NEW DELHI: The environment is now conducive to restarting the process of privatising Air India Ltd and the failure of Jet Airways (India) Ltd to secure an investor will not affect the disinvestment of the flag carrier, said Atanu Chakraborty, secretary of DIPAM (Department of Investment and Asset Management).
“If an oil firm like (Saudi Arabia’s) Aramco feels that it can make its public issue, then certainly those who use the product can consider hitting the market," Chakraborty said in an interview on Thursday.
Saudi Arabia is resuming plans for a potential initial share sale of oil giant Aramco, months after putting the planned listing on hold, Bloomberg reported earlier this month. The kingdom wants to raise a record $100 billion from selling a 5% stake in Aramco, which would make it the biggest IPO in history.
The Indian government failed to receive a single bid when it first offered to sell a stake in Air India in May last year. A key concern among potential investors was the level of management control they would have post purchasing a stake with the government retaining a 24% stake and all attendant shareholder rights available to it under law, instead of opting to remain as a minority financial investor.
Chakraborty said however that the offer of retaining a 24% stake in Air India was to allow for a “quality handholding" for the buyer. “It was meant more to help a person who buys in. We are examining all the queries and comments that have been made. Accordingly, the alternative mechanism (of the Cabinet ministers) which takes a final decision will take a final call," he said.
Asked whether the government is looking to raise substantial revenue from a divestment of Air India or if it simply wants to get rid of the debt-laden company, Chakraborty said: “Whenever we sell any of our assets, I guess expecting some value out of the asset being sold is not misplaced. However, before selling, we look at its value and try to compare with what the buyer has to offer."
Last year, the government also mandated that Air India and low-fare international unit Air India Express will retain their combined debt of ₹24,576 crore, excluding net current liabilities, post the sale. Interested investors, however, told the government that this was not in line with Air India’s future earnings potential.
Chakraborty said the amount of debt that would be absorbed by the government would be decided closer to the date of seeking expressions of interest from potential investors.
“We have already announced taking out some debt and you will see the exact package emerging when we take out the request for expressions for interest. We will have to look at the latest balance sheet of Air India which is under the scrutiny of the auditors at this stage," he said.
Asked whether there is any need to amend the substantial ownership and effective control (SOEC) clause which mandates that Air India will remain with Indian nationals, Chakraborty said it was not necessary. “In the US, only 26% (foreign) ownership is permitted. So, it’s not that SOEC everywhere is very liberal. If you see the budget document, it talks about bringing the economy in line with global best practices in the market. I guess that would be the touchstone by which you should measure any of the decisions and offerings of the government," he said.
The government in January 2018 allowed foreign airlines to buy a stake of up to 49% in Air India with prior government approval before putting the carrier for sale. Until then, foreign airlines were allowed as much as 49% in private Indian airlines, but not in Air India. The government however later clarified that “substantial ownership and effective control of Air India will remain with Indian nationals" post any stake sale.
On Jet Airways which has grounded flights since April, Chakraborty said the airline had its own set of problems. “It would be unfair of me to discuss that since it is already in IBC (Insolvency and Bankruptcy Code) related process. Air India is a very robust organization with large number of owned planes," he added.