Air India, which is operationally profitable now, is looking to rejig debt worth Rs 10,000 crore under the scheme for sustainable restructuring of bad assets floated by the Reserve Bank.
To further strengthen the ability of lenders to tackle stressed assets and provide an avenue for reworking the financial structure of entities facing genuine problems, the central bank has introduced ‘S4A’.
The Scheme for Sustainable Structuring of Stressed Assets (S4A), introduced in June this year, also came against the backdrop of rising concerns over NPAs in the banking system. Sources said that Air India is actively looking at the possibility of availing ‘S4A’ to rejig debt to the tune of at least Rs 10,000 crore.
In case the proposal gets a green signal, it would be first time that a public sector undertaking avails the scheme.
Air India, which has been in the red for the past many years, has posted an operating profit of Rs 105 crore in the last fiscal -- first time in a decade. The carrier is also working on ways to bring down its overall debt burden, especially with respect to significant interest outgo.
Currently, the airline’s debt is estimated to be more than Rs 50,000 crore. A consortium of 19 lenders have extended loans to the national carrier.
Sources said many factors have to be taken into account before opting for the ‘S4A’ mechanism. Among others, the exact quantum of cash flow available for the airline has to be ascertained in order to decide on the level of sustainable debt, they added. While overall performance of the carrier in the last fiscal has been better compared to the last few years, an extensive diligence needs to be carried out before applying for the scheme, sources said.
According to them, SBI Capital Markets would be roped in to work on the nitty gritties of the proposal and the whole process of availing ‘S4A’ is expected to take at least six months. The airline is surviving on a Rs 30,000 crore bailout package from the government that is spread over ten years. Over Rs 22,000 crore has been provided to Air India under the turnaround plan which includes financial support towards repayment of principal as well as interest on government- guaranteed loans taken for aircraft acquisition.
Amid Air India continuing to grapple with financial woes, there is clamour in certain quarter for privatisation of the airline. Earlier this month, Air India chief Ashwani Lohani rued the lack of level-playing field in competing with private airlines and called for a “course correction”.