New Delhi: The government is open to changing some of the restrictive conditions laid out in the terms of sale for state-run Air India if it finds that investor interest in the asset is lukewarm after the 14 May deadline for submission of initial bids.

Prior to that, there will be no change to the terms of sale based on claims by companies opting out of the race for the national carrier, according to a government official who spoke on condition of anonymity.

Also, in the event of a material change in conditions, those who have not thrown their hat in the ring before the original deadline will get a fresh chance, the official said. The idea of going purely by the actual bids received rather than the posturing by potential investors is to make sure the disinvestment in Air India is truly a market-driven process.

Despite Jet Airways (India) Ltd stating it is not participating in the transaction and InterGlobe Aviation Ltd, the operator of IndiGo airline, saying it has no capability to successfully turn around Air India, the government believes the offer will eventually generate sufficient interest.

“Mostly, investors keep their cards close to themselves till the 11th hour. We will wait and see how many investors show interest. It is not just airlines that can bid for Air India, businesses in other sectors are also free to bid," the official said.

Changes required in the terms of sale, if any, will be put together by transaction adviser EY based on suggestions received and a decision will be taken by a group of ministers chaired by finance minister Arun Jaitley, said the official. The conditions specified in the information memorandum released by the civil aviation ministry include a three-year lock-in period for investment, retaining the Air India brand for its operations for a number of years to be specified and compulsory listing of the company. Also, the government is expected to specify the terms related to protecting employees after the deal in the request for proposals.

The government intends to choose qualified bidders to buy 76% stake in Air India, 100% stake in Air India Express Ltd and 50% stake in Air India SATS Airport Services Pvt. Ltd based on net worth and profitability criteria by 28 May.

Analysts said that airlines interested in the companies will examine the offer based on the synergy these assets offer to their current operations.

“While it is too early to comment, in case the government finds the response to the invitation seeking expressions of interest does not measure up to its expectations, it may require modifying some conditions for the divestment process," said Kinjal Shah, vice-president of corporate ratings at Icra.

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