The government may relax the deadline for submitting an expression of interest (EoI) to buy 76% in state-owned carrier Air India.
However, the structure of the deal will remain unchanged with no plans to split the international and domestic businesses of the airline.
“Some prospective bidders may feel that the timeline of 45 days given to submit an EoI for the airline is too short to do due diligence and decide to participate in bidding. If we get enough of such suggestions in pre-bid consultations, there is a possibility that the deadline will be extended,” said a senior government official.
According to the preliminary information memorandum, bidders participating as a consortium have to finalise their shareholding structure before submitting the EoI. The shareholding pattern of the consortium cannot be changed for three years after the transaction is done.
“It is very difficult to abide by the sort of binding commitments the government wants from consortium members at the EoI stage. To freeze the shareholding structure requires legal, financial and board-level decision making. To do that, bidders will want to do due diligence of Air India’s books,” said a consultant, who advises some global airlines in merger and acquisition. “Freezing the shareholding structure at the EoI stage will reduce the bidder’s interest in Air India,” he added.
Government officials say a shareholding structure has been mandated to discourage non-serious bidders from accessing Air India’s data room.
“But we will be open to extending the deadline if that is the common consensus that emerges during consultations,” he said.
The government has, however, ruled out splitting Air India’s domestic and international businesses.
“Doing that will require the cabinet’s approval, which means restarting the process. To demerge Air India is a multiyear task, there is no question of changing the structure of the deal just to suit one bidder,” he said.
IndiGo, the Indian airline with the strongest balance sheet, pulled out of the race to bid for Air India, citing the government’s unwillingness to divide the business of the airline.
“From Day One, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express. However, that option is not available under the government’s current divestiture plans for Air India. Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s operations,” IndiGo President had said.
The official said despite IndiGo pulling out, the government expected a substantial interest in Air India. “If you look at the eligibility conditions, it is clear that there are high chances of a consortium, probably backed by a deep-pocket corporate, to participate in the deal. Many such entities will be interested,” he said.