Saturday, June 08, 2019

Govt plans to liberalise terms of Air India sale to attract buyers

New Delhi: The government is planning to liberalise the terms and conditions for the sale of state-owned carrier Air India. The changes would allow a potential buyer to go for a stake sale of the airline immediately after acquiring it. The revised norms would also enable merger or reverse merger of Air India with any existing business of the buyer.

At least 95 per cent stake of Air India will be up for sale while retaining 5 per cent for the employee stock option (ESOP).
This is the first time the government will relax rules for strategic disinvestment, meant to prevent asset stripping. The rules were framed to safeguard the government following the disinvestment of Centaur Hotel, Mumbai, where the Comptroller and Auditor General (CAG) had pointed out irregularities in the sale process.

The relaxation of the rules was proposed by transaction advisor EY as multiple entities during the last sale process in 2017 had objected, saying it restricted the bidder from raising capital from the market and developing synergy with existing business.

According to senior government officials involved in the sale process, there will be no restriction on change in shareholding by the selected bidder. Even in case the bidder is a consortium of multiple entities, it would be allowed to do a share sale. This will allow the new owner to raise capital by way of share sale.

Last time, government had made it mandatory for a selected bidder to lock in its entire shareholding in Air India for a period of three years. Such restrictions on change in shareholding were also applicable when a particular investment was through a special purpose vehicle.
08/06/19 Arindam Majumder/Business Standard
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