New Delhi: Air India’s plans of converting Rs 10,000 crore debts into equity will give a much needed push its ambitious turnaround plan of becoming profitable by FY2018.
On Monday, The Economic Times reported that the state-run carrier is looking to convert its debt into equity through the Sustainable Structuring of Stressed Assets or S4A scheme. The scheme permits lenders to determine and segregate debt into a 'sustainable debt' component (representing the loans which are capable of being serviced by the current cash flows of the company) and to restructure the balance into equity or quasi-equity instruments which are expected to provide an upside to the lenders in case of recovery.
Business Standard could not independently verify the report but a senior Air India official explained that the airline will need to significantly improve its financial metrics before the lenders are interested in such a proposal.
“There are several plans which include asking the banks to convert debt into equity but that will work out only when the airline is profitable,” said one official. He said that he was unaware of any restricting plans.
The airline's chairperson Ashwani Lohani has said that the national carrier is looking to clock net profit by FY18, two years earlier than what was originally envisioned in the Turn Around Plan (TAP) approved in 2012.
But Lohani has been categorical in pointing out that historical reasons have led to a huge debt burden which needs to be cleared. The airline has total debt of more than Rs 51,000 crore till March 31, 2015. Minister of State for Civil Aviation Mahesh Sharma said in Parliament in March that Air India's total debt burden of Rs 51, 367.07 crore includes Rs 22,574.09 crore outstanding on account of aircraft loans.
22/08/16 Arindam Majumdar/Business Standard
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On Monday, The Economic Times reported that the state-run carrier is looking to convert its debt into equity through the Sustainable Structuring of Stressed Assets or S4A scheme. The scheme permits lenders to determine and segregate debt into a 'sustainable debt' component (representing the loans which are capable of being serviced by the current cash flows of the company) and to restructure the balance into equity or quasi-equity instruments which are expected to provide an upside to the lenders in case of recovery.
Business Standard could not independently verify the report but a senior Air India official explained that the airline will need to significantly improve its financial metrics before the lenders are interested in such a proposal.
“There are several plans which include asking the banks to convert debt into equity but that will work out only when the airline is profitable,” said one official. He said that he was unaware of any restricting plans.
The airline's chairperson Ashwani Lohani has said that the national carrier is looking to clock net profit by FY18, two years earlier than what was originally envisioned in the Turn Around Plan (TAP) approved in 2012.
But Lohani has been categorical in pointing out that historical reasons have led to a huge debt burden which needs to be cleared. The airline has total debt of more than Rs 51,000 crore till March 31, 2015. Minister of State for Civil Aviation Mahesh Sharma said in Parliament in March that Air India's total debt burden of Rs 51, 367.07 crore includes Rs 22,574.09 crore outstanding on account of aircraft loans.
22/08/16 Arindam Majumdar/Business Standard
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