Bidders for national carrier Air India will have to meet a minimum net worth criterion before they can be allowed to put in a formal bid for the airline and gain access to the Air India bid data room, a top official with the airline said on condition of anonymity.
Bidders for national carrier Air India will have to meet a minimum net worth criterion before they can be allowed to put in a formal bid for the airline and gain access to the Air India bid data room, a top official with the airline said on condition of anonymity. “The net worth criteria is to be determined by the Air India Specific Alternative Mechanism (AISAM),” said the official. The AISAM is headed by finance minister Arun Jaitley and was set up after the government decided to go ahead with Air India’s divestment, to work out the specifics following a nod from the Cabinet Committee on Economic Affairs (CCEA) to Air India’s strategic divestment in 2017. “Any consortium bidding for Air India will have to meet the net worth criteria and if they do not meet it they would not be qualified to take the bid further,” the official added. Any interested airline or consortium partners can bid for Air India only after a preliminary information memorandum has been issued seeking interest from these entities; this is likely to happen within this week with the final bid submissions slated to be completed by March 31, said the official. “The government does not want any uncertainty post the transaction being concluded, as it is one of the largest divestment exercises undertaken and we need to have certain parameters to safeguard it,” said a person directly in the know of the process.
When asked about the net worth criteria, he refused to give specifics of what the net worth required for such a bid should be. “The transaction manager for the divestment process has been given a mandate in which the government has specified in terms of deliverables and a transaction is structured with those parameters,” he said, adding that it’s a multiple structure that the government has in mind, so as to realise maximum value from the transaction. Sources in the government also confirmed that Naresh Goyal-promoted airline Jet Airways, along with its international airline partners, Air France–KLM and US-based Delta Airlines, has shown interest in bidding for Air India. Other consortiums too are believed to be in the race; the consortium approach is being favoured for bidding given the large size of the transaction. Air India has debt of nearly `58,000 crore, a mix of working capital loans and aircraft leasing loans, according to airline officials. It is not clear how Jet, with its partners, will meet the net worth criteria as Jet’s net worth, due to continuous losses it has suffered over the past many years, is negative (-$755.4 million according to Bloomberg data). Its international partners are positioned better. Delta, which is one of the largest carriers in the world in terms of passengers flown, had a net worth of $13,910 million, while Air France-KLM posted had a net worth of $3,609 million.