Govt Will Not Allow Private Owners Of Air India To Fire Employees; Tata Can Buy Air India!

Govt Will Not Allow Private Owners Of Air India To Fire Employees; Tata Can Buy Air India!
Govt Will Not Allow Private Owners Of Air India To Fire Employees; Tata Can Buy Air India!

As per the reports coming in, the buyers of loss-making airline Air India and oil firm Bharat Petroleum Corporation Ltd (BPCL) will not get a free hand to shed excess workforce as the government will build in certain protection to employees in the share sale agreement, DIPAM Secretary Tuhin Kanta Pandey said.

How Did This Happen?

Usually, the public sector companies often have more people on rolls than their private sector counterparts and companies wanting to take them over would likely right-size them to remove inefficiencies.

The Secretary of the Department of Investment and Public Asset Management (DIPAM) said the government will follow a two-stage bidding process for selling its entire holding in Air India and BPCL, in an interview with PTI.

According to this, the first preliminary interest from potential bidders is invited, followed by them being given access of data room on the companies for due diligence. In the second stage, price bids are invited.

Though, in the case of Air India, the expression of interest (EoI) has been invited by March 17, an offer seeking the same for BPCL is likely to be floated in the next few days.

When questioned about if the bidders will get a free hand to right-size the companies after the acquisition, Pandey said, “There will be certain protection to employees and there will be other conditionalities and this will be listed out in the share purchase agreement (SPA).”

Though, he did not give details of the conditionalities, an SPA will be signed with the acquirer who offers the highest bid for buying out government stake.

Why Would This Happen?

As per the reports, the government is selling its entire 100% stake in Air India but wants effective control to stay with Indian nationals. 

Basically, the airline started as Tata Airlines in 1932 and was later acquired by the government, has not made profits since 2007. 

As of date, it has a total debt of Rs60,074 crore, of which bidder has to take over Rs23,286.5 crore.

What About BPCL?

While in the case of BPCL, the government is selling its entire 53.29% stake in the company that will give buyers ready access to 14% of India’s oil refining capacity and about one-fifth of the fuel market share in the world’s fastest-growing energy market.

Pandey said “There is a two-stage process. There will be EoI and request for proposal or RFP (in the first stage) and due diligence-cum-bidding stage (in the second). After the bidding stage, the highest bidder (will be identified). The highest bidder meeting the reserve price will sign the SPA.”

When asked about concerns overvaluation of BPCL, he said DIPAM has valuation methodologies. “There is an independent asset valuer and then there is a transaction advisor who will do the business valuation. Then, the value will be arrived at. But, this valuation or the reserve price will not be revealed unless the financial bids are received,”.

On the other hand, officers’ unions of blue-chip public sector undertakings (PSUs) have opposed the government’s decision to privatize India’s second-biggest oil firm BPCL, saying family silver worth Rs9 lakh crore is being sold for a fraction of the amount.

Comments are closed, but trackbacks and pingbacks are open.

who's online