Govt to select bankers, lawyers for Air India sale process
14 September 2017
The government has invited bids for the selection of two financial advisors and a legal advisor for the sale of stake in Air India, as it proceeds with the privatisation of the national carrier and its subsidiaries.
In an advertisement published in newspapers today, the ministry of finance said, ''The Government of India has ''in-principle'' decided to consider disinvestment of the AI Group as a whole or its constituents fully or part thereof through strategic sale with transfer of management control''.
The notification further said the government requires the services of reputed law firms with experience and expertise in mergers and acquisitions / takeovers / strategic disinvestments / private equity transaction, to act as legal advisers and assist the government in the process.
The government had in June cleared the proposal to sell Air India, which is struggling under losses and a huge debt, and, according to finance ministry officials, the process to offload all or parts of the airline is expected to conclude by early 2018.
Interested investment banks and law firms have to apply latest by 12 October if they are interested for the advisory role in the sale process.
Meanwhile, reports said the government may allow foreign airlines to invest in Air India although the consolidated FDI circular keeps Air India out the ambit of being bought by foreign investors. The idea is to expand the scope for bidders for the loss making national carrier as the exclusion of foreign investors would limit the number of suitors.
The government is expected to take a final decision on whether to apply the 49 per cent FDI limit to Air India also after getting the opinion of the transaction advisors, reports quoting sources close to the development said.
So far, InterGlobe Aviation, which runs Indigo, has been the sole bidder, that too for Air India's international operations, while privately-held Bird Group has shown interest to buy the ground-handling unit of Air India.
In the interim, Air India plans to take short-term loans of up to Rs3,250 crore to meet "urgent working capital requirements", according to a document.
The disinvestment-bound airline, which is staying afloat on taxpayers' funds, expects to get the central government's guarantee for the proposed borrowings shortly.
In a tender document issued today, the carrier said it is "looking for government guarantee backed short-term loans totalling up to Rs3,250 crore in the first phase to meet its urgent working capital requirements by September 25, 2017".
The tenure of the loan will be one year and the amount is proposed to be drawn in two or three tranches.
"The Government of India guarantee, which is expected shortly, will be valid for a period of one year or till the date of disinvestment," the document said.
Banks have been asked to submit their financial bids by September 19, indicating the amount of government-guaranteed short-term loans they are willing to offer.
Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds. The 10-year bailout package began from 2012.
So far, the embattled carrier has received around Rs 26,000 crore under the package.
Air India had net debt of over Rs52,000 crore as of end-March 2017. This includes working capital and other debt of Rs32,000 crore and Rs20,000 crore related to purchase and lease of aircraft.