Government’s Air India Sale Said To Attract Gautam Adani Now
Billionaire Gautam Adani-led Adani Group is conducting due-diligence on Air India Ltd., based on the outcome of which it will decide whether or not to bid for the debt-ridden airline, source said.
The government has put up for sale its entire stake in Air India and Air India Express Ltd. as well 50 percent shareholding in Air India SATS Airport Pvt. Ltd. The proceeds will go towards meeting its lofty disinvestment target for 2020-21.
According to sources, Adani Group’s M&A team is scrutinising Air India bid documents and interest was at a preliminary stage. Bidding, the sources insisted, would depend on the due-diligence.
Adani Group's spokesperson could not be immediately reached for comments.
If Adani bids, it will join likes of Tata Group, the Hinduja family, IndiGo airlines and New York-based fund Interups Inc., who are said to be considering putting in an expression of interest at the close of the bid deadline next month.
Government officials on Tuesday indicated that the March 17 deadline is now likely to be extended. An inter-ministerial group headed by the home minister will meet later this week to decide on the new date.
Sources said Adani sees synergy in Air India and its airport operations. The group had last year won bids to operate six airports at Ahmedabad, Lucknow, Jaipur, Guwahati, Thiruvananthapuram and Mangalore.
The deciding factor for Adani to bid for Air India would be debt and losses on the airline’s books. The buyer will have to take on fixed debt of Rs 23,286.50 crore along with certain identified current and non-current liabilities.
To be sure, Airports Authority of India restricts an airline or a group owning an airline to hold no more than 27 percent in the airports. A similar clause, which restricts airlines or group-owning airlines from holding more than 10 percent in Delhi airport, recently resulted in the collapse of Tata-GIC group's investment in GMR Airports.
After its unsuccessful bid to sell 76 percent stake in Air India in 2018, the government this time has decided to offload its entire stake. Of the total debt of Rs 60,074 crore as on Mar. 31, 2019, the buyer would be required to absorb Rs 23,286.5 crore, while the rest would be transferred to Air India Assets Holding Ltd., a special purpose vehicle.
As a precursor to the Air India sale, the Union Cabinet in February 2019 approved setting up of the SPV to house Rs 29,464 crore debt of the national carrier and its four subsidiaries—Air India Air Transport Services Ltd., Airline Allied Services Ltd., Air India Engineering Services Ltd. and Hotel Corporation of India.
Non-core assets—art and artifacts—as well as other non-operational assets of the national carrier too will be transferred to the SPV.
Air India and its subsidiary, Air India Express, owned about 120 aircraft in 2017-18 and 126 planes as of September last year.