Minimum Net of Rs 5K Crore is a Must for Air India Bidders

The government has stipulated Rs 5,000 crore as the minimum net worth for those looking to bid for state-owned Air India, in order to screen out frivolous and dubious contenders, a senior government official told The Economic Times. Carriers with zero or negative net worth can participate provided they form a consortium with other partners, together adding up to the stipulated threshold, he said. An airline with negative net worth can also partner a private equity investor to bid for Air India, the person said."The minimum net worth criteria for companies or consortiums bidding for Air India has been set at Rs 5,000 crore.

But to allow participation from domestic airlines — many of which have negative net worth — it has also been decided to allow them to bid provided they form a consortium that has a net worth of over Rs 5,000 crore," he said. "A minimum net worth criterion will ensure that there are no non-serious as well as fly-by-night operators bidding for the national carrier."
Analysts welcomed the move, saying that it would help ensure participation by Indian carriers. "It is a well-thought move as this will allow some of the interested Indian carriers to bid along with consortium partners and also signals that the government is keen to have more participation from Indian carriers," said Kapil Kaul, CEO of Centre for Asia Pacific Aviation in India.
He said the delay in seeking expressions of interest (EoIs) means that the prospect of "executing this complex transaction by yearend as planned is looking tight". The net worth criterion was part of recommendations made by the Evaluation Committee (EC) of the finance ministry to the core group on disinvestment, which is headed by the cabinet secretary.

It was approved by the Prime Minister's Office at a meeting in the second week of March, said an official aware of the matter. Among Indian carriers, IndiGoBSE -0.93 % had the highest net worth of about Rs 3,800 crore at the end of FY17.

Other carriers that could be interested like Jet Airways, SpiceJet and Tata group-promoted Vistara have negative net worth. That would mean domestic carriers would need to find partners, such as a foreign airline or a private equity investor, to become eligible to bid for the national carrier. Likely combinations could include Jet Airways with Air France-KLM and Vistara along with investor Singapore Airlines.

IndiGo and an unnamed international carrier have officially expressed interest in bidding for Air India. Jet Airways and the Tata Group are also likely bidders but have not made public any such plans. The government intends to complete the sale of Air India by the end of 2018 and expressions of interest are likely to be sought in a few weeks.