Government looks to sweeten Air India sale deal, discusses proposals for prospective bidders

Senior government officials said there are some options, including allowing interested parties to bid based on the enterprise value, being considered but a significant reduction in debt was unlikely.

NEW DELHI: The government has decided to go ahead with the process to divest stake in Air India and is discussing proposals to further sweeten the deal for prospective bidders by allowing some relaxations along the bidding process. However, any significant reduction in debt has been ruled out, government sources told ET.

Senior government officials said there are some options, including allowing interested parties to bid based on the enterprise value, being considered but a significant reduction in debt was unlikely.

“There are a few options on the table (enterprise value). Some relaxations have to be given; restructuring of the transaction will have to take place, since some investors don’t want things to be fixed. Maybe, start with the expressions of interest (EOI) and decide (on the value) before financial bids are closed, but we will have to take a call on that,” said the government official.


The government, which did not get any bids for the national carrier in 2018, called for bids again in January this year to sell its stake in Air India, Air India Express and 50% of ground handling company, AISATS.

The government, which had reduced the airline's debt to Rs 23,286 crore from Rs 62,000 crore in order to make it more attractive to suitors, is unlikely to reduce the debt further as the reduced debt is against assets.

As Covid-19 has impacted businesses across the globe, including aviation, the interest in Air India privatisation has not been satisfactory, leading to the government extending the deadline for submission of interested bids more than once.
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ET reported on August 14 that Tata Sons may consider bidding for the carrier – probably the only serious bidder.

“There is interest from investors but there are problems being faced by the sector. We may make tweaks, if necessary. Decisions will be taken within a week to 10 days,” the official further said.

Another source said that even if the government were to take the route of selling at the enterprise value, debt reduction may not take place since it is already very low.

“Also there is a concern of under selling the asset despite the pandemic because the global situation appears to be improving,” said another official.
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The government has also clarified that deferring privatisation of Air India for up to three years is not being considered. It was one of the suggestions made to the government by EY – the consultants for AI divestment.

“Deferring the divestment process is not even an option. We have to move ahead with the process- whether it happens in the current fiscal or the next fiscal. If we were to wait, the situation will only get worse. There will be more funds needed from the government or else things will stall, which is not even an option,” said a senior government official on a condition of anonymity.
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