Sebi rejects Air India's proposal seeking change in listing norms

The listing plan of Air India (AI) has suffered a setback, after the Securities and Exchange Board of India (Sebi) denied the state-owned carrier exemption from a rule which makes net profit for the past three years mandatory for this.


The government has been mulling an Initial Public Offering (IPO) of equity for AI among options for its future course, after its proposed part-divestment found no investor interest.


A government official said the aviation ministry had explored the idea of listing the airline. “Sebi’s view was sought but the market regulator has declined to give any special exemption to AI as that will open a Pandora’s box of other entities seeking similar relaxation,” the official said.


The airline is not in a position to register any profit due to high debt and a consequently high interest outgo. AI is in losses for years and with a high fuel-cost environment, there is little chance the airline will be in green in the near future.


The government is also contemplating if AI’s divestment plan could be restarted, with relaxed guidelines. These plans, including offering the entire stake in AI, are likely to be discussed in a meeting of the alternative mechanism for disinvestment, headed by the finance minister.


But, officials accept that with a general election in less than a year, the government might have little appetite to restart the process. “If the market didn’t show interest in the first attempt, chances of them participating reduce now, as there will be a political uncertainty over the process,” an official said.


Experts have called on the government to take bold steps. “Over the past 12 months, since the divestment process was announced, the carrier has inevitably experienced a loss of direction, with no major strategic decisions being taken, pending a new owner taking over.Turning Air India around from this position, in this competitive environment, is neither practical nor feasible under government ownership,” said Kapil Kaul, chief executive officer for South Asia at CAPA, an aviation consultancy firm.

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