Air India sale: Debt burden on buyer to be Rs 23,286 crore

Bidders for cash-strapped Air India will need to absorb Rs 23,286.50 crore of its debt, as government plans to sell its entire stake in the national carrier for the second time after a failed attempt in 2018. At Rs 23,286.50 crore, the debt amounts to be more than a third of the total debt of Rs 58,282.90 crore of Air India and its subsidiary Air India Express. The remaining debt will be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle of the national carrier.

The government has made the deal lucrative this time by offering 100 per cent stake in the airline as well as reducing the debt of the company from Rs 33,392 crore earlier.

In 2018, the government had offered to sell its 76 per cent stake in the airline but did not get even a single bidder. Currently, the Government of India owns a 100 per cent stake in the airline and its subsidiary Air India Express.

"At the time of closing of the proposed transaction, debt of Rs 23,286.5 crore will remain with Air India (AI) and Air India Express Limited (AIXL), and the remaining debt of AI and AIXL will be allocated to Air India Assets Holding Ltd (AIAHL)," says a government notification.

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The notification adds the allocation of debt to AIAHL is subjected to requisite approvals from lenders, creditors and regulators, as applicable.

As of March 31, Air India has a total debt of Rs 58,283 crore and servicing the loans is a major challenge for the national carrier as the annual outgo is more than Rs 4,000 crore.

Also Read: Govt to sell 100% stake in Air India; issues bid document

In a bid to make offer more attractive, the government has also relaxed the bidding norms wherein net worth for the potential bidder has been fixed at Rs 3,500 crore, from Rs 5,000 crore net worth earlier. The minimum stake for an individual consortium partner has been also lowered to 10 per cent. The last date for submission of bids for Air India will be March 17, 2020.

During the financial year 2018-19, the national carrier had posted a net loss of about Rs 8,400 crore due to higher operating cost and foreign exchange losses. The state-run carrier has posted an operating loss of around Rs 4,600 crore in the last financial year, mainly due to a rise in fuel prices and higher costs as Pakistan closed its airspace for Indian carriers.

By Chitranja Kumar