Will Air India find a buyer? The answer is worth Rs 43,000 crore

air-india-2--bccl
“It certainly seems that the government will only take care of Rs 15,389 crore of the debt unlike what was expected earlier,” said Mahantesh Sabarad, deputy vice president at SBI Caps Securities.
MUMBAI: Air India's buyer will have to take on at least a mammoth Rs 33,392 crore or close to 70% of the beleaguered carrier's debt on its books, a clause that negates industrywide assumptions that the government would write off a significant portion of the airline’s loans, and makes it a far less attractive investment than had been expected.

“..it is expected that debt and liabilities including net current liabilities of Rs 8,816 crore aggregating to Rs 33,392 crore will remain with Air India and Air India Express (no change for AI-SATS except in normal course of business),” said the government document calling for expressions of interest (EoI).

“This number shall be further adjusted to account for material business developments post March 31, 2017 for instance purchases/delivery of aircrafts etc. The balance debt shall be allocated to Air India Asset Holding which is 100% owned by the Government of India subject to receipt of requisite approvals from lenders and regulators, as applicable.”

“It certainly seems that the government will only take care of Rs 15,389 crore of the debt unlike what was expected earlier,” said Mahantesh Sabarad, deputy vice president at SBI Caps Securities.

“Along with the debt of Rs 33,392 crore and the debt reflecting lease rentals which is off balancesheet, the minimum acquisition price for Air India thus comes to be close to Rs 43,000 crore, unless the government decides to sell some aircraft” he added.

"This is a clear challenge to the new buyer. Taking on such a huge debt on the balance sheet would be a concern for shareholders if the buyer is a listed entity," said Jagannarayan Padmanabhan, lead, transport and logistics, CRISIL infrastructure advisory.