The government will soon invite bids to sell its entire stake in Air India, after potential buyers balked at an initial attempt to divest a partial stake in the national carrier, reports Asit Ranjan Mishra in Mint.
“The expression of interest document for Air India will be put out anytime now, at least before the end of this month. The plan is to sell 100 per cent stake in the airline. The proposal needs clearance from a ministerial panel before it is made public,” a Finance Ministry official said on condition of anonymity.
A sale of Air India is key for the Union government to meet its ambitious disinvestment target of INR 1.05 trillion for the year to March 31. Meeting the target is crucial this year as the government estimates that its corporate tax rate cut will lead to a revenue loss of INR 1.45 trillion.
Debt-laden Air India has been surviving on a INR 30,000-crore government bailout and has ceded market share to private airlines such as IndiGo and SpiceJet.
The ministerial panel to divest Air India, headed by Home Minister Amit Shah, met for the first time on September 19 to explore all options. The panel also includes Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Puri, and Railway and Trade Minister Piyush Goyal. The panel is likely to meet soon to formally clear the privatisation process of Air India.
The first attempt at selling a stake in the flag carrier in March 2018 failed to take off as investors were uncomfortable with the government retaining a 24 per cent stake in the airline as well as the requirement to stay invested for at least three years. Also, Air India’s debt of more than INR 33,000 crore that was bundled with the sale deterred investors.
To reduce the debt burden, the government established Air India Assets Holding Ltd (AIAHL) in February, a special purpose vehicle (SPV) to park a part of the airline’s debt not backed by any asset, non-core assets and other non-operational assets of the airline. Only Air India Air Transport, out of the company’s four subsidiaries, has been transferred to AIAHL as of now. The SPV has raised INR 7,000 crore through a bond sale to refinance its debt last month.
Air India’s net debt swelled from about INR 55,000 crore at the end of March 2018 to INR 58,351.93 crore at the end of March 2019. It includes working capital and aircraft-related debt. The sale of Air India, which has about 128 planes, will also let the government exit a loss-making business.
Presently, full foreign ownership is allowed in an Indian airline, although foreign airlines cannot own more than 49 per cent stake in a local carrier.