The Government of India is likely to set Air India’s price in the range of Rs 15,000-20,000 crore, with sources saying that in case the highest bidder’s financial bid is less than the reserve amount, it is still likely to sell off the airline. The Centre has received financial bids from Tata Group and SpiceJet founder Ajay Singh for acquisition of the debt riddled national carrier.
The reserve price was reached after taking into consideration all the assets the buyer would get. This includes slots, aircraft, foreign flying rights, brand value, cash flow as well as the debt burden. Sources, as per ToI, said the call was made due to the amount of fund infusion that will be required to keep Air India alive in case the divestment does not get through.
It should be noted that Air India’s accumulated debt-cum-losses combine is close to Rs 1 lakh crore, with daily loss being about Rs 25 crore. As such the government has been looking to expeditiously conclude the deal.
The financial bids are being evaluated against an undisclosed reserve price and the bid offering the highest price above the benchmark would be accepted. The government intends to sell 100% of its stake in the state-owned national airline, including Air India’s 100% shareholding in AI Express Ltd and 50% in Air India SATS Airport Services Private Ltd.
The government’s attempts since 2017 failed to get any significant interest. After receiving feedback from potential investors, the Centre in October 2020 amended the EoI clause relating to the transfer of Air India’s debt to the new investor, giving bidders flexibility to decide on the quantum of humongous debt they want to absorb.
The stake sale process begun in January 2020, however the process had been riddled with delays due to the COVID-19 pandemic. The government, in April 2021, asked the potential bidders to put in financial bids; the last day for placing the bids was September 15.
Air India was founded by the Tata Group in October 1932, and the government nationalized the airline in 1953. Tata Group was among the multiple entities that had put in an initial expression of interest (EoI) in December 2020 for buying the Maharaja.