The government has invited bids for offloading 98 percent stake in Air India’s (AI) ground handling arm, Air India Air Transport Service Ltd (AIATSL). This announcement shows the government is going through the motions to keep its narrative - of not having abandoned the disinvestment of loss-making Air India (and group companies) – alive.
But there is little likelihood of the disinvestment of AIATSL actually going through since Lok Sabha polls are widely expected to be announced soon and once the dates are out, such grand sell-off plans will almost certainly have to be put on hold till the new government takes office.
Having said that, it is heartening to see that the babus in Rajiv Gandhi Bhawan have finally learnt some lessons from the sale process of Air India (the airline), which bombed last May primarily due to the government insisting on retaining a 24 percent stake and scaring off potential investors by leaving a large quantum of the debt on the airline’s books.
The Preliminary Information Memorandum (PIM) released last evening (Tuesday) shows that the government is all right with exiting the ground handling business completely since 98 percent stake is on offer to a bidder and employees can bid for the remaining 2 percent. A clean break is a good way of showing the seriousness of intent in this instance.
A senior civil aviation ministry official had acknowledged some days back that the government had erred in insisting on remaining a minority shareholder in the case of Air India disinvestment. This official had also said that the second mistake the government made in AI’s case was leaving so much debt on the airline’s books for any incoming investor, since the latter would have most certainly not been able to service such liabilities through merely operating the airline efficiently.
Now, after months of the disinvestment process getting derailed, the government has formed a Special Purpose Vehicle (SPV) and announced it will transfer almost Rs 30,000 crore of the debt on AI”s books to this SPV, leaving it much lighter with just around Rs 25,000 crore of debt.
The official quoted above said even when the debt load on AI has been halved, any prospective bidder may not find the airline attractive since the debt remaining on the books is still too high.
So with all this background, the government has taken some sensible steps while offering AIATSL for disinvestment. For one, it is a profit making business. The net profit more than doubled year on year in 2017-18 to Rs 71 crore and AIATSL has been consistently profit making since the commencement of autonomous functioning from 2014-15.
13/02/19 CNBC TV18
To Read the News in full at Source, Click the Headline
But there is little likelihood of the disinvestment of AIATSL actually going through since Lok Sabha polls are widely expected to be announced soon and once the dates are out, such grand sell-off plans will almost certainly have to be put on hold till the new government takes office.
Having said that, it is heartening to see that the babus in Rajiv Gandhi Bhawan have finally learnt some lessons from the sale process of Air India (the airline), which bombed last May primarily due to the government insisting on retaining a 24 percent stake and scaring off potential investors by leaving a large quantum of the debt on the airline’s books.
The Preliminary Information Memorandum (PIM) released last evening (Tuesday) shows that the government is all right with exiting the ground handling business completely since 98 percent stake is on offer to a bidder and employees can bid for the remaining 2 percent. A clean break is a good way of showing the seriousness of intent in this instance.
A senior civil aviation ministry official had acknowledged some days back that the government had erred in insisting on remaining a minority shareholder in the case of Air India disinvestment. This official had also said that the second mistake the government made in AI’s case was leaving so much debt on the airline’s books for any incoming investor, since the latter would have most certainly not been able to service such liabilities through merely operating the airline efficiently.
Now, after months of the disinvestment process getting derailed, the government has formed a Special Purpose Vehicle (SPV) and announced it will transfer almost Rs 30,000 crore of the debt on AI”s books to this SPV, leaving it much lighter with just around Rs 25,000 crore of debt.
The official quoted above said even when the debt load on AI has been halved, any prospective bidder may not find the airline attractive since the debt remaining on the books is still too high.
So with all this background, the government has taken some sensible steps while offering AIATSL for disinvestment. For one, it is a profit making business. The net profit more than doubled year on year in 2017-18 to Rs 71 crore and AIATSL has been consistently profit making since the commencement of autonomous functioning from 2014-15.
13/02/19 CNBC TV18
0 comments:
Post a Comment