DIPAM Secretary Tuhin Kanta Pandey said that after the historic privatization of Air India, the government will now start work on monetization of over Rs 14,700 crore of its four other subsidiaries including Alliance Air and non-core assets like land and building.
On October 8, the government announced that salt-to-software conglomerate Tata has won a bid to acquire the debt-ridden national carrier Air India for Rs 18,000 crore.
This includes cash payments of ₹ 2,700 crore and borrowings of over ₹ 15,300 crore. The deal, which is expected to be completed by the end of December, also includes the sale of Air India Express and ground handling arm AISATS.
talking PTIPandey said the Department of Investment and Public Asset Management (DIPAM) will now formulate a plan for monetization of Air India’s subsidiaries with special purpose vehicle AIAHL and will close the liabilities.
“There will be a plan to monetize the assets of AIAHL. It is again a huge task for settlement of AIAHL liabilities and assets. AIAHL has Ground Handling, Engineering and a company of Alliance Air which is to be privatized,” Mr. Pandey Said, who led the privatization of Air India.
“This (sale of subsidiaries) could not be started as they are all closely linked. Unless Air India goes, we cannot go ahead with other things,” he said.
As a precursor to the sale of Air India, the government had in 2019 set up a special purpose vehicle – Air India Assets Holding Limited (AIAHL) to hold debt and non-core assets of the Air India Group.
Air India has four subsidiaries – Air India Air Transport Services Limited (AIATSL), Airline Allied Services Limited (AASL), Air India Engineering Services Limited (AIESL) and Hotel Corporation of India Limited (HCI) – as well as non-core Assets, paintings and artefacts and other non-operating assets were transferred to the SPV.
As on August 31, Air India had a total debt of Rs 61,562 crore. Of this, Tata Sons’ holding company Tales Pvt Ltd will take over Rs 15,300 crore and the remaining Rs 46,262 crore will be transferred to AIAHL.
In addition, non-core assets of Air India, including land and buildings, valued at ₹ 14,718 crore, are also being transferred to AIAHL. In addition, liabilities of ₹15,834 crore to operational creditors, such as outstanding dues for fuel purchases as on August 31, will be transferred to AIAHL.
Mr Pandey said the government would prepare the balance sheet of Air India between September 1 and December 31, just before closing the deal.
“The dues of the operational creditors may not move forward in the September-December period if the government continues to fund…they are up to ₹20 crore/day, if the government stops funding the dues will increase. So more or less it Not much will grow,” said Mr. Pandey.
The net liabilities left with AIAHL is ₹ 44,679 crore, after adjustment of all dues to lenders and operating creditors and assets of AIAHL.
The government is spending Rs 20 crore per day to keep Air India running. The high debt in the airline’s balance sheet had turned the equity value negative at (-) ₹ 32,000 crore and the option before the government was to either privatize it or wind it up.
Between 2009-10 and now, the government has invested over ₹1.10 lakh crore in the ailing airline. This includes ₹ 54,584 crore in the form of cash assistance and ₹ 55,692 crore in the form of loan guarantee.
While this will be the first privatization since 2003-04, Air India will be the third airline brand in the Tata stable and will give it access to over a hundred aircraft, thousands of trained pilots and crew, and attractive landing and parking slots. all over the world.
Jehangir Ratanji Dadabhai (JRD) Tata founded the airline in 1932. Then it was called Tata Airlines. In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe.
Tata will have to retain over ₹13,500 crore employees of Air India and Air India Express for a year, after which VRS may be offered.
The terms of the deal allow Tata to go ahead with the merger and sell up to 49% stake after one year, but ensure business continuity for three years. The Air India brand and eight logos will also be transferred to Tata, but with a lock-in of 5 years and subject to the condition that they cannot sell them to a foreign entity.
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