New York based investment company Interups Inc has officially withdrawn itself from the bidding process of the Indian loss making public airline Air India.
Withdrawing last minute from the bidding process on December 29, which was the last day for filing the EOI physically, the US retirement fund for NRIs has depicted the reason behind the move, commenting that not doing so could lead to a ‘potential legal disqualification’.
Let’s learn in detail about this.
Interups Inc’s Last Moment Withdrawal
The public listed US based investment firm Interups Inc had submitted an expression of interest (EOI) in the bidding process of Air India on December 14, which was the online deadline for the same.
The firm’s plan was to hold 49% ownership in Air India, while a controlling stake of 51% would be held by Air India’s employees.
“Our group will invest the entire monies required for the airline, with no capital requirement from employees to contribute into the acquisition effort. No-one knows Air India better than its employees and management.”, said Interups chairman Laxmi Prasad to BBC.
However, on the last day of submission of physical copies of EOI on Tuesday, Interups withdrew itself from the bidding due to a clause in the process, which could lead to a legal obstruction.
Reason Behind Interups’ Withdrawal
According to a clause under the AI sale, “no two interested bidders either individually or as a member of consortium shall be entitled to take the benefit of financial strength of the same affiliate for the purpose of participating in the proposed transaction either directly or indirectly.”
We had earlier informed you that a group of 209 employees of Air India, led by the commercial director of the carrier Meenakshi Mallik have filed their own EOI too.
Consequently, with two interested bidders, i.e. a consortium of AI employees led by Mallik and another one proposed by Prasad, both representing a common affiliate, in this case the employees, could lead to a potential disqualification of both the parties.
Due to the presence of another employee-backed bid, Interups decided to withdraw itself from the process.
However, this is not the end of the US firm’s presence in the bigger picture.
Interups To Financially Support the Employees’ Consortium
With Tata Group still as the strongest contender in the string of prospective buyers for Air India, Interups has decided to back the AI employees’ consortium financially, instead of independently participating in the bid.
Laxmi Prasad comments, “We have not submitted our physical EoI for (this) reason but we are aligned with the employees and terms remain the same — we completely fund the transaction with employees gaining 51% and we retaining 49%. Instead of filing, we have chosen to support the employees who already have filed their bid.”
However, despite a consortium of 209 Air India employees bidding in the drive, a large section of employees being addressed to not get involved in the bid process, mainly from cabin crew unions like IPG and ICPA.
This is due to concerns over disproportionate pay cuts between pilots(witnessing almost 70% pay cuts) and management(witnessing only about 10%).
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