Air India bidding deadline ends today, no suitors yet

New Delhi: Managers of Air India sale have their fingers crossed as the bidding deadline will expire today evening. There have been no bids so far.

But the government is betting on last-minute flurry of bids, going by the large number of queries it got so far, but a no show by investors will turn out to be a blow to Air India privatisation—seen as the last resort after taxpayer bailouts.

On Wednesday, civil aviation secretary R.N. Choubey said that no bids had been received and that the government expects bids to come in at the last hour. Choubey also told television channels that there was no scope of government extending the 31 May bidding deadline, which was already extended once from 14 May on account of poor response. Last week, the secretary told reporters that the government was not against calling off the Air India sale if bids did not meet expectations.

Some key concerns of investors include the level of management flexibility available to them with the government retaining 24% stake, commitments to be given to protect employees and the level of debt to be retained in the company—Rs24,576 crore excluding net current liabilities—which some find high in comparison to potential future earnings. After the sale, government will enjoy all shareholder rights available to it under law, rather than opting to remain as a minority financial investor.

Industry watchers said that in order to make sure that the Air India sale goes through, the government may have to modify the terms of the disinvestment. Some of the finer aspects of the sale will only be disclosed in the request for proposal (RFP) and in the shareholder agreement that the government will sign with the highest bidder. Investors will not know what these terms would be at the time of putting in their initial expressions of interest by 5pm today.

In case of poor investor interest, the government may have to do a rethink on the terms of disinvestment, said Kinjal Shah, vice president (corporate ratings) at rating agency Icra Ltd.

According to a government official, who spoke on condition of anonymity, potential investors will keep their cards close to themselves till the eleventh hour as information about their bid could influence competition for the asset.

The government had in April invited fresh bids for selling 51% in state-owned helicopter services company Pawan Hans Ltd after cancelling the previous invitation for want of sufficient response. Poor investor interest could be a setback for the government’s policy of privatising loss-making, state-owned companies after having explored other options.

The offer for Air India sale includes 76% in Air India Ltd, 100% stake in low-cost international carrier Air India Express Ltd and 50% in Air India SATS Airport Services Pvt. Ltd.

Air India is currently on a bailout approved in 2012, under which it has so far received an equity support of over Rs26,545 crore till 2017.livemint