Mar. 26—NEW DELHI — The government plans to raise nearly INR3,000 crore in FY24 by selling engineering and ground handling companies that used to be units of Air India Ltd, two people aware of the matter said.
"We expect the divestment process for AI Engineering Services Ltd and AI Airport Services Ltd to take place in 2023-24. We have feedback of a strong appetite for these two companies, so we are hopeful of a successful transaction," one of the two people mentioned above said on condition of anonymity.
The divestment process for Air India and its five subsidiaries received 'in-principle' approval from the Cabinet Committee on Economic Affairs in June 2017. The five subsidiaries included AI Airport Services (AIASL), regional carrier Alliance Air, Air India Engineering Services Ltd (AIESL), Air India Express, and Hotel Corp. of India Ltd.
Among these, AI Engineering Services and AI Airport Services have been the most profitable. AI Engineering Services is the biggest company in India's maintenance, repair and overhaul (MRO) sector, handling around 450 aircraft in FY22. Net profit during the year was INR844 crore, including other comprehensive income. Meanwhile, AI Airport Services provides ground handling services at 105 airports in India and generated a net profit of INR15.4 crore in FY22.
The government sold 100% of Air India and Air India Express to the Tata Group in January 2022, but not the remaining four companies. For warehousing Air India's four subsidiaries, non-core assets, paintings and artefacts, as well as other non-operational assets and liabilities, the government formed a special purpose vehicle in February 2019 called Air India Assets Holding Ltd (renamed AI Asset Holdings Ltd after divestment).
"There are at least 3-4 suitors for AIESL and another 7-8 potential bidders have already shown interest in the ground handling arm AIASL. The successful bidder for AIASL is also likely to get grandfather rights. The roadshows for both these companies have been completed," the second person cited earlier added.
Government expects INR1,800-1,900 crore from the sale of the engineering arm of Air India and INR700-800 crore from the ground handling arm, officials said.
The government will commence the divestment process for Alliance Air, but it is likely only in 2024 as there seems to be a lack of appetite for it given the consolidation and cost restructuring underway in Indian aviation," another official added.
" Alliance Air is also asset-light and is expected to garner interest. The roadshows are around 50% completed. So presently, the time is probably not right for its sale, but it is also in pipeline," he said.
For the engineering arm, Tata Group is among the front-running contenders, as this will lead to better synergies with the organization's narrow-body and wide-body fleet, he added.
Air India managing director and chief executive officer Campbell Wilson last week said absence of AI Engineering Services from Air India divestment was a negative surprise, and they had to start building in-house capabilities from day one.
"Negative surprises...the fact that on day one of privatization, Air India's engineering capabilities disappeared, and it was retained by the government," he had said, adding that the airline has access to the AIESL for some engineering services until the end of next year under the transaction.
As part of the Air India divestment, the government took over the airline's debt of about INR45,000 crore and all non-core assets (about 111 properties), including the office building and housing colonies, estimated to be valued at INR14,718 crore, according to an official statement in 2021.
Under the government's plan, the disinvestment proceeds will go to AI Asset Holdings. They will be utilized to set off the working capital loan liability of Air India not backed by any asset and also to service interest payments on non-convertible debentures issued as part of various Air India debt recasts in the past.
So far, most properties with clear records have been sold under four rounds of e-auctions, and a few big-ticket properties are under process to be monetized, including the iconic Nariman Point building in Mumbai, Vasant Vihar colony in Delhi that is spread over 30 acres and a large plot measuring 14,326 sq. m at Baba Kharak Singh Marg in Delhi. Mint reported on 20 March that Maharashtra is poised to become the new owner of the iconic Air India building at Nariman Point, Mumbai, following the state government's fresh offer of INR1,600 crore to acquire the property.
(c)2023 the Mint (New Delhi)
Visit the Mint (New Delhi) at www.livemint.com
Distributed by Tribune Content Agency, LLC.