Civil Aviation Minister Hardeep Singh Puri on Thursday said bidding for Air India would be done on the basis of its enterprise value instead of equity value.
Enterprise value of a company means the combined value of equity, debt as well as cash with the company. Equity value measures the value of a company's shares.
"We have decided to ask for bids for Air India on enterprise value (EV)," Puri said at a press conference.
Aviation Secretary Pradeep Singh Kharola explained at the conference, "In simple terms, it (bidding on EV) means that the bidder will have to say how much debt he will be able to carry along with Air India."
In this EV also, a ratio has been earmarked between how much the bidder can take as debt and how much the bidder has to give as cash, he added.
It has been decided that whatever EV the bidder quotes, minimum 15 per cent of that has to be given in cash to the government and remaining 85 per cent has to be taken as debt along with Air India, Kharola explained.
The debt of Air India as on March 31, 2019 was Rs 58,255 crore. Later in 2019, Rs 29,464 crore of this debt was transferred from Air India to a government-owned special purpose vehicle called Air India Assets Holding Company Limited (AIAHL).
Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said at the conference that 15 per cent cash is the minimum requirement and if the bidder has a higher cash share in EV, it will lead to less share of debt but the bidder will not get any preference during bid evaluation.
"For bid evaluation consideration, the higher your EV, the better your bid is. And the highest EV gets it," Pandey added.
On Thursday, the deadline to submit bids for the national carrier was extended for the fifth time this year to December 14.
The fourth extension was given on August 25 when the deadline for placing bids for Air India was pushed by two months to October 30 due to the COVID-19 pandemic. The process of stake sale in the national carrier was initiated on January 27.
Air India Chairman and Managing Director Rajiv Bansal said at the conference that the airline is likely to have a loss of around Rs 8,000 crore in the current financial year.
After its unsuccessful attempt to sell Air India in 2018, the government in January this year restarted the divestment process and invited bids for selling 100 per cent of its equity in the state-owned airline, including Air India's 100 per cent shareholding in Air India Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.
