India’s efforts to sell debt-laden Air India failed to take off after it received no bids for the airline at the end of the Thursday evening deadline, dealing a blow to the government’s disinvestment programme.
"As informed by the Transaction Adviser (EY), no response has been received for the Expression of Interest floated for the strategic disinvestment of Air India. Further course of action will be decided appropriately," the ministry said in a statement.
The government announced plans to sell a 76% stake in the troubled national carrier in March but the sale was grounded even before take-off. The conditions laid down by the government in the bid document did not appeal to potential buyers, who had earlier expressed interest in the airline.
IndiGo and Jet Airways opted out of the race early on largely because of the conditions of the sale in the key bid document called the preliminary information memorandum (PIM).
One of the conditions that put off buyers was that interested bidders needed a net worth of Rs 5,000 crore and they had to show profits in three of the five preceding financial years.
Another deterrent was that the PIM suggested the buyer would get Rs 33,392 crore of the total debt of Rs 51,000 crore. The Rs 33,392 crore debt includes current liabilities of Rs 8,816 crore and aircraft finance lease.
Also, the government’s retention of 24% stake was seen as a deterrent. There was confusion as to how the government will exercise its stake once Air India is sold. Besides, the buyer would have got the airline's massive workforce which was considered a liability.
"The government should treat this as a significant failure. The next step should include a comprehensive restructuring of Air India under a special administration which can be followed by 100% divestment with less complex terms," Kapil Kaul, CEO of the Centre for Asia Pacific Aviation (CAPA), South Asia, said in a statement.
“We expect the government to quickly address structural issues and résumé the process at the earliest."
According to sources, the government had received several queries from foreign carriers initially. Some of the names included British Airways, German carrier Lufthansa, Singapore Airlines, and Malaysian Airlines. Apart from these, the Washington DC-headquartered International Finance Corporation (IFC) too had shown interest in the airline.
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