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July 14, 2001
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Money > Business Headlines > Report July 14, 2001 |
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Govt stake in A-I can be below 40%Puja Mehra The shareholders' agreement for Air-India cleared by the Cabinet Committee on Divestment allows for the government's stake to be diluted below 40 per cent if it is unable to match the level of capital infusion by the strategic partner post-privatisation. Top government officials told Business Standard that the shareholders' agreement cleared by the CCD on July 4 has a well-specified clause on capital infusion into the cash-strapped airline. The national carrier's losses for the last fiscal was Rs 285 million and its net worth has seen a sharp erosion from Rs 14.35 billion in 1994-95 to Rs 3.50 billion during 2000-01. While the clause permits the dilution of government equity in favour of the strategic partner, it will be prudent for the government to infuse capital as well, the official said. Raising debt after privatisation will not be a commercially wise option since Air-India's debt equity ratio already stands at 8:1. The government plans to sell 40 per cent stake to a strategic partner and 10 per cent each to the employees and the public including financial institutions. The clause on capital infusion, however, implies that the strategic partner can acquire more than 40 per cent stake in Air-India after the strategic sale. The airline will require substantial capital infusion soon after the sale for aircraft acquisition and to improve the overall operations of the carrier. "The cost could run into several billions of rupees," the official said. The SIA-Tata consortium is the only bidder remaining in the fray for Air-India. The government has virtually disqualified the Hindujas from the race for the national carrier on security grounds. Powered by YOU MAY ALSO WANT TO READ:
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