December 15, 2020 4:48:21 am
“Multiple expressions of interest have been received in Air India’s strategic divestiture. The transaction will now go to the second stage, ”Tuhin Kanta Pandey, secretary of the Department of Investment and Management of Public Assets, posted in a tweet.
In a boost to its efforts to divest its stake in Air India, the Center said Monday that it has received “multiple expressions of interest” in the debt-laden airline. These include offerings from the Tata Group and a consortium comprising several of the airline’s employees and a US-based investment firm.
The deadline for submitting formal offers closed at 5 pm Monday and the government is expected to notify qualified bidders on January 5. This is the government’s second attempt to divest its stake in the airline after the previous move in 2018 ended without an offer. .
The signal behind the sale
While meeting the divestment target of Rs 2.1 lakh crore for 2020-21 may be a difficult task (only 5% has been achieved so far), a successful sale of Air India will send a strong message about the seriousness of the strategic plan of government sale.
“Multiple expressions of interest have been received in Air India’s strategic divestiture. The transaction will now go to the second stage, ”Tuhin Kanta Pandey, secretary of the Department of Investment and Management of Public Assets, posted in a tweet.
Previously, the Government had put 76% of Air India’s shares up for sale along with a portion of the debt. But this time, it plans to divest 100% of its share capital in Air India Ltd, which includes Air India’s equity stake of 100% in Air India Express and 50% in Air India SATS Airport Services.
According to sources, Tata Group has submitted an official expression of interest to the airline, although the offer has not been made through its affiliated airlines, Vistara or AirAsia India. A Tata Group spokesperson declined to comment.
The other confirmed offer has been made by a consortium of Air India and Interups Inc employees, according to Laxmi Prasad, president of the US-based firm. On its website, Interups says that “it is a publicly traded company dedicated to the business of identifying and investing in business opportunities or transactions, either directly or on behalf of its stakeholders, affiliates, associate and customer concerns.” .
The consortium’s offer proposes to cede 51 percent stake to the group of employees involved, which includes some board members among 219 employees, and 49 percent to Interups Inc, which will act as financial partner.
The plan to include employees was put in place by Air India’s chief commercial officer, Meenakshi Mallik, who wrote to nearly 20,000 employees seeking participation in the divestment process. However, some employee unions had advised their members not to move.
In its latest divestment move, a key change made by the government in terms of bidding is that it has allowed potential investors to bid based on the value of the company, effectively allowing bidders to determine the level of debt they would like. assume.
Air India had current liabilities and provisions, including short-term loans and commercial accounts payable, of Rs 70,686.6 crore and net debt of Rs 58,255 crore at the end of 2018-19. Thereafter, the Center transferred Rs 29,464 million of this debt to a government-owned special purpose vehicle, Air India Assets Holding Company Ltd.
Entities that have submitted expressions of interest must submit their physical offers before December 29. Qualified bidders will submit bids based on business value and the winning entity will be decided based on who is listed with the highest business value. This entity will have to pay at least 15 percent of the value of the listed company in cash, while the rest can be contracted as debt.
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