Decision on National Aviation Company of India IPO only after six months

A decision on the much-awaited initial public offering (IPO) of the National Aviation Company of India Ltd (NACIL), the merged entity of Air India and Indian, is not less than six months away, union civil aviation minister Praful Patel clarified on Tuesday 16 October.

Patel said the decision on the IPO as well as on granting stock options to NACIL employees would be taken keeping in view the market environment. "We will review the merger after six months and then take a call on the IPO," he said.

The minister''s comments come on the background of officials from his ministry indicating that Accenture, the consultant that advised the government on the merger of the two state carriers, has already been asked to work out valuations and the different possible methods by which equity dilution can be achieved. The study could take up to five or six months to complete.

NACIL officials said the company is looking at revenues of $4 billion this fiscal against $3.5 billion in 2006-07, but it is not clear whether the merged entity would be able to declare a profit. Both Indian and Air India were making losses before the merger.

If NACIL is able to report good numbers for 2007-08, it would play a crucial role in the timing and the size of the proposed IPO, since a profitable entity would be able to command much better valuations.

NACIL managing director V Thulasidas had earlier indicated that the government might offload up to a 15 per cent stake through the IPO, but no such decision has been taken to date.