The civil aviation ministry has extended the deadline for submitting expressions of interest (EoIs) for Air India by a fortnight to May 31 and has decided to allow shortlisted bidders to change partners in the consortium before submission of final offers.
The revision in bid conditions was announced on Tuesday following requests from prospective suitors. Also the selected bidder will be allowed to have operational synergies in areas of human resources, operations, sales and procurement, while keeping other businesses at arm’s length.
Originally, bidders were asked to submit EoI by May 14 and the intimation to qualified bidders was to take place on May 28. Now the deadlines have been extended to May 31 and June 15, respectively. While earlier the government allowed no changes in the consortium, now the norm has been eased to allow change once. A single bidder would be allowed to form a consortium and the existing consortium can rope in new members, while adhering to the bid criteria on net worth and profit. However, there would be no change in the lead member of the consortium and shifting from one consortium to another would not be permitted. The ministry also released 160 queries received from prospective bidders and its response to them. It has clarified that individuals (except Air India employees) will not be eligible to bid for the airline.
The civil aviation ministry said the government decided to retain 24 per cent in the airline. “The government will have rights similar to that of a minority investor as per the Companies Act and shareholders’ agreement,” the ministry said in its response. A source close to the transaction said there was no condition for the selected bidder to undertake an initial public offering within three years of the deal.
The ministry has also said it will disclose at the time of request for proposal (RFP) whether a call and put option will be provided in the share-sale agreement. A put option gives existing shareholders the right to sell securities at a specified price, thereby providing an exit route from the company. A call option allows the buyer to acquire shares at a predetermined price.
“The government has not relaxed conditions with respect to its own ownership and debt to be retained by the new owner. These have been among the main concerns of prospective bidders and should have been addressed before the issue of RFP,” said an aviation source.
While domestic airlines, IndiGo and Jet Airways, have decided not to bid for Air India, the sale process is attracting investment of a few foreign airlines, private equity firms like Warburg Pincus, sovereign wealth funds, and the World Bank’s private investment arm, International Finance Corporation.