Air India divestment: Govt gets 6 bids for transaction advisor mandate

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26 Aug, 2025 12:21

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The government on Monday received bids from six consulting companies and investment banks for the mandate of advising it on the divestment of its stake in Air India, an official with one of the bidders told Moneycontrol.

The candidates in the fray are KPMG, EY, Rothschild & Co, BNP Paribas, ICICI Securities and Edelweiss Financial Services. October 23 was the last date for submitting the bids and the government will select two out of the six for the advisory process.

The fact that only six firms are in contention for the mandate, which is a prestigious one, may leave the government a little puzzled as the September 25 pre-bid meeting had seen the presence of ten companies. Another official, not involved with the process but whose bank is among the bidders, was not surprised.

“The fee (to be quoted in bulk) that the successful bidders will get will be little. Others would have thought it better to work on the buy side with the interested companies in Air India rather than work with the sell side and gain little despite all the volume of work,” he said.

So far, InterGlobe Aviation which runs IndiGo, has officially expressed interest in buying the international operations of Air India, while the Tata Group said it would "definitely look" at the national carrier once the government finalises the privatisation process. A few companies have also expressed interest in the airline's ground handling subsidiary.

Apart from the transaction advisor, the department of investment and public asset management that is managing the entire divestment exercise, will also appoint a legal advisor and an asset valuer to help with the process.

“Two things will keep smaller names away. One is that this will be bigger than any other divestment carried out by any government so far," one of the interested bankers had earlier told Moneycontrol. "Also, the request for qualification for appointment of the advisor lays down the condition that the bidder should have handled a transaction of at least Rs 4,000 crore during April 1, 2012 and June 30, 2017. Not many people would have done a transaction of that size.”

The government has ‘in-principle’ decided to disinvest AI as a whole or its constituents fully or part thereof through strategic disinvestment with transfer of management control. The airline operator has five subsidiaries and one joint venture.

The airline made a loss of Rs. 4,310.65 crore in 2015-16. This was on top of a loss of Rs. 6,280.42 crore in 2014-15. The wholly state-owned company is weighed down by a debt of around Rs. 52,000 crore.

The government’s rules on foreign direct investment permit 100 per cent FDI in an airline with a foreign airline not allowed to hold more than 49 percent in an Indian carrier.

While the final contours of the divestment will be known only after all the stakeholders – the government, transaction advisor and interested suitors deliberate on buying the whole or parts of the airline – it is certain that the government will have to absorb AI’s debt to have any private sector company acquire the loss-making airline. A special purpose vehicle will also be formed in which all the real estate and artefacts of the airline will be housed, according to a ministry official.

While the government intends to complete the divestment of the airline this financial year itself, it will not be a smooth going. The airline’s unions, seven of them, are expected to meet in the capital this week to draw out a strategy for opposing the privatization process.