India plans to transfer a “significant part” of Air India’s debt and its ground handling unit into a separate entity to reduce the struggling State-run carrier’s burden after a failed attempt to sell it.
A special purpose vehicle has been incorporated and the government’s 100 percent shareholding in Air India Air Transport Services Ltd will be transferred to it, Aviation Secretary RN Choubey told reporters today.
The stake will be sold to a buyer and the proceeds will be used to retire Air India debt, he said. Choubey refused to share the quantum of Air India’s debt that will be transferred to the new entity.
The move to hive off the national carrier’s debt comes after the government failed to get any bids for an earlier plan to sell 76 percent in Air India along with its half the stake in the ground handling unit.
That was because a potential buyer was expected to take on Rs 33,390 crore of the carrier’s total debt of Rs 48,700 crore as on 31 March 2017.
The decision to transfer the debt and ground handling unit into a separate entity was taken at a meeting of Alternate Mechanism, or a group headed by Finance Minister Arun Jaitley, looking at ways to push through divestment of the national carrier. The panel has decided to seek expressions of interest for the ground handling unit.
The government earlier received unsolicited offers from four to five companies interested to bid for the ground handling arm of Air India. “This will be a successful strategic sale,” Choubey said.
He, however, said it is difficult to give a timeline when the sale will be completed and will depend on the time required to transfer the subsidiary to the special purpose vehicle.
The Alternate Mechanism also decided to go ahead with the divestment of State-run helicopter service Pawan Hans Ltd and SBI Capital Markets to float a request for proposal and draft share-purchase agreement.
The new proposal aims to sell the government’s 51 percent and Oil and Natural Gas Corporation Ltd’s 49 percent stake in Pawan Hans against the earlier plan of only divesting the government’s holding.
(Published in an arrangement with BloombergQuint.)
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