'Bidding for Air India to be done on enterprise value'

Bidding for Air India to be done on enterprise value: Hardeep Singh Puri

The enterprise value of a company includes the equity value, debt as well as cash with the company

Civil Aviation Minister Hardeep Singh Puri addresses a press conference at National Media Centre, in New Delhi. Credit: PTI

In a bid to sweeten the deal for sale of Air India, the government on Thursday revised the bidding process, by allowing prospective buyers to bid on its aggregate value (enterprise value) rather than only focusing on its market capitalisation

Civil Aviation Minister Hardeep Singh Puri announced the changes to the bidding process and extension of the deadline to submit the expression of interest documents for sale of Air India till December 14.

Puri said given the current uncertain environment, the Air India Specific Alternate Mechanism (AISAM), headed by Home Minister Amit Shah, has decided to unshackle the bidding process and invite bids at enterprise value.

“The bids will be invited on equity and debt. In the current Preliminary Information Memorandum (PIM), the debt left in the company would be Rs 23,286 crores,” Puri said.

Enterprise value incorporates debt and cash for determining a company’s valuation as opposed to market cap, which leaves out its debt and cash reserves.

It has been decided that the prospective buyer will have to offer a minimum of 15% of the enterprise value in cash to the government while the remaining 85% can be taken as debt along with Air India, Civil Aviation Secretary Pradeep Kharola mentioned.

The debt of Air India, as on March 31, 2019, was Rs 58,255 crore of which Rs 29,464 crore was transferred to a government-owned special purpose vehicle – Air India Assets Holding Company Limited (AIAHL).

According to the new time-line announced by the government, prospective bidders can submit queries seeking clarification on the revised bidding process by November 5. The government would respond to the queries by November 12. The last date for submission of Expression of Interest would be December 14 and the qualified interested bidders will be intimated on December 28.

Puri said the extension to the bidding process has been granted at the request of potential bidders who sought more time to evaluate the airline citing the pandemic situation.