Govt may offer entire Air India stake in fresh attempt to woo buyers

About 17 months after the failed disinvestment attempt, the Maharajah is again preparing to woo buyers. This time round, the government may be prepared to sell its entire stake in Air India since a partial stake sale failed to garner interest. The buzz is that the expression of interest document for the beleaguered national carrier will be put out soon, and definitely before month end. "The plan is to sell 100% stake in the airline. The proposal needs clearance from a ministerial panel before it is made public," the official told Mint.

Air India's sale is crucial for the government as it hopes to meet its highest-ever divestment target of Rs 1.05 trillion for the current fiscal. Furthermore, a successful sale will buffer the exchequer - the government is looking at a loss of Rs 1.45 lakh crore due to the recent adjustment in the corporate tax rate. The carrier, reeling under a debt burden of over Rs 58,300 crore, has thus far managed to stay afloat on a 10-year bailout package of Rs 30,231 crore. Its market share has also fallen far behind private players like IndiGo and SpiceJet.

A ministerial panel headed by Union Home Minister Amit Shah had met for the first time on September 19 to explore options to take Air India's divestment plan forward. The panel includes Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Puri and railways and trade minister Piyush Goyal. The panel is reportedly likely to meet again this month to formally clear the privatisation process.

The Centre's previous attempt to sell Air India in March 2018 had failed miserably since investors were not comfortable with the government retaining 24 per cent stake in the airline. Moreover, the way the deal was packaged, including saddling the new buyer with the carrier's existing debt, proved a huge deterrent.

The government has been trying to address some of these issues. For instance, a new special purpose vehicle, Air India Asset Holding Ltd (AIAHL), was established in February to transfer part of the airline's debt as well as non-core assets and other non-operational assets of the airline. Although only Air India Air Transport, out of the company's four subsidiaries, has been transferred to AIAHL so far, the hope is that this development will help attract potential new buyers. The SPV raised Rs 7,000 crore through a bond sale to refinance its debt last month.

"With a revival of Jet Airways appearing bleak, Air India offers a great opportunity for any company that wants to enter the full service carrier business in India," Dhiraj Mathur, an aviation expert and former partner at PwC India, told the daily. According to him, although the airline is an "attractive asset", the big question is how many investors will boast deep enough pockets to acquire it since the present rules don't permit 100 per cent ownership by foreign airlines.

As per government norms, a foreign carrier can neither hold over 49 per cent stake in a domestic airline nor effectively control it. So the Modi government may have to rethink this policy before exiting Air India. "The other two issues are related to employees and liabilities, a lot of which the government has restructured and put into an SPV. If those can be addressed, it's a great asset," Mathur added.

Given that Air India's debt continues to balloon - net debt swelled from about Rs 55,000 crore at the end of March 2018 to Rs 58,351.93 crore at the end of March 2019 - the government will be hoping to get second time lucky in its disinvestment attempt.

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