The Indian government has now made it clear that it will not extend the deadline for submission of expression of interest for its ailing airline Air India, which it has been trying to sell since 2018.
The current deadline is December 14, but the time provided for interested parties to submit physical bids has been increased from one week to 15 days, Economic Times reports. As a result, qualified bidders will now be informed by January 5, instead of December 29.
The government wants to divest its 100% stake in Air India and budget carrier AI Express, and sell its 50% share in Air India SATS Airport Services, a joint venture with Singapore-based ground handling firm SATS. Set up in 2010, Air India SATS Airport Services currently operates in five airports – Bangalore, New Delhi, Hyderabad, Mangalore and Thiruvananthapuram.
In the past two years the government has been sweetening the conditions for the potential suitors owing to lackluster response. At present the government wants to sell the airline on the basis of its enterprise value because many of its aircraft and assets have been lying idle because of Covid-19 flight restrictions.
Enterprise value is a popular valuation methodology for takeover deals and it is often used as an alternative to equity market capitalization. It is a measure of a company’s total value, which includes market capitalization, short- and long-term debt and cash on the company’s balance sheet.
The changes were made as valuation based on Air India’s flight operating capacity would not be possible at present due to curbs in the number of flights. The potential bidders will be provided time to clear their queries on these changes. The government had appointed Ernst & Young India as transaction adviser.
The bidders will be asked to place offers for the entire company, 85% of which would be considered to go towards debt repayment and the balance would accrue to the government. After sweetening the deal, Air India has outstanding debt of 233 billion rupees (US$3.16 billion), down from 620 billion rupees ($8.41 billion).
Prime Minister Narendra Modi’s government made the first attempt to sell the national carrier in 2018, but failed to get any bids. It had sought buyers for a 76% stake in Air India and investors were reportedly not comfortable with the government retaining a 24% stake. It called for bids again in January this year, but had to postpone the deadline for submission of expression of interest five times owing to the Covid-19-induced meltdown of the aviation sector.