Sunday, October 04, 2020

No clarity on bids even as Air India bidding deadline looms

New Delhi: The deadline for submitting bids for Air India privatisation is ending by the end of the month among speculation that even the $3 billion debt still on the books of the airline may be becoming an impediment to the sale of the national carrier.

No airline or corporate group has publicly shown interest in bidding yet except US-based fund Interups Inc, which has said it is interested and is a strong bidder for Air India.

The government has been trying to sell Air India for the past few years. According to a report by financial services house, HSBC, previously, when the government tried to sell Air India, the terms and the shape in which the government wanted to sell Air India were not sufficiently attractive to any of the potential buyers. Hence the government has sweetened the deal this time and has decided to be more flexible with the terms.

First of all, the government is ready to sell 100 per cent stake in Air India (previously, it was selling only 76 per cent, which was a sticking point for potential buyers as the fear of continuous government intervention deterred many potential buyers). In addition, the government has shifted almost 60 per cent of the total debt to a special purpose vehicle (SPV).

The total debt on Air India's balance sheet stood at $8 billon, but the government has transferred $5 billion of debt to an SPV and the buyer will have to absorb $3 billion of debt, most of which is aircraft related.

HSBC said the government is also trying to trim Air India's work force to attract buyers although its employee cost to revenue ratio stands at around 11 per cent, which is broadly at par with IndiGo.

Reports suggest that the government is open to revisiting and refining the terms of the sales based on suggestions from the investors.

The remaining debt of $3 billion has become a sticking point with potential bidders and investors, who are now asking for the deal to be sweetened further.

The deadline for the bids ends on October 30. It was earlier extended on August 31 in the light of the Covid pandemic.

Interups Inc has talked about a bid for Air India. Laxmi Prasad, Chairman, Interups, said, "Getting ready to propose for Air India - valuation and financial structuring is almost complete. Will completely domesticate the investment including from NRIs that is now treated as domestic investment for Air India in exception. I am sure we will certainly please the government and the people of India by retaining Maharaja as our pride Indian carrier."

Prasad had told IANS earlier that Interups Inc will be submitting its bid for Air India.

03/10/20 IANS/daijiworld

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