On 5 January 2021, the government plans to announce the names of the bidders qualified for Air India’s disinvestment. After 19 years of hits and misses (the first attempt at a strategic sale was first made in 2001), there seems to finally be some hope for the national carrier.
By the time the deadline (14 December) was over, the government had received multiple expressions of interest (EoIs), including those from Tata Sons, SpiceJet and a consortium of Air India employees (219 in number) in tandem with Interups Inc, a US-based financial investment firm. Air India’s commercial director, Meenakshi Malik, leads the 219-member employee group that is bidding for the carrier (along with Interups).
“Once the government names the qualified bidders, they will be permitted to make a financial bid for the airline, based on the enterprise value (including market capitalisation of the company, its short-term and long-term debts, as well as any cash on the company’s balance sheet),” says an official from the ministry of civil aviation.
“The winner will be chosen on the basis of whoever quotes the highest enterprise value. This entity would have to pay at least 15 per cent of the quoted enterprise value to the government in cash, while the remaining can be taken as debt.” Once the qualified bidders are chosen, they will be given access to a virtual data room (VDR) of Air India.
The government has decided to offload 100 per cent of its stake in Air India. With accumulated losses of over Rs60,000 crore, this is being considered the best way to take the sale forward and the only way for the airline to survive.
With the pandemic adversely impacting the aviation sector globally, for a carrier like Air India, which has been struggling to stay airborne, this was a double blow. According to the Directorate General of Civil Aviation (DGCA), Air India’s domestic market share is about 9 per cent (IndiGo leads with over 60 per cent of the domestic market share), while, in the international sector, Air India has an 18.6 per cent market share.
The winner will be chosen on the basis of whoever quotes the highest enterprise value. This entity would have to pay at least 15 per cent of the quoted enterprise value to the government in cash, while the remaining can be taken as debt
Tata (which originally founded Air India in 1932) already operates Vistara (its joint venture with Singapore Airlines) and AirAsia India (a joint venture with Malaysian AirAsia Bhd) and so, if they manage to get Air India, they would be able to consolidate all their airlines under a single brand. Interups Inc, a New York-based company, intends to invest $9 billion in the aviation industry and wants to take 49 per cent control of Air India, with the remaining 51 per cent being handed over to the participating (219) employees of the airlines.
Air India, which was started as a mail carrier in 1932 by JRD Tata, will give the successful bidder control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports and 900 slots overseas. Besides, the bidder would also get 100 per cent of Air India’s low-cost carrier Air India Express and 50 per cent of AISATS – which provides cargo and ground-handling services at major Indian airports.
Meanwhile, in the ongoing fiscal, the government has set a target to get Rs2.10 lakh crore from disinvestment. This includes Rs1.20 lakh crore from the sale of shares of Central Public Sector Enterprises (CPSEs) and Rs90,000 crore from the sale of shares with public sector banks and financial institutions. Till now, in the ongoing fiscal, Rs11,006 crore has been mopped up through minority stake sale in CPSEs.