Published: Sun, June 03, 2018
Markets | By Otis Pena

Government receives no bids for Air India stake sale

Government receives no bids for Air India stake sale

In almost two decades, this is the second time that Air India stake sale has not taken off. A no-show by investors could set back the disinvestment process, which generated a lot of interest, initially.

"No response has been received for the Expression of Interest (EoI) floated for the strategic disinvestment of Air India. Further course of action will be decided appropriately", the Ministry of Civil Aviation said after the deadline for sending bids passed.

Private firm Ernst and Young has been appointed the "Transaction Adviser" (TA) for the process.

The government may look to raise a record 1 trillion rupees ($15 billion) from the sale of state assets in the current fiscal year that started on April 1, and Air India was expected to be a significant contributor.

Air India's fleet comprises more than hundred Boeing Co. and Airbus aircraft that make more than twenty-three hundred local flights per week to fifty different airports. Although Tata Sons, the holding company for the conglomerate declined to comment, media reports stated that sources claimed the offers of the divestment were too "onerous".

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As per PIM, Air India and Air India Express would retain Rs 24,576 crore excluding net current liabilities after the sale.

India's Tata Group, Singapore Airlines (SIA), which together run Vistara, and InterGlobe Aviation Ltd, owner of the Indigo carrier, were all linked to a takeover but have ruled themselves out. Under the proposed disinvestment process, around Rs 33,000 crore debt would have remained with Air India.

The company had reported a loss of about Rs. 5,765 crore loss in 2016-17 and had a total outstanding debt of Rs. 48,781 crore at the end of 2016-17. The qualified bidders would have moved on to the request for proposal stage, where the finer details of the stake sale were to be shared.

Whether the Air India sale would be restarted or when it would be restarted is still uncertain. "We will sit together and take stock", he noted. Given that it's the taxpayers' money that keeps the national carrier flying, the government ought to pay heed to what the USA civil rights activist Martin Luther King Jr had once said, "There comes a time when one must take a position that is neither safe, nor politic, nor popular, but he must take it because conscience tells him it is right". We did not leave it ambiguous. It has made a decision to retain the remaining 24 per cent equity stake in the debt-laden company to sell it in future when it gets optimum value.

Earlier this month, the government had extended the EoI submission deadline to May 31 from the previous date of May 14. "Investors would also like some level of comfort that on day-to-day operations, they will have a free hand without government interference", said Kaul. Airline major Jet Airways had also said that it will not participate in the divestment process. Aviation secretary R N Choubey said the deadline for submitting the EoI will not be extended.

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