by Harish Gupta, National Editor, Lokmat Group
Amit Shah led GoM clears sale of Air India
Bids invited, March 17 deadline
Hindujas, TATAs keen to enter aviation sector
New Delhi, Jan. 27
With the government finally coming out with a public advertisement for sale of 100% equity and management control of Air India today, all eyes are set on prospective buyers. The last date of submission of Expression of Interest (EoI) is March 17, 2020.
Informally, the Tatas, Hindujas, IndiGo, SpiceJet and a few private equity firms including some foreign companies have shown interest in buying Air India.
The 100% sale of Air India also includes its 100% owned subsidiary Air India Express Limited and 50% AI SATS Airport Private Limited. A private company, Ernest & Young, has been appointed sole transaction adviser for the deal. The Modi government had invited the EoI in 2018. But at that time, the government wanted to sell only 76% stake. Secondly, the financial liability was also huge. Thus, no one turned up.
Later, the PM appointed Union Home Minister Amit Shah as head of the Group of Minister for AI's sale, lock,stock & barrel. The Amit Shah led committee decided to off-load 100% equity with a rider that AI's control will remain with an Indian entity, limiting the scope of any foreign bidders interested in the asset to 49%.The Indian partner will have to hold 51% equity. It also decided that the buyer will be liable to pay the debt relating to the aircraft AI has in its fleet and not others.
This certainly made it a lucrative offer for any bidder. The aircraft debt is roughly $3.26 billion. The government offered to transfer remaining debt into a Special Purpose Vehicle (SPV) which the buyer won't have to pay.
Air India has a fleet of 125 aircraft and its domestic market share is 11.9 per cent as on December, 2019. A successful bidder would win control of the airline's 4,400 domestic landing and parking slots and 1,800 international slots at Indian airports, as well as 900 slots at airports overseas.
Industry experts are keeping their fingers crossed as the overall environment is not positive in the economy despite the Modi government taking a series of steps.
The Modi government has made it clear that it won't lend further financial support to AI and may shut down if the second disinvestment bid fails. It is incurring a daily loss of Rs 20-25 crore.