Air India sale offer Before and Now: 6 changes that may help Maharaja’s divestment take off this time

After failing to get the debt-laden Air India off its books in 2018, the government has once again put the Maharaja on the block. Making the offer more lucrative and toning-down a few requirements that bidders need to meet. In the second such attempt in two years, the government hopes for higher interest from potential bidders for India’s national airline, which is reeling under a debt of over Rs 60,000 crore. In its first attempt, Air India had failed to attract any serious bids. Here’s a look at what changes the government has made to sweeten the deal.

Entire stake goes up for grabs

• Before: The preliminary information memorandum for inviting expression of interest for strategic disinvestment of Air India Limited, 2018 offered bidders a 76% stake in Air India including AI’s shareholding interest in the subsidiaries AIXL and AISATS.
• Now: The new invitation that the government published on January 27, offers bidders a 100% stake including AI’s shareholding interest in AIXL and AISATS. With the entire stake up for grabs, private entities will be attracted to the offer that makes Air India boardroom free of any government interference.

Debt re-allocation plan revised

• Before: What has been the most attractive part of the new offer is the slashed debt of the company. The government had in 2018 offered that “The existing debt and liabilities of AI and AIXL as on 31st March 2017 be reallocated and it is expected that debt and liabilities, including net current liabilities, remain with AI and AIXL.” This meant that the new owners of the airline would have to carry on a huge debt on their backs, more than Rs 60,000 crore.
• Now: The revised offer has done away with most of the debt leaving the new owners with just Rs 23,286 crore debt. The debt left with the company is on account of 82 aircraft purchased by AI. AIXL, the subsidiary that will be sold along with AI, too has liabilities worth Rs 25,000 crore. Of these, the new buyers will take over only Rs 9,700 crore which will be adjusted to ensure that there are assets against them. The government will also take other liabilities, if any, arising on account of income tax, customs duty, and service tax.

Government to clear salary dues

• Before: Air India, often known as the Maharaja employs 17,984 people that have not been paid for quite a while now, as the company was burdened with mounting debt. A solution to this concern was amiss in the 2018 offer.
• Now: Announcing the invitation for expression of Interest, Union Minister Hardeep Singh Puri, Monday announced that the government will clear the salary dues before the proposed transaction is completed.

Eligibility criteria for bidders changed

• Before: Under the 2018 offer, bidders were required to have a net worth of Rs 5,000 crore and positive Profit After Tax in at least three of the immediately preceding five financial years from the EOI Deadline.
• Now: The new offer has relaxed the net worth requirement to Rs 3,500 crore, and PAT finds no mention.

Changes in consortium criteria

• Before: Minimum stake for an entity in a consortium in the 2018 offer was kept at 26% and the minimum stake of the lead member in a consortium was to be at least 51%.
• Now: Under the new offer minimum stake for an entity in a consortium has been reduced to 10%, while the minimum stake of the lead member in a consortium has also been reduced to 26% making it easier for entities to tie-up and submit an EOI.

Lock-in period relaxed

• Before: In the 2018 document, the lock-in period was kept at three years, which has been relaxed now.
• Now: The lock-in period has been brought down to one year post the completion of the proposed transaction.

Industry experts and analysts reacted positively to the offer made by the government. The debt-laden carrier has a 127-aircraft strong fleet that controls 50.64% of the International market share when clubbed with AIXL, among Indian carriers. Air India currently serves 42 international destinations. The government has set 17 March 2020 as the last date for submission of Expression of Interests.

Source: Financial Express