The lemon-plus problem in corporate rescues erodes enterprise value

Corporate rescues under IBC show that culture matters as much as capital-Air India's case reveals how hidden organisational baggage can shape rescue outcomes beyond financials

The strategic divestment of Air India and its subsidiaries by the Government of India to the Tatas was technically a sale, but in essence, a rescue of a flailing airline. It was, however, a classic case of the “lemon-plus problem”: Not only the information asymmetry typical of used products, but also the weight of entrenched cultural baggage. 

What deterred investors in earlier attempts to sell Air India was not so much the financial liabilities or ownership restrictions, but the perceived difficulty of reforming an organisational culture shaped over nine decades under very different managements: The Tatas (1932–1953) and the Government