New Delhi: Ailing national carrier Air India is on its way to find a new owner soon with the final bids being closed on Tuesday. It is likely that by the middle of this year, the disinvestment process of the airline will be completed.
As per sources in the Aviation Ministry, two potential bidders have submitted their bids which closed on Tuesday—one being the Tata Sons and the other bid was the consortium of employees of Air India.
The third entity, a US based Funds Interups Inc, which had earlier submitted its Expression of Interest in the debt-ridden national carrier, decided to pull out of the bidding process and not to submit the bidding documents physically when the window for it closed on Tuesday.
The Sunday Guardian spoke to Laxmi Prasad, Chairman of the New York-based Interups Inc, to understand the reasons behind the last-minute withdrawal from the bid and if his company was still interested in pursuing the airline.
Laxmi Prasad told this newspaper that his company has not pulled out from the process of buying Air India yet and that it has refrained from submitting the bid to avoid legal hindrances.
Prasad said, “We haven’t pulled out of the process, there is a legal issue that had cropped up at the last moment. We had filed an EOI (Expression of Interest) on 14 December, saying that the Air India Employee’s Consortium will have 51% stake while we will retain 49% stake. But what happened was that a section of employees had submitted the bid for the transaction and had already put in the physical documents on Tuesday and there is a clause in the memorandum that says no two interested bidders with the same affiliation can participate in the bidding. This was brought to our notice at 2 o’clock in the afternoon on Tuesday and in this scenario, if we had also filed our physical documentation having the employees as the 51% shareholders and us as 49% shareholders, that would have become a potential point of disqualification for both the parties and we did not want to do that.”
Prasad further added that Interups was very much in the race and that their original proposal was to support the consortium of employees which still is the case.
“We cannot officially bid for the transaction now, but as per our original plan, we will join the employees’ consortium as their financial partners and if we win the bid, the consortium will be having 51% stake in the airline, while Interups would be having 49% of the stake in the airline,” Prasad said.
The employees’ consortium is a consortium of Air India employees which has been created with 219 employees and is led by Meenakshi Malik, Air India’s Commercial Director. The employees have contributed at least Rs 1 lakh each for the bidding and are expecting to acquire 51% of the stake in the airline. The consortium will be supported by a financial partner.
However, asked to elaborate on what interests him and his company in Air India, which is ailing and has a huge debt on its balance sheet, Prasad said, “That is not a correct understanding of Air India. Nowadays, every airline is in debt, the question is about the capability of the airline and the huge potential that is in front of it. Air India has a huge possibility for turnaround and we are looking at this aspect. The airline has some prime landing rights in the United States, the UK and in many European nations and is perhaps the only Indian international carrier to have that. The airline carries about 37 million passengers every year and has more than 100 fleets, a robust ground handling infrastructure and many more. The intangible asset value this airline has is huge and this in fact calls for a humongous valuation of the airline.”
He further added that Interups has already made a valuation of the company and that they are expecting to give a very tough competition.
“We have gone very deep into the asset valuation of the airline. We have even considered the intangible assets the airline has and the potential the airline has to grow and expand if turned around and I can say that we will definitely be giving a very tough competition on the valuation side,” Prasad told this newspaper.
Prasad also explained how if his company Interups and the Consortium win the bid, they plan to turn around the airline.
He said, “What Air India needs is not anything but money, it needs a significant amount of money to be pumped into the system. The negative working capital of the airline needs to be made positive first and moreover, the airline has the capability to monetise its assets and this would provide a working capital. It will also need to expand its global routes and offer competitive pricing on global routes and increase passenger traffic in international routes, since the domestic route in India has cut throat competition.”
“Secondly, we are planning to go for an extensive digitisation programme for the airline that would definitely make the airline look more attractive and bring in new opportunity. Some aesthetics of the aircraft would also need to be changed along with ensuring on-time performance and passenger services,” Prasad said.