested bidders. Ultimately, the devil will lie in the details,” said Dipti Lavya Swain, a cross-border corporate and mergers and acquisitions lawyer.
This is the second attempt by the government to sell Air India. The first attempt at selling a stake in the carrier in March 2018 failed as investors were uncomfortable with the government retaining a 24% stake in the airline as well as the requirement to stay invested for at least three years. Also, the acquirer was required to absorb Rs 49,000 crore in debt.
