New Delhi: Air India’s new owner could be decided by June-end and the government aims to complete the “legal closing” of the transaction by December when the Maharaja’s assets are transferred to the winning bidder. AI will be split into five parts, with four of them — AI-AI Express-AI SATS; ground handling unit; engineering units and Alliance Air — being offered for sale while the fifth will be a SPV that will remain with the government.
The SPV will have AI’s unsustainable debt, Centaur hotels, land and the priceless art collection that the airline has built over decades. AI’s debt of Rs 50,000 crore, which may be as high as Rs 70,000 crore, will be spread over these five entities.
A day after the Budget, aviation minister Jayant Sinha gave the fine print of AI’s disinvestment, which he termed as the “biggest ever” exercise of its kind in India terms of value and revenue. As per the timeframe set by department of investment and public asset management (DIPAM), the government expects to have the winning bidder by June-end. The process is expected to be complete by the year-end, soon after which the process for next general election will begin if the same is not preponed.
He said AI’s divestment will be a three-step process. “We will soon issue information memorandum for all the four entities being offered for divestment that will contain all their details. Then interested parties will bid for whichever unit or units they wish to, with the highest bidder getting the same. Thi s is the biggest reform being initiated by the Modi government,” Sinha said.
AI’s valuation is currently underway by the transaction advisor (TA). “There are some ways of valuing an entity. It can be done on ‘ongoing entity basis’ where it will be a some multiple of cash flow. Or on the basis of all the assets. For AI valuation, the ongoing entity basis may be followed. The TA will have a reserve price,” Sinha said. The third method is “liquidation basis” where the valuation is done by considering that thye unit is being shut down and down. This will not be applied for AI’s valuation.
FM Arun Jaitley-headed alternative mechanism (group of ministers) will decide how much stake, if any, should the government retain in AI. The decision of strategic divestment means minimum 51% will be sold off to the private bidders.
IndiGo and Tata-Singapore Airlines are interested in the airline arm of AI. A foreign player, whose identity is not being disclosed, has also written to the government, expressing interest in the airline business. Other players in ground handling and aircraft maintenance have come forward for the other units of AI.