Air India gets clearance to sell Rs 350-crore properties

By: and |
Mumbai | Updated: August 11, 2015 11:34:12 AM

Over three years after Air India’s Turnaround Plan (TAP) proposed to raise Rs 5,000 crore through the sale of properties, the national carrier has finally made some headway by getting the required clearances to sell properties worth Rs 350 crore.

Air India flight delayedAir India had in December 2014, signed an agreement with National Buildings Construction (NBCC) to monetise its assets under three possible models for developing the properties. (Reuters)

Over three years after Air India’s Turnaround Plan (TAP) proposed to raise Rs 5,000 crore through the sale of properties, the national carrier has finally made some headway by getting the required clearances to sell properties worth Rs 350 crore.

Air India had recently sent a proposal to the aviation ministry, earmarking certain domestic and international properties for sale, urging the ministry to move the proposal before the Cabinet, a senior Air India official told FE.

“Till date, the airline has not been able to monetise its properties due to the various constraints like regularisation/ reinstatement of the title deeds of some of the properties. The airline has also signed a joint venture (JV) agreement with New Delhi-based National Buildings Construction (NBCC) under which it plans to monetise certain properties on a JV basis, following the models (on cost and revenue sharing) developed by NBCC,” the official added.

The domestic properties identified by the airlines includes a piece of land at Coimbatore, flats at Mumbai’s Sterling Apartment complex and a parcel of land at Chennai’s Mount Road, which is expected to fetch the airline Rs 250 crore.

The carrier has also identified properties owned by the company in Mauritius, Hong Kong and Nairobi (Kenya) for monetisation, and expects to raise Rs 100 crore from the sale of these properties.

The properties on the block will all be monetised using the bidding process.

According to the government approved TAP, Air India is required to raise Rs 5,000 crore by monetising its domestic and international properties by 2022-23, with an annual target of Rs 500 crore FY13 onwards. However, the airline hasn’t been able raise any money by selling its properties yet.

“In 2015-16, the airline plans to raise at least Rs 250 crore through monetisation of such properties, which will be used to retire the long-term debts of the company. In addition, (the airline expects to receive) Rs 100 crore on account of sale of foreign properties,” said the Air India official.

Air India currently has a total debt of about Rs 44,000 crore, consisting of aircraft related debt of Rs 22,000 crore and a long-term working capital debt of Rs 18,000 crore.

The board of the national carrier had at its meeting in February 2013, approved six properties to be monetised for raising money and trim debt. According to the airline’s guidebook on monetisation, a document which chalks out Air India’s land-sale plans, properties approved for monetisation, includes land and building at the AI colony and a residential flat no 6B located at Middleton Street in Kolkata, a parcel of land at Coimbatore, Plot no 37/13 at DLF, Qutab Enclave in Gurgaon, a plot of land at Mount Road Chennai and four flats at Sterling apartments in Mumbai’s posh Peddar Road.

The airline board had also given its approval for the sale of some of the airline’s international properties, including residential properties in Mauritius and Kenya (Nairobi) and a plot of land in Hong Kong.

Air India had in December 2014, signed an agreement with National Buildings Construction (NBCC) to monetise its assets under three possible models for developing the properties.  Under one such model, NBCC was to bear the cost of developing the project and the sale proceeds were to be shared between NBCC and Air India in an agreed ratio.
The second model requires NBCC to pay Air India a portion of the value of the land upfront while NBCC is required to also bear the project cost and the sale proceeds were to be shared between the two in an agreed ratio in this case.
Under the third model, NBCC will construct the project on behalf of Air India; the development cost will be invested by NBCC and it will charge a fixed internal rate of return (IRR) on the project on its investment on mutually acceptable terms.

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