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Air India disinvestment: Govt invites applications from investment bankers, law firms
September, 15th 2017

The government on Thursday invited applications for appointing transaction advisors and law firms in assisting strategic sale in the national carrier Air India. The Department of Investment and Public Asset Management (DIPAM) said it will engage up to two transaction advisors from consulting firms/investment bankers, merchant bankers, financial institutions and banks.

“The Government of India has in-principle decided to consider the disinvestment of the AI Group as a whole or its constituents fully or part thereof through strategic sale with transfer of management control,” the DIPAM said in notice inviting Expression of Interest. “AI group operates to 42 international destinations and over 70 domestic stations. It has an operating fleet of 142 aircraft comprising 65 A-320 aircraft, 15 B777 aircraft, 24 787 aircraft, 23 737-800 aircraft and 11 ATRs and 4 B747 aircraft,” it said.

In its notice for the law firms, the department said the government “requires the services of reputed law firms with experience and expertise in mergers and acquisitions/ takeovers/strategic disinvestment/ private equity transaction to act as legal adviser and assist government in the process,” one of the notices said. Applications have to be submitted by October 12.

Apart from the main company, five of the Air India subsidiaries and a joint venture firm has been included in the strategic sale plan. These are its low cost airline Air India Express Limited; ground handling arm Air India Air Transport Service Limited; maintenance, repair and overhaul subsidiary Air India Engineering Services, regional connectivity operator Airline Allied Service and Hotel Corporation of India. Air India has a 50:50 joint venture with Singapore Air Transport Services (SATS) for ground handling activities at Delhi, Mumbai, Bengaluru, Trivandrum and Mangalore.

Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds. The ten-year bailout package began from 2012. Air India’s share capital as on March 31 , 2017 is Rs 24,425 crore and its authorised capital is Rs 30,000 crore.

In June, the Cabinet Committee on Economic Affairs gave its in-principle nod for the strategic disinvestment of the airline, which has a debt burden of around Rs 55,000 crore. Subsequently, an Air India-specific alternative mechanism comprising of group of ministers was set up to guide the sale process.

The ministerial group is looking into treatment of Air India’s unsustainable debt, hiving off of certain assets to a shell company, demerger and strategic disinvestment of three profit-making subsidiaries, among other aspects.

Air India is also planning to take short term loans worth up to Rs 3,250 crore to meet urgent working capital requirements. Through a strategic disinvestment, the government can sell up to 50 per cent of its shareholding of a central public sector enterprise, along with transfer of management control. The last strategic sale took place in Jessop and Co in 2003-04 under the National Democratic Alliance government, when 72 per cent of government stake was sold to Indo Wagon Engineering for Rs 18.18 crore, as per data available with the DIPAM.

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