Amid reports that domestic private airlines have developed cold feet in bidding for Air India due to the tough conditions and doubts about the worth of the state-run carrier, a top finance ministry official on Thursday said not just airlines but other firms having sufficient net worth and the ability to run AI could buy the 76% stake on the block.
Amid reports that domestic private airlines have developed cold feet in bidding for Air India due to the tough conditions and doubts about the worth of the state-run carrier, a top finance ministry official on Thursday said not just airlines but other firms having sufficient net worth and the ability to run AI could buy the 76% stake on the block. Venture capital funds could tie up with domestic companies to bid for AI, Neeraj Kumar Gupta, secretary of the department of investment and public asset management said. “…we are not looking for only an airline to take over (AI)… Finance and the capability to take over and run such an asset are the main criteria (for potential bidders),” Gupta said.
Last month, the government issued a preliminary information memorandum (PIM) offering 76% equity in AI, along with its budget arm Air India Express and airport service unit Air India SATS. “We had given a small carve-out for airlines (to bid) (in terms of) how domestic airlines could be fitted in (when it comes to) eligibility of the consortium, but otherwise anybody who has (the required) net worth and funds can bid for Air India,” Gupta said at an Assocham event here. Domestic carriers IndiGo and Jet Airways have indicated they won’t be bidding for the state-run carrier unless the current bidding conditions are changed.
Sources said several queries have been received with regard to the AI disinvestment “from entities in airline industry as well as other corporate groups”. As per the PIM conditions, the government would retain 24% in AI and the prospective buyer/s are obligated to list the airline in a specified time-frame. The last date for submission of expression of interest for AI is May 14. Of the over Rs 60,000 crore liability of AI, the prospective buyer would have to take over about Rs 33,000 crore debt, most of which is backed by aircraft.
The government has set a net worth criteria of Rs 5,000 crore for all bidders. Though there is a profitability criteria for the potential bidder — that in at least three of the preceding five financial years, its profit after tax (PAT) must be positive — if the consortium has a scheduled airline operator in India as its partner, the PAT condition won’t be applicable, if its shareholding is restricted to a maximum of 51% of the paid-up equity share capital of the consortium.
Employee unions have expressed concern about job security of employees post-privatisation of the airline. Official sources added that there should be no concern about retrenchment as the government “would follow best industry practices”. There are over 11,000 regular employees at AI and its two other units.