Employee consortium bid for Air India rejected

Employees will not be able to own Air India post privatisation, as the bid by employee consortium has been disqualified because they were not able to fulfil eligibility requirements.
“The EOI and the supporting documents submitted by you have been duly evaluated and have been found to not fulfil the eligibility requirements set out in the Preliminary Information Memorandum (as amended) (PIM) issued in respect of the strategic disinvestment of Air India Limited (AI) and is liable for disqualification, including on account of: (A) non-submission of required three years audited financial statements for foreign consortium member…….; (B) non-submission of information or details by IB ……for investments in offshore companies, which form substantial part of Net Worth of foreign consortium member…….; and (C) the Foreign consortium member not being an appropriately regulated Foreign Investment Fund as defined in the PIM,” Air India’s commercial director and face of employee consortium Meenakshi Malik informed employees in an email quoting EY’s email on the participation.

“Accordingly, we hereby inform you that, you have been disqualified from proceeding to Stage II of the strategic disinvestment of AI,” the email added.

EY is the consultant for the sale of Air India, where the government plans to sell off 100% in the airline alongwith Air India Express and 50% in ground handling company AISATS.

With the rejection of the employee consortium, chances of foreign fund Interups owning stake in Air India has also taken a hit. US-based fund Interups, which has shown interest in Air India, had pulled out later and said that they would support the employee consortium.

The Tata Group, Ajay Singh, in his personal capacity, alongwith two investors and Kolkata-based businessman Pawan Ruia too, in his personal capacity, are still in the race for Air India.

The Tata group, which is being considered a frontrunner, may bid for Air India through its low-fare airline company AirAsia India.

Loss-making Air India is set to make a record loss of Rs 10,000 crore in this financial year. The airline is saddled with debt of over Rs 23,000 crore on its books after the government shifted its working capital debt to a state-owned special purpose vehicle called AI Asset Holdings Ltd.

The government has also sweetened the offer this time, allowing suitors to base their bids on enterprise value. The condition is that of the total bid amount, about 15% will go to the government as the price of Air India, and the remaining 85% will be debt to be taken on by the successful bidder.