Govt announces plan to sell entire stake in Air India, sets terms for sale

March 17 is deadline for submissions of initial expressions of interest; any bidder would have to agree to assume roughly $3.26 billion in debt.

The government said India said on Monday it plans to sell its entire stake in Air India, in a revised push to sell its national carrier after an initial attempt to sell a majority stake in the airline failed to draw a single bid in 2018. A document inviting expressions of interest in Air India, released on Monday, said the government would sell a 100 per cent stake in the carrier, which operates both domestic and international routes.

The document set March 17 as the deadline for submissions of initial expressions of interest and said any bidder would have to agree to assume roughly $3.26 billion in debt, along with other liabilities.

The government said that substantial ownership and effective control of Air India would have to remain vested with an Indian entity following the sale, limiting the scope of any foreign bidders interested in the asset. In 2018, India had tried to sell a 76% stake in Air India and offload about $5.1 billion of its debt, terms that potential buyers at the time viewed as too onerous. Air India, known for its Maharaja mascot, has some of India’s most lucrative international and domestic landing and parking slots that are key for airlines.

Air India stake sale: Buyer to get only Rs 10,000 crore of airline debt

This is a third of Rs 33,992 crore debt that was to be passed on to the new owner during last year’s failed disinvestment process

The government is likely to transfer about Rs 20,000 crore of additional debt from Air India’s books in order to make it lucrative for buyers. The move will leave Air India with about Rs 10,000 crore of debt. This is a third of Rs 33,992 crore debt that was to be passed on to the new owner during last year’s failed disinvestment process. Potential bidders had expressed inability to take over the debt-laden airline.

As of March 31, Air India had a debt of Rs 58,351 crore.

While the Air India Alternative Special Mechanism (AIASM) headed by home minister Amit Shah is yet to take call on it, it has been proposed to the ministerial group that the move is necessary to make it attractive for buyers. Transaction advisor EY has pointed out high debt as one of the reason why investors didn’t show any interest to acquire the airline last year.

Further, the argument is that the yearly expenditure to run Air India is more expensive for the government than to pay annual interest on a debt of Rs 50,000 crore. The government has already invested Rs 30,000 crore under a bailout package extended by the previous UPA regime in 2012 for 10 years.

The government has already transferred Rs 29,500 crore of debt to the special purpose vehicle Air India Asset Holding Limited (AIAHL). In order to clear that debt, the SPV has already raised Rs 14,000 crore from bond market. It will further raise about Rs 8,000 crore through a government-guaranteed bond issue over the course of the week. The deal becomes more lucrative as most of the the debt is backed by assets like aircraft that Air India owns.

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.