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Air India sale: Govt mulls easing debt burden on buyers

Earlier in January this year, the government had announced that potential buyer will need to absorb Rs 23,286.50 crore debt of Air India

Air India sale: Govt mulls easing debt burden on buyers

As per the new proposal, bidders for Air India will be allowed to bid on enterprise value and not on entity value

Bidders for cash-strapped Air India will not have to absorb $3.3 billion debt (or Rs 24,295 crore) of the national carrier, as government plans to drop debt condition to make the deal attractive. After a failed attempt in 2018, the government is still struggling to find buyers for the loss-making carrier for the second time. The economic disruption caused by the coronavirus pandemic has made the situation even more difficult.

The central government has been advised to scrap debt condition as it discourages potential buyers of Air India, according to a Bloomberg report.

As per the new proposal, potential buyers will be allowed to bid on the enterprise value and not on the entity value, the report said.

Moving forward with Air India stake sale for the second time in January this year, the government had proposed to sell its entire 100 percent stake in the airline, as against 76 per cent in the previous failed attempt in 2018. It had also reduced the debt of the company to Rs 23,286.50 crore from Rs 33,392 crore earlier. At Rs 23,286.50 crore, the debt amounts to be more than a third of the total debt of Rs 58,282.90 crore of Air India and its subsidiary Air India Express. The remaining debt will be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle of the national carrier.

Air India would sell its cent per cent stake in profit-making budget carrier Air India Express as well as 50 per cent shareholding in equal joint venture Air India SATS Airport Services (AISATS). All the three entities would be sold together and management control of the national carrier would be transferred to the new investor. Currently, the Government of India owns a 100 per cent stake in the airline and its subsidiary Air India Express.

In wake of coronavirus pandemic, the government has already extended the deadline for bids for the fourth time in 2020. As per latest announcement, bidders have been asked to submit their bids by October 30, 2020.

As of March 31, 2019, Air India had a total debt of Rs 58,283 crore. Servicing the loans is a major challenge for the national carrier as the annual outgo is more than Rs 4,000 crore. The airline reported highest-ever net loss of Rs Rs 8,556.35 crore in 2018-19, compared to net loss of Rs 5,348.18 crore in 2017-18.

By Chitranjan Kumar

Also Read: COVID-19: Air India suitors get a bargaining chip

Also Read: Air India sale: Debt burden on buyer to be Rs 23,286 crore

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