Financial Bids For Air India Disinvestment Likely by September 2021, Centre Informs Parliament

The financial bids for Air India’s disinvestment from qualified interested bidders (QIBs) are likely by September 15, the Union government informed the Lok Sabha today (Jul 22).

“(The) Request for Proposal (RFP) along with draft Share Purchase Agreement (SPA) have been shared with QIBs (qualified interested bidders) by the transaction advisor on 30.03.2021 for submission of financial bids. The financial bids are likely to be received by 15.09.2021,” Minister of State for Civil Aviation, General (Retd) V.K. Singh, said in response to a question.

The minister further informed the Lower House that the Civil Aviation Ministry had issued the preliminary information memorandum for inviting Expression of Interest (EOI) for strategic disinvestment of Air India along with 100 per cent stake in Air India Express Ltd and 50 per cent stake in Air India SATS, on January 27, 2020.

However owing to the outbreak of Coronavirus pandemic, the last date for submission of EOI was frequently postponed and finally it was fixed for December 14, 2020, he said in the reply.

A Special Purpose Vehicle (SPV) i.e. Air India Assets Holding Limited (AIAHL), has been setup inter-alia for warehousing non-core assets of Air India Limited, he added.

The Centre has not disclosed the names of the QIBs as yet, though it maintains that it received “multiple” expressions of interest for Air India’s privatisation.

After an unsuccessful attempt to sell Air India in 2018, the Modi government in January 2020 restarted the strategic disinvestment process of Air India.

In October that year, government has changed a bidding parameter for state-owned airline Air India, allowing potential buyers to quote enterprise value instead of equity value. Enterprise value of a company includes the equity value, debt as well as cash with the company. Equity value measures the value of a company’s shares.

According to the current sale terms, the buyer is required to take over debt of around Rs 23,286 crore. The debt is mainly on account of aircraft purchase, which is backed by sovereign guarantees. Those guarantees will be withdrawn when the airline moves to private ownership.

Tata Sons and a consortium led by Spice Jet are among possible contenders reportedly in the race to acquire Air India.