New Delhi: The disinvestment department or DIPAM has invited an Expression of Interest (EoI) from potential investors for selling 100 percent of Air India and its stake in two subsidiaries with easy bidding norms of debt and eligibility, in its second attempt to privatise the debt-laden state-run airline.
The deadline for submission of EoI for 100 per cent divestment in Air India and the airline’s stake in low-cost unit Air India Express and airport services company AISATS is March 17, according to a preliminary information memorandum issued by DIPAM on Monday.
Since the huge debt had proved unattractive for potential bidders, now, the government has relaxed bidding norms to coax investors to buy the airline. The bidding party will have to bear with only Rs 23,286 crore of the total Rs 60,000 crore debt of Air India.
As for eligibility, the lead member of a consortium can have 26 percent shareholding. The earlier criterion set a holding of 51 percent in a consortium. The minimum shareholding in a consortium has also been eased to 10 percent, potentially enabling more entities to bid as part of a consortium.
The net worth for eligible bidders has been relaxed to Rs 3,500 crore from Rs 5,000 crore.
Air India Express is a wholly-owned subsidiary of Air India. The airline owns 50 percent of AISATS. Individuals and consortia can bid for the airline.
The government has struggled at least twice in the past two years to privatise loss-making Air India due to a lack of interest from bidders.
One reason for the failure was that the government was unwilling to fully exit the airline, looking to sell only 76 percent stake.
The PIM says AI has an aircraft fleet of 121 aircraft (excluding 4 B747-400 aircraft) as on November 1, 2019, mainly comprising Airbus and Boeing aircraft such as A-319, A320, A-321, B-777 and B-787 out of which 65 are owned/on finance lease/bridge loans, 21 are on sale and lease back model and balance 35 are on operating lease.
Consolidated business in the past had a mix of real estate and aviation interests.
Government of India is now carving out real estate assets and other businesses which are not integral to the core airline business into a separate SPV along with part transfer of certain debt and liabilities (modalities have been worked out) thereby resizing the balance sheet, it said.
Earlier this month, the Home Minister Amit Shah-led GoM approved draft for inviting bids.
In 2018, DIPAM did not receive any bid in its EoI for selling 74 per cent stake in Air India.
Prior to the EoI, the stressed airline invited bids for monetizing its land and building assets through MSTC e-auction for sale of its properties across the country including Air India Holiday Home in Lonavala, many residential plots in Mumbai’s upscale areas like Bandra, Khar, Prabhadevi, flats in Asian Games village in delhi, many commercial land, buildings, flats in Bhuj, Bengaluru, Kolkata, Nashik, Pune and Trivandrum.
Cushman & Wakefield is the Property Advisor and the realty consultant of Air India.
The bids closing date is January 31, 2020. Transaction adviser EY is learnt to have advised government that for non-receipt of bids last year included the government’s decision to retain 24 per cent stake and corresponding rights, high amount of allocated debt and profitability track record and all these, sources said have been now taken care of.
Air India’s net loss in 2018-19 is provisionally estimated to be Rs 8,556.35 crore.
The government has been pumping money and hived off some debt to keep the airline aloft and ready for sale.