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Air India: Entities can bid based on affiliates' financial strength

Air India: Entities can bid based on affiliates financial strength
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New Delhi: Entities can bid for national carrier Air India on the basis of the financial strength of their affiliates, a proposition that could attract more bidders.

In its second attempt in as many years to divest loss-making Air India, the government came out with the Preliminary Information Memorandum (PIM) on Monday.

The government has proposed selling 100 per cent stake in Air India along with budget airline Air India Express and the national carrier's 50 per cent stake in AISATS, an equal joint venture with Singapore Airlines.

As per the PIM, a bidder may also "qualify on the basis of net worth of its affiliate, provided such IB (Interested Bidder) itself has a positive net worth...," subject to certain conditions.

This means that an entity can bid based on the financial strength of its parent, according to a source involved in the disinvestment process.

Such a provision could also help in attracting more bidders.

In case an IB is taking the benefit of financial strength of its affiliate, then the net worth of only the affiliate would be used for the purposes of evaluation of financial capability of the IB, as per the PIM.

To make the disinvestment more attractive, the government has eased the bidding norms. Prospective bidders now need to have a minimum of Rs 3,500 crore net worth.

In 2018, when the government tried to divest Air India, the net worth criteria was fixed at Rs 5,000 crore.

Meanwhile, the source said that complete foreign ownership of the national carrier would not be possible.

Under the Foreign Direct Investment (FDI) norms, the Substantial Ownership and Effective Control (SOEC) framework and provisions in the bilateral agreements, it would not be practical for Air India to have 100 per cent foreign ownership, the source said.

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