The much delayed privatisation of Air India (AI) is gathering pace but unlike in the auction of telecom spectrum there are no reserve prices yet for the beleaguered national carrier.
Finance ministry officials said they expected to receive the financial bids from the prospective bidders by September 15. The reserve price would be decided after the “financial bids were received and not opened”.
The decision to do away with the reserve price beforehand and wait till the financial bids come would give a fair chance to all who are in the race for AI, the officials said.
The government is hopeful of completing the strategic sale by December and hand Air India over to the new owners before the end of this calendar year.
Consultant RBSA Advisors will come up with a formal indicative price but it is not known whether it will be known to the bidders.
The final reserve price, officials said, will be decided by a group of ministers after all the financial bids are received.
The Centre has not revealed the names of qualified interested bidders as yet. After the consortium of Air India employees, backed by NRI businessman Laxmi Prasad and his New York-based Interups Fund was disqualified, the Tata group and SpiceJet are the two buyers reportedly left in the race.
According to the terms of the Expression of Interest, the new owner will have to take up nearly 40 per cent of the company's total debt of Rs 60,074 crore, while the rest will be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle.
The EoIs were made public in January 2020. The last date of submission of EoIs — after multiple extensions because of the Covid-19 pandemic — was December 14, 2020.
The Centre had announced in October 2020 that the bidding would be done based on enterprise value instead of equity value. Enterprise value includes equity value, debt as well as cash with the company. Equity value measures the value of a company's shares.
A minimum 15 per cent of the enterprise value has to be given in cash to the government, while remaining sums has to be taken as debt along with Air India.
After its unsuccessful attempt to sell Air India in 2018, the government in January last year restarted the divestment process.
In 2018, the government had proposed to offload 76 per cent of equity as well as transfer management control. However, the offer failed to attract any bidder.
