New Delhi: The Narendra Mod-led government’s decision to retain 24 per cent stake in ailing national carrier Air India after its privatisation is seen as the main cause for the subdued response to the proposed disinvestment in the carrier, reported the Economic Times on Monday. “The government decision to retain 24 per cent post-divestment was a non-starter,” an aviation industry expert, aware of the talks around the sale of government equity in state-run Air India told the ET.
Worth mentioning here is that the first big-ticket strategic sale of the carrier failed to attract a single bidder last week, dealing a big blow to the government’s target for offloading stakes in state-controlled companies. At present, it puts pressure on the Centre to look into other options to meet its steep target of raising Rs 80,000 crore from divestment in government-held companies, opine experts.
“The government holding even a 1 per cent stake is not a comfortable situation for any investor buying an airline,” another industry veteran told the financial daily. NITI Aayog — the government’s premier policy advisory body — had recommended a 100 per cent stake sale in debt-laden Air India.
In March, the government decided to divest a 76 per cent stake in Air India as well as transfer the management control to private players. Disinvestment-bound Air India total debt stood at over Rs 48,000 crore at the end of March 2017. The national carrier, however, posted a 20 per cent growth in revenue in March-April 2018.
“We don’t see it as a failure on the government’s part … there is a limited universe of bidders for Air India: Either we have to expand that, or align with market expectations,” a senior finance ministry official told the ET on condition of anonymity.
Meanwhile, in April, several media reported that Jet Airways ruled out a bid for Air India. IndiGo — India’s largest domestic airline — also declined to buy out the state-run ailing airline because the terms set by the government were unfavourable.