Air India to get Rs.800 cr fresh equity

A meeting of the Cabinet Committee on Economic Affairs, presided over by Prime Minister Manmohan Singh, approved the fresh equity induction for the state-run National Aviation Company of India Limited, the company that runs the carrier.

An official release said NACIL’s present paid up equity capital of Rs.145 crore was not sufficient for an aviation company of its size.  “The equity induction will not only ease the cash flow situation of the company but would also preclude borrowing from the markets at a high cost”, it added.
Monthly installments
The infusion will be effected in two equally monthly installments. “The release of funds will be calibrated to the achievement of milestones laid down by the Group of Ministers (GoM)”, the release added.

Finance minister Pranab Mukherjee, who led the GoM, had approved the Rs 800 crore equity infusion recently. The group is likely to take a view on increasing stake of another Rs 1,200 crore to the ailing company shortly. The airline had posted a loss of Rs 7,200 crore in the last two fiscal years. The induction of fresh equity was approved only after it adopted a turnaround plan. The release said, “NACIL is currently facing a severe financial loss which is compounded by its costly legacy assets, weakening revenue stream and high cost structure, resulting in rising liabilities.  Upon the directions of the Government, NACIL has initiated a multi-pronged turnaround plan”.