The Indian government's offer to sell stakes in debt-laden Air India has failed to draw a single bid, underlining challenges faced in fixing the state carrier, as well as meeting a broader target of stake sales in government-held firms.
The alternative mechanism for Air India, a group of ministers formed to overlook the divestment process and headed by the finance minister, is likely to meet soon to decide the next course of action, sources said.
Aviation secretary R.N. Choubey, DIPAM secretary Atanu Chakraborty and accounting firm Ernst & Young are also likely to meet soon to decide future course of action, the sources added.
Factors such as high debt, retention of employees and the stance of the govt about eventually retaining a 24% stake in the new company emerged as points of concern for the investors, people with knowledge of the matter told CNBC-TV18.
The government was looking forward to better participation in the stake sale, said India's civil aviation secretary, R.N. Choubey.
New timelines will be decided based on the course of action decided by the alternate mechanism, and various options are available, he added.
The current bid process will not reach the request for proposal (RFP) stage, due to lack of interested parties, Choubey said.
The government also made its stand on the ownership of the future company, and said, the control of the company will lie solely with the buyer.
The transaction advisor is expected to talk to companies and probable probable investors regarding the issues flagged so far.
The government felt that there was no ambiguity on any points, Choubey said, and added that the process had been a great learning experience for the centre, and that it was now in a better position to judge what the market wants.
The aviation secretary further added that the government intended to signal to the market that complete freedom would be given to the buyer of Air India, but said he could not comment on whether the end of 2018 would continue to remain the target for the stake sale.
The current bid process cannot proceed further due to the lack of interest, he further added.
The aviation secretary on Wednesday said the government was unlikely to further extend the May 31 deadline. The government had expected bids to come in at the last minute.
Prime Minister Narendra Modi's government announced a plan in March to divest a 76 percent stake in Air India and offload about $5.1 billion of its debt.
The government, which is looking at divesting 76% of its stake, had eased some terms and extended the period to make bids earlier this month.
Air India flies some lucrative routes but also has one of the industry's highest employees-per-aircraft ratios.
Air India, known for its Maharaja mascot, has some of India's most lucrative international and domestic landing and parking slots that are key for airlines.
While the buyer would have management control and gain access to more than 2,500 international slots and over 3,700 domestic slots, it would also need to take on Air India's 27,000 employees, 40 percent of whom are permanent staff.
The terms also stipulate that the government would continue to hold a 24 percent stake, and the winning bidder would need to abide by conditions, not yet detailed, designed to safeguard employee interests.
The government had also restricted merging the airline with the buyer's existing businesses, but later relaxed the rule to allow some integration for business efficiency.
India's IndiGo Airlines and Jet Airways, which had initially shown interest, opted out of the race for Air India after the initial terms were disclosed. They have not made any comments since the clarification was issued by the government earlier this month.
Steel-to-autos conglomerate Tata Group, widely seen as a potential suitor for Air India, was also unlikely to consider a bid as the terms were too onerous.
Tata already operates two airlines in India, including Vistara with Singapore Airlines.
Singapore Airlines has in the past said it was keeping an "open mind" about Air India, but three sources close to the company have played down the carrier's interest, despite its previous public comments.
Read our complete coverage of the stake sale here.
First Published: IST