In a major setback to the Air India disinvestment process, the government today said no initial bids were received for the proposed stake sale and various options would be explored for the future of the debt-laden national carrier.
The deadline for submission of Expression of Interest (EoI) ended today with not a single bidder evincing interest in the airline, nearly one year after the Prime Minister Narendra Modi-led NDA government gave its nod for the stake sale.
In nearly two decades, this is the second time that Air India stake sale has not taken off. Back in 2001, during the then NDA government, the disinvestment process was scrapped.
“As informed by the transaction adviser, no response has been received for the Expression of Interest floated for the strategic disinvestment of Air India,” the Civil Aviation Ministry said in a tweet.
“Further course of action will be decided appropriately,” it added. EY is the transaction adviser for the process.
Civil Aviation Secretary R N Choubey said the government was expecting better participation for the Air India stake sale and indicated that there could be a re-think on the strategy.
The alternative mechanism headed by the finance minister would decide the future course of action on Air India disinvestment, Choubey said, even as he emphasised that the government would not like the airline to lose the market share. A joint forum of Air India employee unions claimed “victory” as the government failed to attract bidders.
To a query on the possible impact on the government’s fiscal deficit and disinvestment target, Economic Affairs Secretary Subhash Chandra Garg said, “We would need to look at what these options are whichever option is chosen… Will have an implication for current year”.
The government has proposed to offload 76 per cent equity share capital of the national carrier as well as transfer the management control to private players, as per the preliminary information memorandum.
The transaction would involve Air India, its low cost arm Air India Express and Air India SATS Airport Services Pvt Ltd. The latter is an equal joint venture between the national carrier and Singapore-based SATS Ltd.
Under the proposed disinvestment process, around Rs 33,000 crore debt would have remained with Air India. The national carrier’s debt burden was about Rs 50,000 crore at the end of March 2017.
Earlier this month, the government had extended the EoI submission deadline to May 31 from the previous date of May 14. The qualified interested bidders were to be intimated on June 15.
“The buzz we received (about Air India stake sale) was certainly encouraging… The transaction adviser will be finding out what is it that they (potential bidders) still found to be a deterrent. We will sit together and take stock,” he noted.
Choubey said the entire process has been a great learning experience and we are in a much better position to judge what the market wants.
“We again and again informed the market that the government has no intention of doing any kind of control other than whatever is the limited rights that we will get as part of shareholders’ agreement. We did not leave it ambiguous. Our impression is that we were very very clear which ought to have given the comfort that the new buyer can run exactly as it wants,” he said.
The government would retain 24 per cent stake in the national carrier, the winning bidder would be required to stay invested in the airline for at least three years, as per the memorandum that was issued on March 28.
Indicating that there would be a re-think on disinvestment strategy, Choubey said the government would factor in all the learnings, including those related to employees and debt while deciding the future course of action.
The government will ensure that the airline does not face “any operational difficulties following the latest developments”, Choubey said.
He was responding to a query on whether the airline would now be having more financial uncertainties as there are decisions linked to the outcome of the disinvestment process.
In April, both IndiGo and Jet Airways had said that they would not be participating in the Air India disinvestment process. IndiGo was the first to evince interest in Air India disinvestment when the government had mooted the plan last year.
Explaining about the next steps, Choubey said the process involves going to the evaluation committee — which is an inter-ministerial grouping — under the Department of Investment and Public Asset Management (DIPAM), then to the Core Group on Disinvestment headed by Cabinet Secretary and finally to the alternative mechanism.
The alternative mechanism on Air India is likely to take up the matter in a couple of weeks, he added.
“Various options are available and the alternate mechanism would take a call,” he said, adding that current bid process cannot go forward since there are no EoIs.
Air India is staying afloat on a bailout package worth over Rs 30,000 crore approved by the previous UPA regime in 2012.
Aviation consultancy CAPA urged the government to carry out a comprehensive restructuring of debt-ridden Air India and followed by 100 per cent divestment with less complex terms. PTI
