Air India Mumbai building sale hits hurdle of a reluctant board

Union shipping minister Nitin Gadkari's proposal of selling Air India's iconic building in Mumbai to the Jawahar Lal Nehru Port Trust (JNPT) has hit turbulence as the national carrier’s board is reluctant to sell the building, which is ostensibly its ‘cash cow’.

Besides, the sale would not have yielded much cash flow for the company since the building is mortgaged to State Bank of India.

It is also felt that under the current market conditions, the building is unlikely to garner the kind of funds expected from a prime real estate at Nariman Point.

According to an official in the know, “It is a steady cash flow stream for the company and also the current evaluation would not even fetch Rs 10 billion for the Nariman Point building to Air India. The building has been mortgaged to the State Bank of India and if it is sold, the state-owned lender would get its due first and the remaining amount would go to Air India.”

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It is learnt that the independent directors on the board of Air India were against the government-to-government sale of the building. The ministry of civil aviation had earlier mooted the proposal for sale of the building and had asked government departments to come forward for buying the building that generates an annual rental income of Rs 1.07 billion for the ailing national carrier.

Gadkari had responded saying that the Jawahar Lal Nehru Port could buy the building.

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“The central government didn't want to antagonise the unions which were against sale of the iconic property. JNPT itself was not keen on the takeover as the major port was not into the real estate rental business,” a source in the know said. Neeraj Bansal, chairman, JNPT, was unavailable for a comment.

JNPT at Navi Mumbai, formerly known as the Nhava Sheva Port, reported and annual profit of Rs 13 billion and handled 66 million tonne of container cargo in 2017-18.

The 23-storey Air India building is the national carrier’s headquarters.

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Built in 1974, the floors have been rented out to the directorate general of shipping, State Bank of India, and Tata Consultancy Services, among the others.

According to the Air India’s website, the company’s secured a term loan from banks, including Rs 92 million from the State Bank of India and Rs 31.7 million from Bank of Baroda.

Air India's debt burden is estimated to be more than Rs 500 billion. In March this year, the civil aviation ministry had informed the Lok Sabha that the airline mopped up Rs 5.43 billion till then from monetisation of its assets in prime locations such as Mumbai and Chennai.

The ministry had also said the carrier collected Rs 2.91 billion as lease rental from the Air India building at Nariman Point, between 2012-13 and January 2018.