Govt mulls selling 100% stake in debt-laden Air India after flop attempt

Govt mulls selling 100% stake in debt-laden Air India after flop attempt

 

New Delhi, Jun 13: The government is considering revising the terms of sale for Air India, including offering a 100 per cent stake, after its latest attempt to sell 76 per cent of the debt-ridden airline failed to draw even a single bid.
Transaction advisor EY has cited the clause of the government holding a minority stake in the state carrier as the biggest reason for the failed disinvestment bid.
“We are looking at changes to the privatisation. We have a 24 per cent ownership clause, till we change it,” said a senior official involved in the process.
The development comes after the government received EY’s analysis on the failed sale process. In its report to the government, EY listed four reasons that proved to be a deal-breaker — the reluctance to sell 100 per cent, a clause to retain employees for a year, the insistence to operate the airline at an arm’s length basis for three years and reluctance of Indian airlines to go for an inorganic expansion.
“The government will take a call based on EY’s report. A core group of secretaries on Air India’s divestment is expected to meet soon on the matter and firm up its next plan of action. Based on this panel’s recommendations, the Group of Ministers on Air India will take a decision,” said a government official.
A second official, however, said Air India’s sale process would depend on the political will of the government. “Though there is no reason that the deal should be called off, it will ultimately depend on the Group of Ministers. Political implication of the decision will also come into play,” the official said.
Meanwhile, the government is likely to infuse another Rs 32 billion in the state-owned airline. The airline has already received more than Rs 260 billion under the bailout package announced in April 2012. The infusion became essential after three banks from the lenders’ consortium refused to extend the line of credit to the airline.
If at first you don’t succeed… Govt mulls selling 100% stake in Air India A line of credit is an arrangement between a bank and a borrower under which it can access funds any time, as long as the borrower breaches the cap set in the agreement. According to Air India officials, the infusion is a response to a request by the airline to restore equity infusion as the finances of the airline have come under stress. The official said Dena Bank, Standard Chartered Bank and Allahabad Bank had refused to extend the line of credit as they had become jittery about lending to the airline due to the ongoing process of disinvestment.

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