Civil Aviation Minister Hardeep Singh Puri said Thursday that tenders for Air India will be done on the basis of its enterprise value instead of its stock value.
The enterprise value of a business includes the value of equity, debt as well as cash with the business. Net worth measures the value of a company’s shares.
“We have decided to seek offers for Air India on enterprise value,” Puri said at a press conference.
Aviation Secretary Pradeep Singh Kharola told the conference: “The offer will focus on enterprise value … In this enterprise value as well, a ratio has been set between what it (the bidder) can take in debt and what he has to give in cash. “
It was decided that regardless of the value of the company quoted by the bidder, 15% of this sum must be paid in cash to the government and the remaining 85% must be considered as debt with Air India, explained Mr. Kharola.
Air India’s debt as of 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).
After its unsuccessful attempt to sell Air India in 2018, the government restarted the divestment process in January this year and launched a tender to sell 100% of its stake in the state-owned airline, including the stake of 100% of Air India in Air India Express Ltd and 50% in Air India SATS Airport Services Private Ltd.