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Need more liberal norms for AI stake sale, says CAPA

Press Trust of India  |  New Delhi 

Pitching for more liberal norms for Air sale and aligning them to investor interest, global consultancy CAPA has said that brand, labour and higher than expected debt continue to be major deterrents for the potential bidders.

At the same time, the Centre for Asia Pacific (CAPA) did not sound very hopeful of the government meeting the December deadline to complete the sale process, which kickstarted with the floating of the Expressions of Interest (EoI) on March 28.

"EOI released recently is well structured and largely aligned to generating interest from investors, which has attempted to balance the needs of different stakeholders while moving the process forward.

"As it happens in such complex transactions, being flexible and having an open mind on major issues is necessary. Revising EOI with more liberal terms will be required to further align it to investor interest," CAPA said in a report today.

The report comes following domestic carriers and opting out of the Air sale process and too reportedly saying no to it, owing to the current sale rules.

Significantly, a joint forum of 10 Air unions have dubbed the move by potential investors as "arm twisting tactics" to force government sell the national carrier for cheap.

On March 28, the Civil Ministry came out with the preliminary information memorandum on Air India's strategic disinvestment, as per which the government plans to offload 76 per cent equity share capital of the national carrier as well as transfer the management control.

The proposed transaction would involve Air India, its low-cost arm Air Express and Air SATS Airport Services, which is an equal joint venture between the national and Singapore-based SATS.

CAPA said it expects a revision in the EOI which will need to be flexible on branding and provide clarity on labour issues, adding that there is a possibility of the government further reducing non-aircraft related debt.

"More important, a written commitment of no interference as government will hold 24 per cent equity (in Air India)," it said.

Noting that an upfront clarity on these issues, especially labour, is critical to generate interest, it said," No one will invest billions in Air and face union disruptions and unexpected costs without firm commitment from the government."

Not ruling out both and being in the fray in the eventuality of the government revising the rule of the game, CAPA said, "Some of them opting out doesn't necessary dilute the value and prospects of this divestment."


IndiGo, which is struggling with engine issues in its Neo planes, had initially evinced interest in acquiring Air India's international operations, but later backed out, saying such an option was not available under the disinvestment plan.

Days later, also said it had decided not to participate in the Air sale process considering the terms of offer in the information memorandum and based on its review.

"The so-claimed probable buyers are using arm twisting tactics so as to put pressure on the government to succumb to change the terms and conditions best suited to them and the Air is sold for a song," the Joint Forum of Air Unions/Guilds/Association said in a statement today.

The forum comprises Air Corporations Employees Union, All Service Engineers' Associations, Air Employees Union, Industry Employee Guild, Air Aircraft Engineers' Association, All Aircraft Engineers' Association, Air Engineers Association, Officers Association, All Cabin Crew Association and All Retired Personnel Association.

"The joint forum as stated many times has strongly opposed the privatisation of Air and its subsidiaries as the Air is our national pride and served the nation many a times at needs," it said.

The Air unions forum also said that it will take up the issue with the PMO and the Civil Ministry, among others.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 11 2018. 22:35 IST
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