Monday, December 02, 2019

Govt adopts cautious stance in preparing blueprint for Air India divestment

The government is proceeding with utmost caution before putting Air India on the block, after potential buyers baulked at its first attempt to divest a majority stake in the national carrier last year. “We will release the draft share purchase agreement (SPA) along with Expression of Interest (EoI). Last time, it was released after the EoI stage. A lot of potential investors raised questions at the pre-bid stage after the EoI was released. We had told them that those issues will be cleared in the draft SPA. So, nobody submitted EoI. Investors should have more transparent information at the very beginning. Through the draft SPA, they could know the details of liabilities including employee costs, their benefits and the dos and don’ts,” a senior finance ministry official said under condition of anonymity. Potential investors will also have access to a virtual data room at the stage of EoI under a confidentiality agreement, where they can raise queries about unclear liabilities. Preparation is taking some time, said the official quoted above. “Ground work is very important. The more preparation we do now, the more time we save later. What matters is closing the deal,” he said.
The department of investment and public asset management (DIPAM) needs to first take clearance from the core group of secretaries on disinvestment headed by the cabinet secretary and then from the Air India Specific Alternative Mechanism headed by home minister Amit Shah, before publishing the EoI and draft SPA documents. To reduce the debt burden on Air India, the government has transferred around ?29,464 crore to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle (SPV) meant to park some of the airline’s debt not backed by any asset, non-core assets and other non-operational assets. “Some more debt will have to be taken out. At present, the negative net worth of Air India is upward of ?30,000 crore. We cannot even start the bidding process which is not meeting minimum investor concerns. In the EoI, the debt amount will be mentioned,” the official said.
02/12/19 Asit Ranjan Mishra/DealStreetAsia
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