Amid speculation about the future of Air India’s divestment, the government has now answered queries it received from prospective bidders, especially to make the Preliminary Information Memorandum (PIM) more attractive.
The government had earlier released the PIM in March, following which industry giants IndiGo and Jet Airways backed out of the bid.
Interestingly, one of the most common query is centred on the government’s 24% stake post the divestment of the beleaguered carrier, with some suggesting an alternate ‘structure such as payout’ to the government.
“Suggestion is noted. However, it is a considered decision by Government of India (GOI) to divest 76% stake and retain a 24% stake. It is noted that ESOPs will also be provided from GoI’s shareholding,” the government clarified.
Clarifying its role in Air India’s management post divestment, the government says it will have rights similar to that of minority shareholders as per the Companies Act and Shareholders’ Agreement.
The government has also categorically denied any clause pertaining to the “three-year timeframe for an IPO” in the PIM. According to the PIM, the government plans to divest its residual stake in the airline in future.
The new owner will also not get any preference in the sale of the remaining assets or subsidiaries of the company.
Coming down the debt that the buyer gets, the government has stated that of Rs 33,392 crore debts, the current liabilities amount to Rs 8,816 crore.
“Cash flow is a function of various internal and external factors, the prospective bidders to undertake their own analysis to estimate future cash flows,” the government says.
The government will also be “released” of all guarantees extended on behalf of Air India as part of the strategic disinvestment, which means that the new owner will be the new guarantor for the airline’s existing guarantees.
About the Air India’s large workforce, the government notes that employee issues are being addressed. Interested bidders are worried about employee unions ‘blocking’ the sale of Air India to a potential buyer.
The government has also addressed that the lock-in period clause does not restrict the new owner from raising additional funding, if required. Prospective bidders were concerned that the three-year lock-in period of not being allowed to sell stakes in Air India will be a binding factor.
The government has also clarified that high networth individuals will not be eligible to bid for Air India as they do not meet the PIM’s clause 11.1. Clause 11.1 states that if the bidder is not an incorporated entity, Air India’s shares will be held by a special purpose vehicle incorporated in India.
The government has extended the deadline for Expression of Interest for Air India till May 31.
(A detailed story on Air India appears in the May issue of Fortune India.)
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