Wednesday, March 11, 2020

Non-resident Indians can now fully own Air India but will that change its fate?

The Narendra Modi government is pulling out all stops to find a buyer for Air India ahead of the March 17 deadline for preliminary bids.
Last week, the government approved 72 changes to India’s Companies Act, which paves the way for non-resident Indians (NRIs) to acquire a 100% stake in the debt-laden national carrier. The foreign direct investment (FDIs) will be permitted under the automatic route, that is without the need for approval from the central bank or the government. The earlier cap for NRIs was 49%.
The move is “meant to liberalise and simplify the FDI policy to increase the ease of doing business in the country,” the government said in a March 4 press release.
While the measure is aimed at mobilising more buyers, analysts are sceptical. “The decision sounds like it is based on the assumption that NRIs will be interested in investing in Air India,” said Ashish Nainan, a Mumbai-based aviation expert. In the absence of a desired response from NRIs, he said, this move will hold no relevance.
The government kicked off the Air India sale process on Jan. 27, but so far there hasn’t been a single confirmed expression of interest. India’s civil aviation minister hinted last week that the March 17 deadline could be extended.
After all, the FDI restraint was not the only issue keeping investors away.

“In addition to settling Air India’s huge liabilities and competing with other airlines in the ticket-price war, a new buyer will also have to build a strong understanding with Air India’s unions for its smooth operation and manpower optimisation,” said Murlee Dhar Shyam, a consultant with GMR Airports.
Bidders for the airline will need to absorb Rs23,286.50 crore ($3.5 million) of debt.

Then there is the issue of restructuring. “Upgrading the airline to compete with existing private carriers will also be the new buyers’ responsibility,” said Nainan. “They (the new buyers) will need a more uniform and efficient fleet and upgraded technology to be able to do that.”
11/03/20 Niharika Sharma/Quartz India
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