While big names have already started doing the rounds as potential buyers of the troubled national carrier Air India, with private airline IndiGo officially throwing its hat in the ring and the Tata Group too reportedly mulling acquiring it, billionaire investor ‘big bull’ Rakesh Jhunjhunwala sought to make it plain that it could be a good asset to buy for a company with an ability to turn it around. “Everyone is interested. I am also interested,” Rakesh Jhunjhunwala said in jest in an interview to ET Now on Friday, in response to a question about the potential buyer interest in the carrier.
Earlier this week, the Union Cabinet gave an in-principle approval for disinvestment of Air India, paving the way for privatisation of the beleaguered national carrier, which turned into a taxpayer money guzzling machine ridden with inefficiencies and mismanagement. Hours after, IndiGo, India’s largest airline by market share, formally expressed its interest in buying Air India, specifically, its international operations and low cost domestic business.
Previously, it was reported that the Tata Group is considering buying the giant beleaguered state-run carrier from the government in partnership with Singapore Airlines. News reports had also said that the government, which is also reportedly keen on retaining Air India as a domestic carrier, is happy with the Tata Group’s interest in the heavily debt-laden carrier, and is even likely to mandate that a controlling stake be bought by an Indian entity.
Don’t cheer yet
However, Rakesh Jhunjhunwala sought to downplay the developments, refraining from making a judgement call on the merit of the interest shown by the potential buyers, adding that Air India’s stake sale would be a long-drawn process. He pointed out that the Cabinet has so far only given an in-principle approval and has left it upon a Group of Ministers, which is yet to be formed, to work out the modalities of the stake sale.
Further, Rakesh Jhunjhunwala also said to ET Now that given the unavailability of any details so far on conditions of the disinvestment and complete status of Air India’s assets and liabilities to be offloaded, IndiGo’s expression of interest means nothing and is uninvited.
Notably, Rakesh Jhunjhunwala had shown active interest in airline companies. He had bought 1.4% stake in low-cost private carrier SpiceJet in 2014, and 1.05% stake in the full-service private airline Jet Airways in 2015.
Although, he discarded the concern over shortage of funds or the size of the balance sheet as a potential hurdle in any company’s bid to buy Air India, saying that it would not be very difficult for the right buyer to raise the funds.
Rather, Rakesh Jhunjhunwala said that it is the ability of a company to turn around an asset which is more important when considering buying an ailing business. When probed further, he said that Indian companies do have the required ability.
Air India’s market share in domestic market has fallen to 14% in 10 years from 35% a decade ago, placing it third in the national ranking, behind Indigo, which commands about 40% of Indian skies, and Jet Airways, which has about 16% of the share. Air India also flies overseas, and commands 17% of the international traffic from and into India.
Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling under a debt of over Rs 52,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. It has not turned profit in 10 years, since at least the year 2007.
Air India has guzzled up taxpayer money over and over again but to no effect. The carrier has received bailout packages worth about Rs 24,000 crore out of a total Rs 30,000 crore approved, but has failed to revive its fortunes amid private airlines continuously gaining market share.
(First published on Friday, June 30 on www.financialexpress.com)