Amit Shah panel sets the ball rolling on sale of debt-laden Air India

Officials aware of the deliberations in a meeting of AISAM on Thursday said the agenda was to seek a formal political approval for the re-initiation of the privatisation process

A group of ministers, led by Home Minister Amit Shah, on Thursday set the ball rolling on disinvestment of state-owned Air India. This is the second attempt of the Modi government to sell Air India after a previous attempt failed to generate any interest.

Officials aware of the deliberations in a meeting of AISAM on Thursday said the agenda was to seek a formal political approval for the re-initiation of the privatisation process. “It was a very productive meeting. We are going to take all the decisions in a defined period of time. The Air India divestment process is underway,” Civil Aviation Minister Hardeep Singh Puri said.

“The issue of debt and the expression of interest (EoI) will be taken up in the next meeting of AISAM,” the official quoted earlier said. The Committee of Secretaries has proposed that the government fully quit the carrier as a 24 per cent holding of the government was one of the major reasons cited by transaction advisor EY on why bidders stayed away. The government has agreed to exit the airline completely by selling off 95 per cent stake in the carrier, retaining five per cent for ESOP of permanent employees.

The government has thoroughly analysed the failed sale process of last year and is making changes in the privatisation process accordingly, the official quoted above said. “EY highlighted that the government holding a 24 per cent stake had scared away many potential suitors. Hence, the decision to sell 95 per cent has been taken,” the official said…

Govt likely to set October deadline for cash-strapped Air India sale

The Centre is planning to liberalise the terms and conditions for the sale of Air India

The development to Air India privatization has taken off going full bore with the Union Budget reporting it as the focal point of divestment this year. The administration is focusing on October as the due date for reporting the arrangement.

Not leaving anything to risk after a bombed endeavor before, the legislature has shortlisted the potential bidders, with the Tata bunch on top for its enthusiasm for aeronautics. Sources aware of everything said the administration would start converses with organizations, including Tatas, in no time for stripping its stake in the national transporter.

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The proposed exchange with potential purchasers will harmonize with the administration method of issuing offer records for articulation of intrigue at some point this month. “Since the money clergyman has submitted in the Budget, we will begin moving toward imminent bidders,” said a source near the advancement. While calling attention to that the Tatas will be moved toward first, he stated, “They have a history with flight and they realize how to run a carrier.”

“In perspective on the current macroeconomic parameters, the legislature would not just reinitiate the procedure of key disinvestment of Air India, yet would offer increasingly focal open area undertakings for key investment by the private segment,” Finance Minister Nirmala Sitharaman had said in her Budget discourse on Friday. The administration will before long reconstitute the Air India Specific Alternative Mechanism (AISAM), following which another offer record will be issued. The AISAM is accused of giving endorsements at each progression of the Air India divestment process, with just the sweeping endorsement given by the Union Cabinet.

Air India fiasco to Macquarie-NHAI pact: A tale of two privatisations

For privatisation to pick up momentum, it is essential to start with "less complex" assets

 

Charles Dickens' famous line "It was the best of times, it was the worst of times" in his novel "A Tale of Two Cities" aptly describes the recent privatisation scenario in India.

While the bid from Macquarie to acquire a bundle of nine highways from the National Highways Authority of India (NHAI) exceeded NHAI's expectations by 50 percent, the Air India privatisation effort, in sharp contrast, failed to attract even a single bidder. Both experiences, with varying degrees of complexity, teach us valuable lessons.

Investors with capital to allocate are looking at assets in India -- one of the fastest-growing economies in the world -- with an eye on the growth in the coming decades. It is important to realise that investors, in general, are primarily looking for assets with similar qualities to what the bundle of highways offered, namely (1) Cash-flow profile clarity (2) Positive cash-flow asset (3) Consumption growth story to back the asset (4) Total management control.

It is essential first to understand the nature of investors who would be interested in a privatisation or asset monetisation in India. There are primarily four types of investors that we must look at (1) Indian corporations (2) Foreign institutional investors such as pension, sovereign and insurance funds (3) Private equity firms (4) Trade buyers.

Of these, the Indian corporates will have quite a few significant players with strategic interests in the privatisation, but by and large, given their stressed balance sheets, their involvement will be limited. If anything, cash-flow clarity will be an absolute essential for them to invest in privatisation.

Large pension, sovereign and insurance funds that have started to invest in Indian assets especially over the last few years would be interested in the asset monetisation process. Such funds look for infrastructure assets with positive cash-flow profiles. Because, in general, they have long-dated liabilities, they focus on assets that can utilise long-dated debt financing to yield stable positive cash-flows. Clarity around cash-flow profiles and positive cash-flow assets will generally be the investments such funds find attractive.

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