AI to raise Rs 1,000 cr for working capital

New Delhi: Faced with severe liquidity crunch, national carrier Air India plans to raise another Rs 1,000 crore from banks and financial institutions to meet its working capital needs. Air India, operated by the government owned National Aviation Company of India (NACIL), will thus increase its working capital limit to Rs 13,550 crore by the end of this fiscal.'
Air India is also raising long-term credit of about $3.5 billion (Rs 17,500 crore) through a consortium of banks to buy aircraft.
Air India has taken the private finance route to meet its financial and operational needs. The government is still to provide the much-awaited bailout of Rs 4,000 crore (Rs 1,300 crore equity and Rs 2,700 crore soft loan) as it wants to know the airlines’ fund-utilisation plans.
But the government has stepped in as guarantor for Air India’s working capital needs to lower the cost of funds. A top airline official confirmed the proposal. “The government will give 0.5% as guarantee to banks for the entire Rs 1,000 crore loan,” he said on condition of anonymity.
NACIL's working capital has increased since it came into being. The working capital limit, when the merger of Air India and Indian Airlines took place, was Rs 6,500 crore. This was subsequently raised to Rs 8,000 crore, Rs 9,500 crore and finally Rs 12,550 crore earlier this year. The Rs 1,000 crore loan proposal is part of the airline's plans to become profitable in three years. Its financial advisor Accenture had suggested a working capital limit of Rs 14,000 crore.
25/11/08 Chanchal Pal Chauhan/Economic Times

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Categories: NACIL Nov 2008