The government's decision to indefinitely defer Indian Airlines' disinvestment by debarring both the remaining bidders -- the Hindujas and Videocon International -- will adversely impact the disinvestment of Indian Airlines (IA) in particular and the overall disinvestment programme in general, merchant bankers said here on Saturday.
The government may now have to alter the mode of divesting its stake in the public sector undertakings (PSUs) that have been put on the block, and seriously consider the possibility of selling its stake directly to the financial institutions (FIs) and the public, they said.
"The decision to ground the airline's disinvestment by raising security issues over the profile of the Hindujas and Videocon International even after both have cleared two levels does not speak well about the government's intent to go ahead with the airline's disinvestment," said a source at a leading merchant banking firm.
More From This Section
"Also, with only one player left in the fray for Air-India now, the government's reserve price will now come under question. Even if the process is completed in a fair manner now, there will be political problems over the sale," he added.
Arvind Mahajan of PriceWaterhouseCoopers said, "The disinvestment of Indian Airlines has certainly been affected. In spite of the efforts by the disinvestment ministry and the minister, certain political forces have been trying to scuttle the whole process. The government may now have to consider other forms of divesting its stake through the process (such as sale to FIs and the public)."
Meanwhile, the Hindujas in a release said they are "extremely disappointed by the Cabinet decision," and that they are reviewing their legal position. However, the company spokesperson did not elaborate what the "legal position" would be.
Venugopal Dhoot, chairman and managing director of Videocon International, told Business Standard, "We would have given a good price for the stake in Indian Airlines. But if the government does not want to sell, what can we do? It is a commercial decision by the government and we have to accept it."
The Cabinet decision to debar the Hindujas and Videocon was prompted by security concerns over the Hindujas' involvement in the Bofors issue and Videocon International's involvement in alleged price-rigging activity in the capital markets.