The Central government on Wednesday revealed that it would be selling 76 per cent stake in debt-ridden national carrier Air India through an auction process.
In an official document that accompanies invitation for the Expressions of Interest (EoI) by interested bidders to purchase Air India, the government said the disinvestment would cover Air India, its low-cost arm Air India Express and ground-handling firm Air India SATS Airport Services.
In a move that could increase buyers interest in Air India, the government said only a part of the airline’s debt would be passed on to the buyer.
According to sources, Rs 33,390 crore of the carrier’s total debt of Rs 48,700 crore debt will remain with Air India and will have to be absorbed by the potential buyer. The rest will be allocated to a government holding company.
The last date for submission of EoIs is May 14. After scrutiny of the EoIs, Qualified Interested Bidders will be identified, who can participate in the second stage of the process which will involve the Request for Proposal (RFP).
In the second stage, the highest bidder would be declared as the buyer after requisite security clearances. Any bidder who wants to submit the EoI and wants to participate in the second stage of RFP will need to have a “minimum net worth of Rs 5,000 crore” and show profitability of the bidding firm (positive profit after tax) in at least three of the “immediately preceding five financial years” from the EoI deadline (May 14). Air India employees have also been permitted to participate as bidders either directly or by formation of an “employee consortium” subject to relevant conditions.
It mentions that the ownership — after the sale — must remain with Indian nationals. It adds that the Central government is “carving out real-estate assets and other businesses which are not integral to the core airline business into a separate Special Purpose Vehicle (SPV).
The government expects that the winning bidder will be identified by the end of June and that the legal closure of the transaction will take place by the end of this year.
The NDA government’s move earlier to allow FDI by foreign airlines in debt-ridden Air India upto 49 per cent was an indicator that the Government was serious about disinvestment in the loss-making cash-strapped national carrier so as to bring about fresh infusion of funds. The government had last year constituted an inter-ministerial group to chalk out the strategy in this regard.
It has incurred huge losses but is surviving based on a bailout package of Rs 30,000 crore that began during the tenure of the UPA-2 government and which is continuing under the current NDA government.