Has the government's proposal to sell 76 per cent stake in Air India gone bad? With two potential bidders - IndiGo and Jet Airways - opting out of the AI's disinvestment process, and reports of Tata Group's aversion to participate too, it seems that airline is left with no likely bidders.
Over the past few days, the airlines have categorically blamed the terms of the sale for their unwillingness. "We welcome the government move to privatise Air India. It is a bold step. However, considering the terms of offer in the information memorandum and based on our review, we are not participating in the process," Jet Airways said in a statement.
The sale document invites bids without any major discrimination and though nothing can be ruled out, the chances of getting bids from unknown entities at this point look improbable.
As per the sale document, the disinvestment process is divided into two stages: PIM (Preliminary Information Memorandum) that's receiving the initial expression of interest followed by RFP (Request for Proposal).
The PIM is a form of curtain-raiser, and more details will emerge in the second stage of the process - if and when it happens. The biggest downer is passing on the high debt burden to the new buyer. Air India and its two other subsidiaries on sale - Air India Express and Air India SATS - have debt and contingent liabilities of Rs 54,742 crore as on March 2017. Under the proposed sell-off, the new buyer will have to take over 61 per cent (or Rs 33,392 crore) of this debt burden.
If this wasn't enough, there are more terms to head off bidders: some unspecified terms to safeguard the interests of AI employees, the need to list AI on stock exchange under terms that will be decided by the government, and to keep the airline's operations away from other businesses of the buyer.
How the government plans to safeguard the employees is not clear at this stage, and so are the terms of the listing. But given that the three entities have a large workforce (of 40,809 people under different employment terms), any buyer would want flexibility to re-look at the manpower requirements. Similarly, restricting the new buyer - if it's an airline - to synergise its existing airline business with AI is a big put off for any airline across the world.
So will the government budge on some of these terms in case of a lackluster response? Almost a month from now, the first stage of the bidding process will be over. The sale of national carrier has made it to front-page headlines of leading dailies and has got people talking, backtracking doesn't seem to be an option anymore.