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The government is likely to include call and put options in the share purchase agreement of Air India to profitably sell its residual stake in the airline after strategic disinvestment. A put option gives the existing shareholders the right to sell securities at a specified price, thereby providing an exit route from the company. A call option allows the buyer to acquire shares at a predetermined price, which is usually above the current price, within a limited time period, allowing it to increase its shareholding in the company. While the government will have the put option to sell its residual stake after one year, the strategic partner will be able to exercise the call option for acquiring the residual stake from the government after three years of divestment, senior government officials aware of the process said. “The general idea is that the strategic partner was there to stay and, depending upon the situation, the government would exit.
After sometime, the strategic partner should have the freedom to go it alone and buy out the government stake because, in any case, the government’s policy was to ultimately quit from the commercial venture,” a senior government official said.
The Ministry of Civil Aviation has suggested that the government should holds 24-26 per cent stake in Air India after disinvestment, since it believed that a strategic partner would increase the airline’s efficiency and make it profitable.
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