Pawan Hans on the block for 4th time; terms more attractive

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December 9, 2020 7:15 AM

Pawan Hans’s total equity and liabilities, including debt, are worth Rs 1,303 crore as on March 31, 2020, almost matched by assets.

As previous EoI terms, asset stripping was allowed after two years while change in shareholding was allowed after three years.As previous EoI terms, asset stripping was allowed after two years while change in shareholding was allowed after three years.

With its previous three offers finding no takers, the Centre has invited fresh expression of interest (EoI) for its 51% stake in state-run Pawan Hans, by allowing potential buyer to sell assets and change shareholding after one year of acquisition of the controlling stake in the helicopter firm.

As previous EoI terms, asset stripping was allowed after two years while change in shareholding was allowed after three years. According to fresh terms, even the buyer can now undertake sale and leaseback of helicopters within one year of the disinvestment provided the money so raised is utilised for business operations.

Earlier, inter-se change in the shareholding among consortium members was not allowed, now it is allowed subject to the Lead member continuing to hold at least 26% equity shareholding in the consortium SPV for a minimum period of one year from the date of consummation of the proposed transaction and other members continue to hold at least 10% equity. With buyer’s lock-in period of investment reduced to one year from three years, a new business continuity clause has been added that the existing business must continue at least for three years.

The due date for submission of EoI is January 19, 2021, (those submitting electronically will have to submit hard copy by February 3) and shortlisting of bidders will be done on February 17. The shortlisted bidders will be allowed to submit financial bids. State-run oil explorer ONGC, which holds a 49% stake in Pawan Hans, has also offered to sell its entire stake to the successful bidder on almost the same terms as the government.

As on March 31, 2019, Pawan Hans had Rs 644-crore contingent liabilities, including Rs 495-crore value added tax liabilities. To reassure potential buyers, the government will indemnify against each of the contingent liabilities related to tax and statutory dues, to the extent of 51% of each such crystallised contingency. The company was in red for the past two years with losses of Rs 63 crore in FY19 and Rs 23 crore in FY20 (excluding losses of Rohini Heliport which is not part of the proposed transaction).

The company’s revenue fell from Rs 458 crore in FY18 to Rs 414 crore in FY19 and to Rs 377 crore in FY20. “The drop in revenue from operations in FY16 onwards can be attributed to lower flying hours due to a reduction in operational fleet caused by 3 accidents during 2015. Revenue has further declined in FY20 due to ageing of helicopters as vintage clauses enforced by various customers act as a hurdle to participate and win new businesses,” according to the preliminary information memorandum published along with EoI. The is the fourth EoI sale of the Centre’s stake in the helicopter services provider, after failed attempts in 2017, 2018 and 2019.

Pawan Hans’s total equity and liabilities, including debt, are worth Rs 1,303 crore as on march 31, 2020, almost matched by assets.

Pawan Hans’ competitors are Global Vectra Helicorp, Heligo Charters and Himalayan Heli Services. Global Vectra Helicorp and US-based Continental Helicopters were understood to have expressed interest in Pawan Hans in the past.

Over the past years, contracts with ONGC and state governments have provided steady source of income (average 40-45% revenues from the oil and gas sector and around 35-40% revenues from state governments).

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