Air India stake sale: Bidders to get share purchase agreement with EoI

To reassure investors, the government will issue a draft share purchase agreement (SPA) along with the formal Expression of Interest (EoI) invitation for loss-making Air India (AI). This is the first time in a disinvestment exercise where the EoI and SHA will be issued simultaneously.

An EoI for sale of at least 95 per cent of AI (keeping 5 per cent for an employee stock ownership plan), along with Air India Express and the ground-handling joint venture, Air India SATS Airport Services, is likely to be invited by the first week of November.

The central government owns all the AI equity. In turn, the airline holds 100 per cent in Air India Express and 50 per cent in AISATS.

As of June 1, there were 9,834 permanent employees and 3,556 contractual employees in AI, which has 125 aircraft.

According to the current process for strategic disinvestment, an SPA is only provided to shortlisted bidders. “On receiving EoIs from prospective bidders, the Transaction Advisor examines the eligibility, based on the terms and conditions of the EoI and other available material, and shortlists them for participating in subsequent stages of bidding. Share purchase agreement approved by the Core Group of Secretaries is provided only to qualified institutional bidders,” states the guidance note in this regard.

The proposed SPA would outline the terms of agreement with employees, status of planes, constitution of the board of directors and rights of the new owner. A major reason why no EoI came in last year's invitation was that prospective bidders were unclear about the rights and liabilities they would inherit after following the process.

"The SPA sets out the agreed elements of the deal, includes a number of important protections to all the parties involved and provides the legal framework to complete the sale of a property. During the submission of EoI, bidders can access the agreement and the data room by paying a nominal fee. They can get clarity before submitting the EoI,” said a person involved in the sale process of the airline.

The change, say sources involved in the process, was a sequel to transaction advisor EY having analysed the failed disinvestment process of last year.

“Bidders were mostly concerned about the conditions for absorbing the employees, pending payment of salaries and allowances to flying and non-flying crew, the terms and conditions and lease period of the aircraft. They wanted clarity on these aspects before being involved in the process,” a second official said.