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Thursday, May 13, 2021
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Govt to sell 100% stake in Air India; bidders will need to absorb ₹23,000 cr debt

The government has invited preliminary bids to divest its entire stake in Air India, and the airline's subsidiary Air India Express. The government owns 100% stake in Air India and Air India Express.

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India further reduced — to $3.3 billion — the number of debt bidders for Air India Ltd. will need to absorb and eased some eligibility requirements, as Prime Minister Narendra Modi tries once again to sell the national carrier.

Expressions of interest are invited by March 17, according to preliminary terms published Monday. The entire company will be sold but effective control needs to stay with Indian nationals, and bidders would need to accept a little more than a third of Air India’s debt — down from two-thirds the last time around when not a single suitor could be found.

“This is a clean exit by the government and the entire non-aircraft related debt has been taken out of the balance sheet,” said Kapil Kaul, chief executive officer for South Asia at the Sydney-based CAPA-Centre for Aviation. “We expect significant response as the offer structured by the government of India is very attractive.”

Air India, which started in 1932 as a mail carrier before winning commercial popularity, saw its fortunes fade with the emergence of cutthroat low-cost competition. The state-run airline has been unprofitable for over a decade and is saddled with more than $8 billion in debt.

Other terms of the offer

Bidders to accept 232 billion rupees ($3.3 billion) of Air India’s total 600 billion rupees debt; compared with 333 billion rupees when a sale attempt was made in 2018

Minimum net worth of bidders lowered to 35 billion rupees from 50 billion rupees

In case of a consortium, the lead member can hold a maximum 26% stake instead of 51% required earlier (minimum shareholding fixed at 10%)

Terms include one-year lock-in for sale of shares and the business must be run for three years

Ernst & Young LLP India is transaction adviser

Indian regulations allow a foreign airline to buy as much as 49% of a local carrier, while overseas investors other than airlines can buy an entire carrier. The government didn’t find a single bidder when it tried to sell Air India in 2018.

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