Having tried various permutations and combinations to dilute its stake in Air India, the Centre now proposes to carve out and sell the subsidiaries of the national carrier first before putting the airline itself on the block.

“One of the options being considered is to divest the five subsidiaries one by one,” a government official familiar with the deliberations told BusinessLine . “Money earned thus will be used to strengthen the balance-sheet of the parent firm. Once that happens, Air India’s valuation will improve, which, in turn, will help in its disinvestment.”

This is a follow-up to the June 18 meeting chaired by Union Finance Minister Arun Jaitley and attended by Interim Finance Minister Piyush Goyal, Civil Aviation Minister Suresh Prabhu and Transport Minister Nitin Gadkari, besides senior officials from the ministries of Finance and Civil Aviation.

The Group of Ministers reviewed the process after the government failed to get a single bid for the debt-ridden airline.

 

 

 

The Centre, through a Preliminary Information Memorandum dated March 28, 2018, had invited Expressions of Interest from prospective bidders.

Although Indigo and the Tata Group did show some interest initially, by the end of the May 31 deadline, not a single bid was submitted, compelling the government to rethink its strategy.

The Centre proposes to offload a 76 per cent equity stake in Air India as well as transfer management control to the winner. The transaction would involve Air India, its low-cost arm Air India Express and Air India SATS Airport Services Pvt Ltd. The latter is an equal joint venture between the national carrier and Singapore-based SATS Ltd.

Under the proposed disinvestment process, around ₹33,000 crore in debt would have remained with Air India, whose debt burden was about ₹50,000 crore at the end of March 2017.

Paring debt

Experts feel that the high debt is one of the key reasons for the lack of response. Debt of such magnitude cannot be waived, so a good option would be to clear it to the extent possible, said the government official quoted earlier. This is where the sale of subsidiaries would be helpful.

The official also made it clear that the Air India disinvestment is critical for the government from the Budget point of view this fiscal.

The Centre aims to get ₹80,000 crore through disinvestments this fiscal. So far, it has managed to get just ₹434 crore. Achieving the target is important to limit the fiscal deficit to the budgeted level of 3.3 per cent.

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