air india: 3 attempts, 20 years: Why government was able to sell Air India this time


NEW DELHI: The government finalized the sale of the national airline on Friday Air india to the Tata Group for their winning bid of Rs 18 billion.
Ownership of the debt-laden airline now dates back to the Salt to Software conglomerate, which founded it nearly 90 years ago.

The national airline has been suffering losses since its merger with Indian Airlines in 2007. The secretary of the Department of Investment and Management of Public Assets (Dipam) said its losses were around 20 million rupees per day.
Therefore, the government had no choice but to sell its stake in the airline. However, it took more than two decades and up to three attempts for Air India to finally change hands.
What did you click this time? Here’s a deeper look at the divestment process over the years …
* 2000-01: the NDA government tries to sell 40% of the stake
As part of its broader privatization and divestment push, in 2000-01, the NDA government under Atal Bihari Vajpayee attempted to sell a minority stake (40 percent) in Air India.

Singapore Airlines together with Tata Group showed interest in buying the stake. However, they eventually withdrew mainly due to opposition to privatization by the unions.
This derailed the divestment plan.

* Financial restructuring plan in 2012
In order to mitigate the losses suffered by the airline, the previous UPA regime approved a restructuring plan (TAP) and a financial restructuring plan (FRP) for Air India in 2012.
* March 2018: the government invites EoIs to sell their 76% stake
After the Cabinet Economic Affairs Committee (CCEA) approved in principle the strategic divestment of Air India and its five subsidiaries, the Center invited Expressions of Interest (EoI) to buy the majority (76 percent) of its stake in The airline.
The winner was to take care of almost 70 percent of the airline’s debts, which later amounted to approximately Rs 33,392 million.

It also included a 100 percent stake in Air India Express, the airline’s low-cost subsidiary, and a 50 percent stake in the AISATS groundhandling arm.

However, no offers were received until the last submission date in May 2018.
The main reason for this was that the Center retained some control of the airline with itself and did not sell 100 percent of its stake.
Furthermore, the debts to be assumed by the bidder were too high.
* January 2020: Government offers 100% stake in Air India
The Center invited new EIs from interested bidders to acquire the airline in January 2020.
This time, however, it was offering full 100 percent stake in the flagship airline.
The deal also included a 100 percent stake in Air India Express and a 50 percent stake in the ground handling arm AISATS.

After not receiving any offers the last time, the Center this time reduced the amount of debt that the buyer would have to assume.
Finally, of the airline’s total debt of Rs 60,074 crore as of March 31, 2019, the new EoI said the buyer would have to absorb Rs 23,286.5 crore.
* October 2020: the terms of the deal were further relaxed
The Center further relaxed the terms of the deal for potential buyers.
This time, investors were given flexibility to decide how much Air India debt they want to absorb.
The government received multiple offers, but the deadline was extended five times to December 14, 2020. The Covid-19 pandemic also delayed the process.
* April 2021: financial offers received
The government began inviting financial offers for Air India and set September 15 as the last date to submit offers.
* September 2021: Tatas, SpiceJet promoter Ajay Singh, make offers.
The transaction saw great competition with 7 EOIs being received in December 2020.

However, the government had to disqualify five of the bidders because they could not meet the requirements set out in the PIM / EOI, even after giving them an opportunity for clarification.
Two sealed bids were received on the expiration date along with non-financial bidding documents and bid guarantee from the two qualified bidders.
One was owned by M / s Talace Pvt Ltd, a wholly owned subsidiary of M / s Tata Sons Pvt Ltd. The other was a consortium led by SpiceJet developer Ajay Singh.
Under the approved procedure for strategic divestment, a reserve price of Rs 12,906 crore was set after receiving the sealed financial offers for the transaction.
While Tatas listed a winning bid of 18 billion rupees, the consortium led by Ajay Singh had listed 15.1 billion rupees.
Consequently, the Tata Group won the tender to acquire Air India.
(With inputs from agencies)

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