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Rediff.com  » Business » Post sell-off, govt likely to hold around 26% stake in Air India

Post sell-off, govt likely to hold around 26% stake in Air India

January 12, 2018 12:13 IST

Government believes privatisation would increase the airline’s efficiency and make it profitable, enriching the value of the remaining stake with it.

India may not fully privatise its beleaguered airline Air India.

While policy think tank NITI Aayog had recommended a 100 per cent stake sale, the government may hold on to around a 26 per cent stake to be sold later.

 

A final call, however, would be taken by the group of ministers looking into the divestment process.

Sources in the know of the development said the government believed privatisation would increase the airline’s efficiency and make it profitable, enriching the value of the remaining stake with the government.

“The idea is to garner as much money as possible from the sale process.

"Having a private management will improve the operations and the airline will start showing profits, which will increase the value of the company.

"Selling 26 per cent, say, after three years, may give more value to the government in terms of money,” said an official.

A second official confirmed that the government was contemplating keeping a minority stake, but insisted that it would like to give full independence to the new owner in running the airline.

“Even if the government holds on to some stake, it will be ensured that there is a very nominal presence in the governing board.

"Full authority will be given to the private player to operate the airline and there will be no interference in day-to-day operations,” the official said.

Experts, however, cautioned that any retention of stake by the government might discourage potential bidders.

“The government should exit Air India completely. Any level of equity retention will deter investors due to concerns about the prospect of continued government interference post-privatisation,” aviation consultancy firm CAPA said.

InterGlobe Aviation, which runs IndiGo, is till now the only player that has shown a formal interest to buy the debt-laden carrier.

But the firm had also made it clear that they would not be interested in a joint ownership with the government.

“Our view is that a joint ownership with the government is at best a very very difficult proposition and we would not go down that path.

"The government has owned and managed Air India for 50 years and is looking to divest of itself right now.

"One would even wonder if truly at the end of the day when the thinking is all done, whether the government itself would be interested in wanting a partnership,” IndiGo co-founder Rakesh Gangwal had said.

Transaction advisor EY has submitted its recommendation to the government after which there was a nod to allow 49 per cent foreign direct investment in order to get more bids.

The formal bidding process would start after the government invites expressions of interest (EoIs), the process for which would start after the Budget presentation on 1 February.

Civil Aviation Secretary Rajiv Nayan Choubey had earlier said that a formal bid is being drafted and be submitted to a ministerial group soon.

“We will certainly be seeking EoIs by February,” he told a publication on Tuesday.

Photograph: Pascal Rossignol/Reuters

Arindam Majumder in New Delhi
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