The government is counting on investors outside the aviation industry as suitors for Air India to keep competition high for the national carrier that is up for sale.
Neeraj Kumar Gupta, secretary in the department of investment and public asset management (DIPAM) said here that the eligibility criteria for the strategic disinvestment is only financial and does not require investors to have prior experience in the aviation sector.
“We are not talking about the technical or managerial expertise of the investor (in the bid document) so that there is an equal opportunity. Even in the case of Air India, we are not looking at airlines alone,” said Gupta.
Speaking at the India investment conference organized jointly by industry chamber Assocham and Private Equity and Venture Capital Association of India, Gupta said that so far the department of investment and public asset management has received a lot of queries and clarifications regarding Air India privatisation from prospective airline and non-airline investors.
Allowing investors with a strong financial position to bid in a consortium with other businesses widens the pool of potential bidders for the assets the government is exiting.
The emphasis on the government welcoming businesses other than airlines on an equal footing with airlines for the 76% stake in Air India comes after some airlines dropped out of the race for the national carrier.
Jet Airways (India) Ltd recently stated that it is not participating, while InterGlobe Aviation Ltd, the operator of IndiGo, the country’s largest airline, said it has no capability to successfully turn around Air India.
Gupta said that the financial prudence displayed by the government makes private investors, including venture capital and private equity investors, key players in economic growth and that the process of disinvestment in state-owned enterprises offers an investment opportunity to them.
According to the bid document released last month, investors with a minimum net worth of Rs5,000 crore and a track record of reporting profit after tax (PAT) in three of the previous five financial years are eligible to bid for 76% stake in Air India, 100% stake in Air India Express Ltd and 50% stake in Air India SATS Airport Services Pvt. Ltd.
DIPAM secretary Gupta added that several public sector companies which are good brownfield projects needing capital for technology acquisition offer scope for private equity and venture capital funds to invest in.
Gupta said that the “transformational” reforms that have taken so far, such as the implementation of the goods and services tax (GST) and bankruptcy reforms indicated the resolve of the central government to take on thorny issues head on.
Experts said bankruptcy reforms have opened up new opportunities.
“There will be a lot of scope for investment in stressed assets,” said Suman Jyoti Khaitan, managing partner at law firm Suman Khaitan and Co.
Source: Mint