Air India reserve price likely to be Rs 15,000-20,000 crore

Tatas have done extensive due diligence involving three teams from Air Asia India, Tata Consultancy Services and external consultants Seabury, Bain, Alvarez & Marsal and law firm AZB & Partners. The group has also formed a separate company Talace Private Limited to participate in the Air India process.

The government has changed a bidding parameter for state-owned airline Air India, allowing potential buyers to quote enterprise value instead of equity value. However, the government has mandated that a willing bidder will have to pay 15 per cent of his quote as upfront cash payment.

“Air India’s current earnings were not the benchmark for the valuation exercise as the company’s abilities are not being used in full. The future earning potential of the airline and financial forecast has been provided after considering full utilization of all assets of the company including current unused slots, frequent flyers and bilateral rights,” said a source.

A separate valuation exercise was undertaken for intangible assets like brand value, bilateral rights and domestic slots of the airline. “Unlike many international airports like Heathrow where slots are traded and a benchmark value can be obtained, India doesn’t permit slot trading.