Air India privatisation: PE funds KKR, Warburg Pincus want a bite too

After Tata Group and IndiGo, Air India’s privatisation bid has received yet another boost as private equity players KKR and Co and Warbug Pincus have expressed interest in acquiring the national carrier’s businesses, reported Live Mint.

The two buyout firms separately sought details of the proposed privatisation process cleared by the Union Cabinet in June 2017, two people aware of the development said.

“Air India’s businesses make attractive investment opportunity for the PE funds,” a source told the English newspaper, saying the discussions on the divestment are still underway.

The government is expected to take some action on privatising the loss-making state-owned airline Air India in next six months. Prime Minister Narendra Modi last month approved plans or selling part or all of the company, ending decades of state support.

Staying afloat on little over Rs 30,000 crore bailout package extended by the previous UPA regime, Air India is saddled with nearly Rs 50,000 crore debt and is in discussions with lenders on ways to restructure the loans.

InterGlobe Aviation that runs the IndiGo airline and Tata Group that runs Vistara and AirAsia India airlines have earlier expressed an interest. Low-cost carrier IndiGo has a 40 per cent share of the domestic market.

While IndiGo said it is keen on buying Air India’s international arm and low-fare division Air India Express, Tata Group had informally sought details on the privatisation from the government.

Headed by Finance Minister Arun Jaitley, a group of ministers (GOM) held its first meeting on 21 july and held discussions on the sale of assests, a possible demerger and strategic disinvestment of three profit-making subsidiaries.

While both KKR and Warburg declined to comment, sources said the funds were kept on hold until someone is appointed to manage the sale, Live Mint added.

This is the first buyout interest expressed by overseas investors after foreign direct investment rules in aviation allowed 100 per cent stake in local airlines in 2016. However, the investments by foreign airlines were limited to 49 per cent of a domestic airline’s capital.

Air India was bailed out in 2012 with $5.8 billion of federal funding. Previous attempts to sell the state-owned airline have floundered, in part due to a lack of potential buyers.

Once India's biggest airline, Air India's market share in the booming domestic market has slumped whereas those of private carriers such as IndiGo, SpiceJet and Jet Airways expanded.