Saturday, January 5, 2019

Air India received Rs 2,000-cr loans from National Small Savings Fund in 2018: Report

THE national carrier received two loans worth Rs 2,000 crore from the National Small Savings Fund in 2018. Air India borrowed Rs 1,000 crore each—for six months in October and for four-and-a-half months in November—at an interest rate of 8.5 percent a year, a media report said. Last month, the government sought Parliament’s approval for an equity infusion of Rs 2,345 crore in the airline under its turnaround plan, ruling out an...
immediate revival of its plan to sell the ailing carrier. Air India, according to budget documents, will receive a total of Rs 3,000 crore in the financial year ending March 2019 from the NSSF—a pool of household investments in state-backed small savings schemes. The interest rate of 8.5 percent for Air India’s NSSF loans is marginally cheaper than the prevailing rates for commercial borrowings. Rates on short-term loans of up to six months offered by banks to public sector companies range from 8.10-8.50 percent plus the risk spread based on how they are rated, said a banker who didn’t want to be identified.
State Bank of India’s current effective one-year lending rate for working capital loans exceeding Rs 500 crore ranges from 8.90 percent to 16.65 percent, including the risk spread. SBI’s marginal cost of funds-based rate for loans with a tenor of six months is 8.40 percent plus the spread of 0.05-1.90 percentage points.
Air India is in a difficult financial position and is availing loans to repay debt and for working capital needs, and any entity in distress will like to avail funds at a cheaper rate, according to Jitendra Bhargava, former executive director of Air India. The carrier has a good credit history as it has never defaulted on any of its loans, he said.
Meanwhile, Life Insurance Corporation (LIC) of India and the Maharashtra state government reportedly willing to bid for the iconic headquarters of beleaguered national carrier Air India in Mumbai’s Nariman Point. It is not clear if there are other bidders or whether the civil aviation ministry at the centre will go ahead with the LIC and Maharashtra government bids, or extend the deadline to allow more bids.
“So far, only LIC and the state government of Maharashtra (have submitted their bids),” a report in the Mumbai Mirror quoted aviation secretary R N Choubey as saying on Monday evening after the deadline for filing bids lapsed. Air India had issued a tender notice on 10 December inviting bids from “government entities 2018.only for sale of lease hold rights of the land and its iconic AI building at Nariman Point, Mumbai.” The deadline for submitting the sealed bids ended at 2.30 pm on 31 December. Many PSUs such as LIC and GIC have evinced interest in the prime property, which is situated in the Nariman Point business hub of south Mumbai. It may be noted that LIC and GIC have their headquarters in proximity to the Air India building, which also happens to be the erstwhile headquarters of the national carrier.
Air India officials said no decision has been taken so far on selling the iconic building. But some companies, majorly the public sector undertakings such as LIC and GIC, besides JNPT, have shown considerable interest in it.
The national carrier had collected Rs291 crore as lease rental from the property between FY13 and January 2018. The valuation of the property is likely to go up with many companies showing interest in it. According to Air India’s audited accounts, the airline’s total losses stood at Rs47,145.62 crore in 2016-17. The government had in May said that Air India has mopped up Rs543.03 crore from monetisation of its assets in prime locations, such as Mumbai and Chennai.
The government had in June started discussions for sale of the iconic tower to Jawahar Lal Nehru Port Trust (JNPT) as part of Air India’s asset monetisation plans after the government’s efforts to partially privatise Air India failed to take off. With over Rs55,000 crore debt on its books, Air India management has been trying to pare burden by monetising non-core real estate properties.

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