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CAPA: Postponing Air India disinvestment will erode its value

Press Trust of India  |  New Delhi 

Postponing of Air by five years will further its value, says aviation in response to a draft report by a Parliamentary panel recommending the review its decision on the airline's stake sale.

The Parliamentary Standing Committee on Transport, in its draft report has said the should look at alternative to as it would not be appropriate to disinvest in the at a time when it has shown operational profits.

The draft report suggested the should revisit its decision to privatise the national carrier at the end of the 10-year turnaround plan in 2022.

"Parliamentary panel recommending of be postponed by 5 years will further its value. estimates that the government would need to inject additional USD 2.5-3bn funding, and these may be conservative estimates," said Kapil Kaul, Chief Executive, for Pacific Aviation (CAPA).

Privatisation of the should in fact be "fast- tracked" to maximise investor interest and value for the government, added.

The last year gave its in-principle approval for the of and formed an group to work on the strategy for the airline's stake sale.

The Air India has a debt of Rs 51,890 crore.

As part of a turnaround plan approved by the previous UPA dispensation, the was to receive a bailout package of up to Rs 30,231 crore for a period of 10 years, starting in 2012.

In 2016-17, the had a net loss of Rs 3,643 crore, while the operating profit rose to Rs 215 crore, as per the provisional figures.

The thinktank has also made suggestions for the Air India's disinvestment process and said the government must sell alone as part of the core disinvestment along with aircraft-related debt and reasonable working capital loans.

Air India's subsidiaries, CAPA says, should be sold off separately to raise capital that can be used to retire debt and that and non-core assets should be placed in a separate Special Purpose Vehicle.

It also proposes that the government should exit from Air India completely and that foreign airlines should be allowed to participate in the bidding process by investing upto 49 per cent as per the FDI norms for the sector.

"No major Indian corporation from outside of aviation will invest in such a complex project without an experienced strategic partner. Allowing foreign airlines to participate will increase the number of interested bidders and the valuation," the CAPA said in a press statement.

It also suggested that the Air India's domestic and international operations should be offered together.

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

First Published: Mon, January 08 2018. 22:05 IST