The Government of India is expected to get approximately Rs 15,000 crore from the sale of its stake in national carrier Air India, its subsidiary AISATS, and Air India Express. As per a Business Standard report, the potential buyers are likely ascribing zero value to the equity of the debt-ridden company. As per a source, the Tata Group is the foremost contender in the race to acquire Air India. The report further added that a reserve price — an official indicative price — for Air India will be finalised by a group of ministers after getting the final bids. At privatising Air India, this is the government’s second attempt. Due to the COVID-19 pandemic, the plan has been delayed.
As per the Business Standard report, suitors are unwilling to place a substantial value on intangible assets, such as airport slots and bilateral rights. The report added that in contrast to airports like Heathrow, slots cannot be traded in India. It becomes intangible as the value of such assets depends on how a bidder is willing to use it. Apart from this, the price of wide-body aircraft like Boeing 787 and 777 and older generation aircraft like Airbus 320 and Boeing 737 has weakened due to the pandemic.
As per a banker, the suitors’ plans spun around doing sale and leaseback of Air India’s owned aircraft and earn liquidity. However, with the pandemic, the new owner may not need those aircraft or good value for those in the lease market.