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Govt panel to consider Air India debt write-off

A debt write-off, a key step in the aviation ministry’s Air India privatisation plan, will make the airline attractive for potential investors such as Tata, IndiGo, KKR and Warburg Pincus.

business Updated: Jul 28, 2017 13:20 IST
Tarun Shukla
Tarun Shukla
New Delhi, Livemint
Air India,aviation ministry,Tata Group
The aviation ministry and Dipam will on Friday will present a recommendation to a govt panel on quantum of debt write-off to make Air India attractive for potential investors.(Reuters)

The aviation ministry and the Department of Investment and Public Asset Management will on Friday present to a ministerial panel their recommendation on the amount of debt that needs to be written off Air India’s books to make the state-owned airline attractive to potential investors, a government official said on condition of anonymity.

Dealing with Air India’s debt of just under R50,000 crore is a key step -- the most critical one, according to some analysts -- in the government’s plan to divest part or all of its stake in the airline.

Friday’s meeting is the second of the ministerial panel tasked to speed up this process. Apart from the Tata Group and IndiGo, private equity funds KKR and Co LP and Warburg Pincus LLC have expressed interest in acquiring Air India’s businesses, Mint reported on July 24.

The ministerial panel comprises finance minister Arun Jaitley, aviation minister Ashok Gajapathi Raju, transport minister Nitin Gadkari, railways minister Suresh Prabhu and power minister Piyush Goyal. The panel met first on 21 July. Gadkari did not attend that meeting as he was travelling.

At that meeting, Air India made a detailed presentation following which the ministers asked the aviation ministry and Department of Investment and Public Asset Management to prepare a note on the options to deal with the airline’s debt, Mint reported on 25 July.

“Friday’s meeting is expected to discuss these options,” the government official cited in the first instance said.

Air India had total debt of about Rs 48,877 crore (at the end of March 2017) of which about Rs 17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans.

The airline has about 17% share of traffic on routes linking India to international destinations and 13% of the domestic market. It also has valuable real estate, bilateral flying rights and sought-after overseas airport slots.

IndiGo (InterGlobe Aviation Pvt. Ltd), the largest airline in the country, has publicly expressed interest in Air India, while the Tata group, which started the airline in 1932 before it was nationalized, has also sought details from the government in informal conversations, Mint reported on 20 July. KKR and Warbug Pincus are also believed to be keen on the national carrier.

Steve Forte, the New York-based former Jet Airways CEO, said the government needs to keep in mind that privatisation is not a dumping exercise.

“If the government (taxpayers, really..) decides to absorb all the debt and sell Air India clean, it would be a great buy,” he added.

The airline has so far received Rs23,993 crore of a Rs30,231 crore equity infusion promised by the government under a financial restructuring plan in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore the previous year.

Niti Aayog, the government think tank, has cited Air India’s “fragile finances” as the main reason for recommending the airline’s disinvestment on 12 May.

First Published: Jul 28, 2017 13:19 IST