“It was inter alia decided to speed up the process of disinvestment of Air India and its subsidiaries,” the letter reviewed by Business Standard said.
Officials said the government was still pursuing the option of selling the airline’s subsidiaries before the airline itself, in order to deal with the outstanding debt of around Rs 27,000 crore. DIPAM Secretary Atanu Chakraborty is expected to brief the PMO soon on the preparations by the department and the transaction advisor regarding the sale of the national carrier.
Consultancy firm EY has been retained as the transaction advisor and the new expression of interest (EoI) to invite the bids could be put out in public domain within a month’s time, said an official.
Taking lessons from last year’s failed privatisation attempt, the government is unlikely to hold any residual stake in the airline. One of the plans being discussed is to sell 95 per cent stake in the airline and retaining 5 per cent for employee stock options (ESOPs).
“There is a plan to give permanent ESOPs in the company at the time of disinvestment along with the assurance of job continuity for one year,” said an official aware of the development.
At last year’s auction, the government had decided to retain 24 per cent in the airline, which was one of the primary reasons why it failed to generate any interest from buyers. Not a single buyer expressed interest in Air India, forcing the government to call off the sale.
The government is also looking at ways to tackle Air India’s huge debt. Despite hiving off around Rs 27,500 crore of debt into a separate entity in order to clean up the books of the airline, market sources said a further reduction in debt was necessary to generate interest.
“When prospective bidders take a decision on buying Air India, they will see if the revenue from operations will be able to take care of paying the annual interest on the debt. At Rs 27,500 crore, it still looks on the higher side. The government needs to take a haircut,” said an executive of a company, which had considered bidding for the airline last year.
It is understood that the government will push to sell the subsidiaries before initiating the process of selling Air India, to tackle the debt issue. “Currently, the process of selling the subsidiaries is on course. The EoI for the ground handling firm Air India Air Transport Services has been issued. Due to the election process, it was kept on hold. Prospective bidders have raised a few queries. Those will be responded to soon,” said a person aware of the development.