Govt mulls Air In­dia IPO

Some ex­perts be­lieve list­ing op­tion is bet­ter than out­right fire sale idea

Financial Chronicle - - FRONT PAGE - FC BUREAU

AF­TER fail­ing to get any buyer for the debt­laden Air In­dia, the avi­a­tion min­istry is now mulling the op­tion of list­ing the air­line on the bourses. “Var­i­ous op­tions would be pre­sented to the min­is­te­rial panel to take the dis­in­vest­ment process for­ward. The op­tion of putting the stake sale plan on hold could also be there,” said a gov­ern­ment of­fi­cial.

The Air In­dia Spe­cific Al­ter­nate Mech­a­nism (AISAM), a group of min­is­ters un­der the chair­man­ship of fi­nance min­is­ter, is ex­pected to con­sider var­i­ous pro­pos­als in its meet­ing next week.

Some mar­ket ex­perts pointed out that list­ing norms re­quire a com­pany to be profit-mak­ing in the past five years and have a pos­i­tive net­worth. Such con­di­tions could mar the prospect of Air In­dia pub­lic of­fer, they added. In the last 10 years, Air In­dia has never made any profit and has a neg­a­tive net­worth given its mas­sive debts and li­a­bil­i­ties.

A few oth­ers, how­ever, said list­ing was pos­si­ble con­sid­er­ing the fact that both the owner of the com­pany and the reg­u­la­tor were gov­ern­ment en­ti­ties.

Ex­perts said list­ing is a much bet­ter op­tion than out­right fire sale af­ter ac­cept­ing all the de­mands of the buyer. Air In­dia be­ing a loss mak­ing com­pany, its val­u­a­tion would be far lower than that of other listed air­lines. In­ter Globe Avi­a­tion, the par­ent com­pany of IndiGo, which has the big­gest mar­ket share in do­mes­tic skies, has a mar­ket cap­i­tal­i­sa­tion of Rs 46,966.83 crore. The gov­ern­ment can com­pro­mise on its ex­pec­ta­tions of Air In­dia val­u­a­tion when it takes the loss-mak­ing en­ter­prise to the pri­mary mar­ket.

“A good part is that once listed, the pres­sure on the man­age­ment of Air In­dia to de­liver re­sults in term of im­prove­ment in top and bot­tom line num­bers would in­crease man­i­fold,” noted an ex­pert. In the pub­lic sec­tor space, there are ex­am­ples of op­er­a­tional per­for­mance im­prov­ing af­ter list­ing on stock ex­changes, he said. “The big­gest ex­am­ple is Coal In­dia.”

Af­ter list­ing and im­prov­ing per­for­mance, the gov­ern­ment may look at divest- ing and prob­a­bly would get a much bet­ter val­u­a­tion.

“When shares of com­pa­nies fac­ing bankruptcy can be traded at stock ex­change with some value, Air In­dia can also com­mand value as the de­mand for air travel is ever-in­creas­ing and the sec­tor is on high growth tra­jec­tory,” a Mum­bai-based re­search an­a­lyst said.

The gov­ern­ment is also mulling op­tions like of­fer­ing en­tire 100 per cent stake to pri­vate in­vestors be­sides sweet­en­ing the deal terms. The fresh dis­in­vest­ment op­tions have come fol­low­ing a tepid re- sponse from in­vestors to bid con­di­tions that re­quired the buyer to take a large por­tion of debt and li­a­bil­i­ties, pro­tect em­ploy­ees and op­er­ate the car­rier at arm’s length from the ex­ist­ing busi­ness.

While the gov­ern­ment is ready to ad­dress these con­cerns, some air­line ex­ec­u­tives said that tim­ing of the dis­in­vest­ment plan is also an is­sue with Gen­eral Elec­tions ap­proach­ing. It in­volves a lot of po­lit­i­cal risk given that there is no cer­tainty that the present gov­ern­ment will re­turn to power. “Af­ter com­mit­ting so much money no in­vestor would like to come un­der scru­tiny of var­i­ous in­ves­ti­gat­ing agen­cies,” an ex­ec­u­tive said re­fer­ring to CBI and ED in case there is a change of regime.

The gov­ern­ment has pro­posed to sell 76 per cent of its stake in Air In­dia along with trans­fer of the man­age­ment con­trol to pri­vate play­ers. It has de­cided to re­tain the re­main­ing 24 per cent eq­uity stake in the debt-laden com­pany to sell it in fu­ture when it gets op­ti­mum value.

Air In­dia is sad­dled with a debt of Rs 50,000 crore and is sur­viv­ing on a bailout pack­age worth Rs 30,231 crore.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.