100 Per Cent Stake Sale, Rs 29,464 Cr Debt In SPV-NDA Pushes For Air India Sale Amid Low Oil Prices, Jet’s Grounding

The new NDA government is likely to expedite efforts to divesting its stake in the state-owned Air India, IANS reported.

A two-stage bid process for selling of entire 100 per cent equity stake in national carrier Air India could kick-start as early as 7 July.

Drawing lessons from last year's privatisation attempt that failed to elicit any response from potential buyers, the government is planning to incorporate changes in the proposal to attract bidders this time.

The government had last year initiated the process to sell majority 74 per cent stake in the national carrier but the plan proved to be a dud with no private investor placing a bid.

The government has already taken a decision to transfer Rs 29,464 crore of Air India’s working-capital debt to a new company, Air India Asset Holdings. Consequently, Air India will now have a debt burden of only Rs 25,000 crore, mostly long-term debt secured by aircraft purchases. Air India’s interest outgo will come down to just around Rs 1,700 crore a year.

The government will also be offering 100 per cent stake to private investors. In the previous attempt, the government chose to retain 24 per cent stake and as a result it did not find any buyers.

Another reason why Air India privatisation could be attractive this time around is the closure of Jet Airways, its key competitors among full service carriers (FSCs), in both domestic and international space. Jet shutdown its operations recently with little prospects of revival.

Earlier this week, the government announced the setting up of a data room which will be up and running by 1 July and the appointment of two nodal officers from key departments to liaise with those dealing with the data room. The data room will provide a compilation of all data pertaining to Air India’s operational and financial aspects.

The government has decided release the preliminary information memorandum (PIM) inviting expression of interest (EoI) by the first week of July.

Other favourable factors that could help the strategic disinvestment at this juncture includes global oil prices that are not very high and the rupee seems to have stabilised at about Rs 69.25 to a dollar.