Private equity funds KKR, Warburg Pincus keen on stakes in Air India
A successful sale of Air India will hinge on whether the government writes off a part of the airline’s debt, which stood at Rs 48,876.81 crore as of March 31.business Updated: Jul 24, 2017 07:10 IST
After the Tata Group and IndiGo, private equity funds KKR and Co. and Warburg Pincus have expressed interest in acquiring Air India’s businesses, according to two people directly aware of the development.
The two buyout firms have separately sought details of the proposed privatisation process of the national carrier that was cleared by the cabinet in June-end, the sources said on condition of anonymity.
“Air India’s businesses make attractive investment opportunity for the PE funds,” said a source. “However, the discussions are currently at a very early stage and will expectedly gain momentum once there is clarity on the divestment process.”
A successful sale of Air India will hinge on whether the government writes off a part of the airline’s debt, which stood at Rs 48,876.81 crore as of March 31. The government has already injected massive funds as part of a Rs 30,000-crore bailout package to keep the carrier afloat.
A potential debt write-off and access to the state-owned airline’s lucrative international routes have already drawn interest from two entities.
InterGlobe Aviation Ltd, which runs the IndiGo airline, and the Tata Group, which runs Vistara and AirAsia India airlines have shown an interest.
IndiGo said it is interested in Air India’s international arm and low-fare division Air India Express, while the Tata Group has informally sought details on the privatisation from the government.
The government had constituted a group of ministers (GoM), headed by finance minister Arun Jaitley, to explore options related to the sale of assets and a potential demerger and strategic disinvestment of three profit-making subsidiaries. The GoM held its first meeting on July 21.
While both KKR and Warburg declined to comment, the sources said the funds were told to wait till an independent adviser is appointed to manage the sale through a bidding process.
“A proposal inviting investment banks to manage divestment is expected soon and quite a few domestic and foreign investment banks have been sounded out,” according to one of the sources.
A spokesperson for the civil aviation ministry did not respond to a query seeking comment.
The interest shown by the two private equity funds is arguably the first by overseas investors after foreign direct investment rules in aviation were changed last year to allow them to own 100% stake in local airlines, while limiting investment by foreign airlines to 49% of a domestic airline’s paid-up capital. More global funds could join the fray in the coming days.
(Published in arrangement with Livemint.com)