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If bidding process fails -- Govt open to IPO route for AI, IA

P. Manoj

Ashwini Phadnis

NEW DELHI, April 30

THE Government has decided to keep open the option of divesting its equity in Indian Airlines (IA) and Air India (AI) to the public and institutional investors through an initial public offer (IPO) in the event of the two bids submitted for the two airli nes are rejected by the Government on technical grounds later.

Senior officials of the Department of Disinvestment (DoD) told Business Line that the Government will take a decision on permitting both IA and AI to go in for an IPO after the DoD comes up with a list of serious crimes in this regard. The list of crimes will enable the Government to identify whether Videocon and Hindujas are eligible to bid or not.

Videocon and the Hindujas are among the two bidders shortlisted by the Government to offload its equity through the strategic sale route in both the state owned airlines and is finalising the shareholders agreement for the sale. If either of the two comp anies are prevented from taking further part in the bidding process, the Government is preparing alternate plans to press ahead with the disinvestment by going in for an IPO to dilute the Government stake.

While Videocon was named by SEBI for price manipulation in the stock market, Hindujas face the prospect of blacklisting if DoD lists threat to national security as one of the crimes.

The DoD is currently in the process of listing ``serious crimes'' which will debar companies from participating in the PSU divestment process as per the directions of the Law Ministry.

Officials also indicated that the Government is keen to avoid being caught in a situation of having to sell its stake in the two airlines to ``tainted companies'' or allowing the process to go forward with only a single bidder left in the fray.

``If the list of crimes to be framed by the DoD debars Videocon which is one of the bidders for IA and Hindujas who have bid for AI, then locating a strategic partner will become very difficult. We are exploring the option of diluting equity in the debt market through the widely held route especially as this was part of the route which the Cabinet had approved at the time of clearing the financial restructuring proposal for both,'' the sources said.

While refusing to state a time frame within which a decision of allowing the two airlines to go in for an IPO will be taken, officials did indicate that any action will be taken only after the Assembly elections in the five States are over by the middle of May.

While in the case of AI the Government has decided to offload up to 40 per cent of its holding to a strategic partner, in the case of IA it intends to sell 51 per cent of its equity in favour of public financial institutions, employees and a joint ventur e strategic partner who will hold 26 per cent.