Covid cloud on Air India, BPCL selloff
The second wave of the coronavirus is likely to delay the financial bids for sell-off bound BPCL and Air India till September as the travel restrictions are likely to delay the physical verification of the assets of the two companies that will determine their net worth.
Government officials are optimistic they will complete the sale process of the two PSUs by the end of the fiscal and beef up the sell-off proceeds for the fiscal.
“Transaction advisers have informed that the bidders have sought extra time as Covid has affected the mobility of bidders’ representatives,” the officials said.
The bidders have online access to the data room and the share purchase agreement but they need to do a physical due diligence of the assets of the companies to get a better understanding of the assets and liabilities.
“After bidders are comfortable and complete their due diligence, putting financial bids will not take much time,” the officials said.
The government has lined up a host of companies for divestment, including the strategic sale of Bharat Petroleum, Air India and Shipping Corp of India Ltd and initial public offer of Life Insurance Corp of India Ltd.
The government has already received preliminary bids from Vedanta Group and two international funds for its plan to sell its entire 52.98 per cent stake in Bharat Petroleum Corp.
The Tata group was among the “multiple” suitors that had put in preliminary bids for the loss-making Air India.
The listing of LIC is also likely to be pushed to the second half of the year because the insurance behemoth’s valuation, which involves assessing its real estate and art assets, is likely to be delayed.
The officials said over the next few months only minority stakes will be sold in some PSUs, including Rail Vikas Nigam Ltd.
The Centre has sweetened the Air India deal by giving potential suitors the flexibility to bid on the basis of the enterprise value of the airline. The government’s failure to complete the initial public offer of LIC and the BPCL strategic disinvestment has led to the divestment targets going awry last year with collections at just Rs 32,385 crore against an estimated Rs 2.1 lakh crore.
If the LIC float does not materialise this time as well, the government will miss the target of Rs 1.75 lakh crore for the current fiscal by a huge margin.