Air India sale: Employees, NRI group in the race

The government on Monday said it has received ‘multiple’ expressions of interests (EoIs) for its entire stake in Air India (AI), while sources said US-based NRI firm Interups Inc and at least one AI employee group are among the entities, which have placed the preliminary bids for the ailing national carrier.

Tata Group through its aviation firm AirAsia India is also said to have submitted EoI, but there was no official word on this till late Monday. The last date for submission of EoI was December 14.

Speaking to FE, Air India’s commercial director Meenakshi Malik said a group 219 employees “from office assistant to AI Board member” have submitted an EoI for 51% stake in the national carrier while the remaining stake will be held by “a financial partner”.

Interups chairman Laxmi Prasad confirmed to FE that the firm has bid with an employee group but said this was not the one referred to by Malik, meaning more than one employee panels may be in the fray. “We are extending substantial stake to the employees with no investment contribution from them.

We have plans to split AI assets into operational company and an InvIT so as to monetise some infrastructure-related assets (air routes, ground handling and parking, training and maintenance),” Prasad said. “Employees will have a share of 51% and they will run the scheduled airline operations while we provide strategic initiatives,” he said, detailing the plan.

Prasad also added Interups’ “offer is open to all employees of Air India”. Interups, a listed company, carries 27,000 plus NRI retirement asset accounts. It had earlier said it was “dead serious” in buying an AI stake.

“The transaction will now move to the second stage (short-listing and financial bids),” department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey tweeted on Monday.

On January 27, the government invited EoI for proposed strategic disinvestment of AI by way of management control and sale of 100% stake which will include AI’s 100% stake in Air India Express and 50% in Air India SATS Airport Services.

On October 29, addressing the concerns expressed by potential buyers amid fresh uncertainties caused by Covid-19, the Centre had changed bidding norms for privatization of AI by allowing bids on the basis of the airline’s enterprise value (EV). The buyer won’t need to accept any pre-determined level of debt, but will require to pay 15% of EV quoted by it in cash.

Under the earlier plan, the buyer was required to take over the airline’s estimated residual debt of Rs 23,286 crore (from the total about Rs 60,000 crore debt as on March 31, 2019).

Bidders can even pay 100% in cash to the government. A higher cash payment by the buyer will bolster the government disinvestment receipts in FY21, but increase its burden from taking over of full or part of the AI debt.
The enterprise value to be quoted (market value of debt and equity) will comprise at least 15% in cash payment to the government and debt takeover by the bidders equivalent to 85% of the value quoted, aviation minister Hardeep Singh Puri had said.

As transaction adviser, EY had earlier, among other options, suggested that the debt level be brought down to Rs 17,464 crore, without additional changes in bidding construct. It had cited the prevailing situation in the domestic and international aviation industry and worsening of AI’s performance.

With Covid-19 hitting the aviation sector hard, Air India has estimated that its cash losses would rise 80% on year to Rs 6,000 crore in FY21. Air India CMD Rajiv Bansal had said that the carrier’s losses could be around Rs 8,000 crore in FY21.