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As Air India bids close, Tatas and consortium led by staff in fray

According to sources, the Tata Group has submitted an official expression of interest for the airline although the bid has not been placed through its affiliate airlines, Vistara or AirAsia India. A Tata Group spokesperson declined comment.

Written by Pranav Mukul | New Delhi | Updated: December 15, 2020 7:29:54 am
This is the Government’s second attempt at disinvesting its stake in the airline after the previous move in 2018 ended up without a bid.

In a boost to its efforts to disinvest stake in Air India, the Centre said Monday that it has received “multiple expressions of interest” for the debt-laden airline. These include bids from the Tata Group and a consortium comprising several of the airline’s employees and a US-based investment firm, sources told The Indian Express.

The deadline for submission of formal bids closed at 5 pm Monday and the Government is expected to notify the qualified bidders on January 5. This is the Government’s second attempt at disinvesting its stake in the airline after the previous move in 2018 ended up without a bid.

EXPLAINED

The signal behind sale

While meeting the disinvestment target of Rs 2.1 lakh crore for 2020-21 may be a tall order — just 5% has been achieved so far — a successful sale of Air India will send a strong message on the seriousness of the government’s strategic sale plan.

“Multiple expressions of interest have been received for strategic disinvestment of Air India. The transaction will now move to the second stage,” Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management, posted in a tweet.

Earlier, the Government had put up 76 per cent stake in Air India for sale along with a portion of debt. But this time, it plans to divest 100 per cent of its equity share capital in Air India Ltd, which includes Air India’s shareholding interest of 100 per cent in Air India Express and 50 per cent in Air India SATS Airport Services.

According to sources, the Tata Group has submitted an official expression of interest for the airline although the bid has not been placed through its affiliate airlines, Vistara or AirAsia India. A Tata Group spokesperson declined comment.

The other confirmed bid has been placed by a consortium of Air India employees and Interups Inc, according to Laxmi Prasad, the chairman of the US-based firm. On its website, Interups says it “is a publicly listed company engaged in the business of identifying and investing into business opportunities or transactions either directly or on behalf of its stakeholders, affiliates, associate concerns and clients”.

The bid by the consortium proposes to give 51 per cent stake to the group of employees involved, which includes some board members among 219 staffers, and 49 per cent to Interups Inc, which will act as the financial partner.

The plan to include employees was put in motion by Air India’s commercial director Meenakshi Mallik, who wrote to nearly 20,000 staff seeking participation in the disinvestment process. Some employee unions, however, had advised their members against the move.

In its latest disinvestment move, a key change made by the Government in terms of bidding is that it has allowed potential investors to bid on the basis of enterprise value, effectively allowing the bidders to determine the debt level they would want to take on.

Air India had current liabilities and provisions, including short-term loans and trade payables, of Rs 70,686.6 crore and a net debt of Rs 58,255 crore at the end of 2018-19. Thereafter, the Centre transferred Rs 29,464 crore of this debt to a Government-owned special purpose vehicle, Air India Assets Holding Company Ltd.

The entities that have submitted expressions of interest need to submit physical bids by December 29. Qualified bidders will place bids on the basis of enterprise value and the winning entity will be decided on the basis of whoever quotes the highest enterprise value. This entity will then have to pay at least 15 per cent of the quoted enterprise value in cash, while the rest can be taken on as debt.

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