Financial bids for the sale of the government’s entire stake in the state-owned carrier Air India are likely to be in by September 15, Parliament was informed on Thursday.
The government also informed the House that Cairn Energy’s and Devas Multimedia’s lawsuits in the US District Court for Southern District of New York seeking declaratory and money judgment against the national carrier as an alter ego of the government of India won’t impact the ongoing disinvestment process of the airline.
Cairn and Devas sought direction from the court to hold the airline company liable for payment towards the arbitration award that they won against the government of India. The government has challenged/challenging the arbitration awards.
“The request for proposal (RFP) along with draft share purchase agreement (SPA) have been shared with qualified interested bidders by the transaction adviser on March 30, 2021, for submission of financial bids. The financial bids are likely to be received by September 15, 2021,” minister of state for civil aviation VK Singh told the Lok Sabha.
Tata Group was among the ‘multiple’ suitors that had put in preliminary bids for the loss-making airline in December 2020. The government is selling its entire 100% stake in the ailing carrier that has been bleeding ever since its amalgamation with Indian Airlines in 2007.
The bidders will then have to get security clearance from the home ministry, which may take another month. Only the bids of investors who have received security clearance will be opened. The transaction may be concluded by FY22 end, once all regulatory clearances are obtained by the winning bidder.
Having failed to attract substantial interests since 2017, the Centre has this time sweetened the deal by giving potential suitors the flexibility to decide how much of the airline’s debt they would like to take on as part of the deal. However, the buyer will require to pay 15% of the enterprise value quoted by it in cash. The bids are likely to be under Rs 20,000 crore of which 15% or Rs 3,000 crore could flow in cash to the government.
Earlier, the buyer was required to take over as much as Rs 23,286 crore of the airline’s total debt of over Rs 60,000 crore (as on March 31, 2019), the government was supposed to absorb the rest.
Besides making huge losses annually, the national carrier has substantial legacy issues for winning bidder with regard to manpower (over 9,600-strong permanent workforce) and social security benefits.
Cairn’s legal recourse in various countries is in line with its declared plan to recover $1.7 billion ‘due’ from New Delhi by attaching assorted Indian assets overseas, including real estate and Air India planes, following a December 2020 international arbitration award overturning levy of Delhi’s retrospective taxes. Devas lawsuit, to recover arbitration award of $1.2 billion, is also aimed at targeting overseas assets of government-owned entities.
“As AI is a separate corporate entity with its own management and board. The case is being defended by AI. The company has appointed lawyers to defend its interests,” Singh said.