AI reserve price likely to be fixed at ~15K-20K cr

A lower bid amount may not halt the disinvestment process

The government has considered the future cash flow projection of Air India, its brand value and intangible assets like bilateral rights and slots in foreign airports to set the reserve price for the airline. Sources indicated that the reserve price would be in the range of ~15,000-20,000 crore.

The government expects the final bid to at least match the reserve price. But, it may still go ahead with the disinvestment process even if the bid quoted is lower than the reserve price.

Valuation firm RBSA Advisors and EY- the consultant for the disinvestment — gave a presentation to the committee of secretaries headed by the cabinet secretary on Tuesday, a person in the know said.

Following the presentation, the committee headed by cabinet secretary Rajiv Gauba on Wednesday met to finalise the reserve price, which will then be used as a benchmark to compare the financial bids. Salt-to-software conglomerate Tata Sons is the favourite to win the bid.

Tatas have done extensive due diligence involving three teams from Air Asia India, Tata Consultancy Services and external consultants Seabury, Bain, Alvarez & Marshal and law firm AZB & Partners. The group has also formed a separate company Talace to participate in the AI process.

The government has changed a bidding parameter for state-owned airline AI, allowing potential buyers to quote enterprise value instead of equity value. However, the government has mandated that a willing bidder will have to pay 15 per cent of his quote as upfront cash payment.

“AI’S current earnings were not the benchmark for the valuation exercise as the company’s abilities are not being used in full. The future earning potential of the airline and financial forecast has been provided after considering full utilisation of all assets of the company including current unused slots, frequent flyers and bilateral rights,” said a person involved in the process.