National carrier Air India Ltd plans to raise up to ₹225 crore through a short-term loan from domestic lenders by 31 January to refinance an earlier loan, the airline said in a tender document on Monday. The loan will carry a sovereign guarantee and lenders will have to submit their bids by 27 January.
Proceeds of the loan, whose tenure is a year, will be utilized for refinancing earlier loans, and the airline will offer 18 of its aircraft as security, according to the document, a copy of which was reviewed by Mint.
The development comes amid the Centre’s plans to privatize the airline. The government is selling its 100% stake in Air India, which has incurred losses since 2007. Tata Group and an employee group headed by a board member are among the entities that have put in preliminary bids for the airline.
However, the stake sale process got delayed because of the covid-19 pandemic and is now likely to be concluded only in the next fiscal.
A senior official at the airline said it is raising capital from the market in the absence of any fund infusion from the government. “The government has stopped infusing funds into the airline but will stand as a guarantor for the loans. The latest round of funds raised from the banks will be used to refinance an earlier loan of the same amount,” the official said requesting anonymity.
Indian airlines, including Air India, are set to post net losses of around ₹21,000 crore during the fiscal year 2021 following travel restrictions and diminishing travel appetite because of the covid-19 pandemic. They will require ₹37,000 crore in additional funding from FY2021 to FY2023 to recover from losses and debt, credit rating agency ICRA Limited said in a recent report.
The overall airline industry debt is expected to rise to about ₹50,000 crore, excluding lease liabilities by FY 2022, ICRA said in the report.
Air India’s net debt is more than ₹60,000 crore at present. The airline has been facing working capital shortage and owes money to various vendors including OMCs, which is being financed by raising loans from various banks. The airline has delayed paying salaries to its employees against the backdrop of its mounting debt obligations.
The article was first published on livemint.com