The government will issue a letter of intent by Monday to the Tata Group that successfully bid for Air India, and a share purchase agreement (SPA) is likely to be signed next week, Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey told ET, swiftly moving the sale process forward.
Furthermore, financial bids for Pawan Hans,
, , of India and Neelachal Ispat Nigam Ltd will be invited soon, he said.
The government would also withdraw its guarantee offered for 42 leases on aircraft amounting to ₹9,185 crore, and these obligations would also be taken over by the Tata Group, Pandey said.
“The SPA would be signed after the issuance of the Letter of Intent (LoI). It can be signed within a week. The LoI can be issued on Monday… We have to legally vet it,” he said, adding that after the signing of the SPA, approvals will be taken from lenders, lessors and other contractual parties.
Pandey said the department has a heavy-duty agenda for this quarter, with financial bids planned for multiple PSEs.
He said financial bids can be invited for BPCL, Pawan Hans, BEML, and Shipping Corporation. Financial bids have already been invited for Central Electronics Ltd, he added.
“We have 6-7 transactions going on in parallel. My agenda is quite heavy for this quarter. I don’t know what will mature faster because the due diligence is not the same for everyone,” he said.
Pandey said the successful privatisation of Air India will boost the confidence of both bidders and the government.
“We are going to the market to get the best market value. If you want to increase competition, then you need more bidders to come. If you want more bidders to come, then they need to have confidence that we can do it from start to finish in a certain timeframe,” he said.
In the government, he said, no one had prior experience of privatisation as the process was discontinued earlier. “That comfort had to come in. There was hesitation and it was prevalent wide across the system,” he noted.
Pandey, who steered the carrier’s sale process at DIPAM, said the system had learnt a great deal from this transaction. He said the process has been there since October 2019 and was followed in eight transactions so far. But these were all in the public-sector space, involving one state-run entity buying government equity in another state-run entity. “While the process was similarly benchmarked in terms of steps, it was not a competitive process…There was a bid and there was independent valuation, but there was only one bidder,” he said, explaining the difference between the Air India sale and these transactions.
“We have learnt a lot in this complex (Air India) transaction because this is the first privatisation in 19 years…This was a complex transaction. We are now in a position to deal with more nuanced ones,” he said, adding that every disinvestment is different and there is no standard template.
He said privatisation is a competitive process involving multiple bidders and has to be on an arms-length and equal terms basis for everyone. “That has its own challenges. You will have multiple people looking at contracts and they will have multiple queries, multiple inspections. You can’t put them into one club because we also want to avoid collusive bidding,” he said.
Asked if eventual scrutiny by agencies of public servants involved in previous privatisation deals played on his mind, Pandey said: “We have to do our part…Beyond a point, many of us don’t believe that we can keep on passing the buck.”
He pointed out that the process is also multi-ministerial and collegial. “So, many people are there and everything we do is by consensus.”
He said the government will sell its residual 19.55% stake in Paradeep Phosphates.