As the deadline to submit financial bids to take over cash-strapped Air India nears, the race between rivals has become more intense. After the consortium of Air India employees, backed by NRI businessman Laxmi Prasad, and his New York-based Interups Fund was disqualified, the Tata Group and SpiceJet have been left in the race to buy the national carrier.
The civil aviation ministry is under the charge of new minister Jyotiraditya Scindia, and disinvestment of debt-ridden Air India is one of his key projects. The deadline to submit the bids is the third week of August.
While the Tata Sons, one of the main contenders in the race, has expedited its due diligence process, low cost carrier SpiceJet has also opened its wings for the much-awaited bid. Ajay Singh, the promoter of SpiceJet is learnt to have arranged a $1-billion war chest for Air India bid through a special purpose vehicle (SPV) which is likely to include two US-based funds.
According to industry insiders, Ajay Singh may hold a minimum 26 per cent shareholding in the SPV, while the US funds are expected to shell out around $700 million. It is going to be Ajay Singh's contribution to the SPV, which will eventually bid for the government’s 100 per cent stake in the national carrier. He is expected to pare his stake in the airline’s cargo unit’s offer for sale once it is listed.
On the other side, Tata Sons Ltd. that owns 84 per cent stake in AirAsia India and controls Jaguar Land Rover, is also getting ready with its bid. The company is learnt to have recently roped in Bain and Company and Seabury Group to carry out due diligence before finalising the bid.
With an aim to facilitate and coordinate with prospective buyers, Air India has set up a 'divestment cell' as well. The cell is making arrangement for buyers visits to the operational sites of the national carrier.
The disinvestment of Air India has been delayed due to second wave of the pandemic, but the government is hopeful of completing the process by the end of this year. Air India has a debt of Rs 60,000 crore which is likely to be parked in an asset holding company owned by the government. The national carrier's stake in Air India Express and 50 per cent stake in cargo and ground handling venture with Singapore’s SATS are also part of the sale.
Earlier, the government was expected to get the financial bid by the prospective buyers by the end of May.
The government has also assured that the interest of Air India employees would be safeguarded whenever the disinvestment process begins.
Debt-ridden Air India has been up for sale since 2017. This is the second attempt of the current Central government to divest its stake in the airline. In 2018, the government had floated the Expression of Interest (EoI) for Air India to offload a 76 per cent stake and management control in the airline, but it did not get a single bidder.
In 2001, the first ever attempt to sell Air India was made during Atal Bihari Vajpayee’s NDA government, when 40 per cent of the airline’s equity was put on the block. But the move could not materalise. In the current budget, the government allocated ₹ 2,268 crore for a special purpose vehicle, set up as part of financial restructuring of Air India. Finance Minister Nirmala Sitharaman had said the disinvestment of Air India and Pawan Hans would be completed in the next financial year. The government currently owns 100 per cent equity of Air India.
The government extended a bid deadline last year and said potential suitors would be allowed to decide how much of its debt they would take on as part of the transaction.
Last month, the national carrier has offered to sell several properties, including offices, flats and staff quarters at major metropolitans as the cash-strapped airline plans to raise ₹200 crore to ₹300 crore from its asset monetisation plan. These properties include residential units at New Delhi's Asian Games Village Complex, flats in Bandra's Pali Hill neighbourhood, flats in Kolkata's Golfgreen locality, and the airline's booking office at Nagpur, among others.
