AI DI­VEST­MENT: EY MAY BE SOLE TRANS­AC­TION AD­VI­SOR

Roth­schild may walk out cit­ing ‘low trans­ac­tion fee’

Business Standard - - FRONT PAGE - ARINDAM MAJUMDER

Adis­agree­ment over fee may see EY emerge as the sole trans­ac­tion ad­vi­sor for the pro­posed dis­in­vest­ment process of state-owned car­rier Air In­dia.

Sources aware of the de­vel­op­ment said that Roth­schild did not agree to the fee of 0.2 per cent of the to­tal trans­ac­tion value, cit­ing it as “too low for such a com­plex process”. Ac­cord­ing to the guide­lines of the bid­ding process, the fee quoted by EY, which was high­est on the pre­ferred bid­ders’ list, was set as stan­dard fee for the trans­ac­tion. EY had quoted 0.4 per cent of the to­tal dis­in­vest­ment pro­ceeds, re­duced by the debt.

Ac­cord­ing to the rules, Roth­schild would have been paid half of the share (0.2 per cent of the to­tal dis­in­vest­ment pro­ceeds, re­duced by the debt). The Bri­tish multi­na­tional bank, which had quoted 1.5 per cent, did not agree to the 0.2 per cent fee. “Roth­schild says they will be un­able to agree to that amount as the process of Air In­dia dis­in­vest­ment was too com­plex,” a se­nior gov­ern­ment of­fi­cial said.

The of­fi­cial said that the rules of bid­ding can­not be changed af­ter the process is over and EY alone might get the man­date. “EY is likely to be the sole trans­ac­tion ad­vi­sor in the process, as Roth­schild has sig­nalled to step out,” the of­fi­cial said.

Amitabh Mal­ho­tra, co-head and manag­ing di­rec­tor of Roth­schild In­dia, re­fused to com­ment on the is­sue. An EY spokesper­son was not im­me­di­ately avail­able for com­ment.

“The fi­nan­cial bids were too low for such a com­pli­cated deal com­pared to the in­ter­na­tional bench­mark. The process not only in­cludes the prop­erty of Air In­dia but also of its five sub­sidiaries. De­spite that, the quo­ta­tions were low, may be be­cause it will be a mar­quee deal,” a per­son, who at­tended the process, said.

EY and Roth­schild were cho­sen as trans­ac­tion ad­vi­sors for the pro­posed dis­in­vest­ment of Air In­dia and Cyril Amarc­hand Man­gal­das was ap­pointed the le­gal ad­vi­sor af­ter the Depart­ment of In­vest­ment and Pub­lic As­set Man­age­ment in­vited ex­pres­sions of in­ter­est for ap­point­ing trans­ac­tion and le­gal ad­vi­sors.

The se­lec­tion was based on a tech­ni­cal round, which had a weigh­tage of 80, and a fi­nan­cial bid, with a weigh­tage of 20. While KPMG, Shardul Marc­hand Man­gal­das and Luthra and Luthra made it to the fi­nal round based on the score of tech­ni­cal bids, they were edged out by the win­ners in fi­nan­cial bid­ding, as the quoted ad­vi­sory fee were low. The mam­moth deal in­cludes an op­er­at­ing fleet of 142 air­craft, com­pris­ing 65 A-320 air­craft, 15 B777 air­craft, 24 787 air­craft, 23 737-800 air­craft and 11 ATRs and four B747 air­craft.

Apart from the main com­pany, five sub­sidiaries and a joint ven­ture firm have been in­cluded in the strate­gic sale plan. These are its low-cost air­line Air In­dia Ex­press; ground-han­dling arm Air In­dia Air Trans­port Ser­vice; main­te­nance, re­pair and over­haul sub­sidiary Air In­dia En­gi­neer­ing Ser­vices; re­gional con­nec­tiv­ity op­er­a­tor Air­line Al­lied Ser­vice; Ho­tel Cor­po­ra­tion of In­dia; and Air In­dia’s 50:50 joint ven­ture with Sin­ga­pore Air Trans­port Ser­vices for ground-han­dling ac­tiv­i­ties.

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