How government sweetened the Air India divestment deal to attract more bidders

Civil aviation minister Hardeep Puri on Thursday introduced that the federal government has determined to revised the bidding parameters for Air India’s divestment and has determined to ask for bids at enterprise worth.

This primarily means bids will now be sought on each fairness and debt.

The new parameters will give extra flexibility on debt to the bidders. The bidders will probably be given the choice to determine on the quantum of debt on the Air India books that they’d like to soak up.

“Interacted with members of the fourth estate today to discuss Air India disinvestment. Instead of a pre-fixed debt level, bidders are now allowed to quote Enterprise Value of Air India. This gives more leverage to bidders for participation in the process,” Puri tweeted on Thursday.

As per the sooner Preliminary Information Memorandum (PIM), the bidding was sought on the premise of solely the fairness worth.

The nationwide provider was placed on the block by the federal government on January 27 whereas a deadline of March 31 was set for bidding. It was later prolonged.

The authorities has been planning to promote its complete stake in Air India Ltd amid rising debt and mounting losses. The Centre had, in January, introduced the stake sale after an try to public sale a majority stake nearly two years in the past failed to attract any bid.

The airline’s accrued debt is estimated to be greater than Rs 69,000 crore. It posted a lack of Rs 8,556 crore in FY19, as in opposition to a web lack of Rs 5,348 crore within the earlier monetary yr.

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According to consultants, the brand new parameters will enable bidders to determine the capital construction of the nationwide provider.

“This would make sense if the existing debt would not be transferred, as it would give flexibility to the investor to decide capital structure,” mentioned Manish Agarwal, head of infrastructure advisory at PwC India, a consultancy.

In the present PIM, the debt left within the firm can be Rs 23,286 crore. As per the PIM issued by the Centre in January, the federal government deliberate to promote its complete stake within the airline and 50% of a floor dealing with unit. The profitable bidder should take solely a debt of Rs 23,286.5 crore (the 2018 provide required them to tackle slightly over Rs 33,000 crore) , whereas the liabilities will probably be determined relying on present property on the time of closing of the transaction, based on the PIM.

As per the corrigendum, bidders can select to specify a decrease share (than 85%) of the enterprise worth to be retained within the type of debt, and as an alternative provide the identical quantity within the type of a better money consideration to the federal government in opposition to the acquisition of 100% fairness share capital of Air India.

“The bid will be on the enterprise value…In this enterprise value also, a ratio has been earmarked between how much a bidder can take as debt and how much (s)he has to give as cash. It has been decided that whatever enterprise value the bidder quotes, 15% of that has to be given in cash to the government and remaining 85% has to be taken as debt,” aviation secretary Pradeep Singh Kharola defined.

The authorities additionally prolonged the deadline for inviting bids until December 14 for the fifth consecutive time since January in a bid to provide buyers extra time.

The Centre in August had issued a notification to increase the deadline for submitting the expression of curiosity for the 100% stake sale of nationwide provider Air India by two months to October 30. The extension was supplied following requests from bidders because of the Covid-19 pandemic, the third time because the course of started in January. Puri mentioned greater than 500 queries have been acquired from bidders when the method started.

The resolution was taken by the Air India Specific Alternative Mechanism (AISAM) on Wednesday following a gathering with the house ministry, Puri mentioned. The AISAM, headed by Union house minister Amit Shah, additionally contains finance minister Nirmala Sitharaman, aviation minister Hardeep Singh Puri and commerce minister Piyush Goyal.