The divestment of Pawan Hans Ltd continues to be a challenging process as the government is yet to announce the outcome of the preliminary bidding round. The last date for bid submission was October 10.
"We are looking into it. It will take some time," a senior official said.
The situation is worrisome as the helicopter company's financials have taken a turn for the worse, especially since the last financial year. In 2018-19 (Apr-Mar), the company posted a net loss of Rs 72 crore and it is already making losses in the current year.
"In the period between April and October, the losses are around Rs 80 crore. At this rate, the losses for the entire financial year could very well exceed Rs 100 crore," a person aware of the development told CNBC-TV18 on the condition of anonymity.
The losses are on account of under-utilisation of its fleet of 43 helicopters. Several of them are very old, some touching the age of 30 years, and hence, are out of service for want of maintenance, the source added.
"The drop in revenue from operations from FY 16 onwards can be attributed to lower flying hours due to a reduction in operational fleet caused by 3 accidents during 2015.
Revenue has further declined in FY 19 due to vintage life of helicopters as vintage clauses enforced by various customers act as a hurdle to participate and win new businesses," Pawan Hans had said in its preliminary information memorandum published on July 11.
While the company has been in the process of leasing of additional helicopters, it has so far not been able to include new helicopters into its fleet.
"Some states are demanding new helicopters. They no longer want the old fleet. That will need funds," another source aware of the development said.
Due to the accidents of its helicopters, the insurance cost has also risen for Pawan Hans to Rs 33 crore as per provisional figures for 2018-19 as compared to Rs 18.5 crore in 2017-18.
The divestment of Pawan Hans has been a challenging task for the government since 2017. In October 2017, the government invited bids for 51 percent stake in the company but could not find any suitable takers even after extending the deadline once. At that time, it was not clear whether ONGC, which owns 49 percent in Pawan Hans, will also exit the company or not.
The EOI was soon withdrawn due to a weak response.
In April, 2018, the government again invited bids for 51 percent stake in Pawan Hans but soon after in July, ONGC board passed a resolution that it will also exit Pawan Hans. As a result, the government floated a fresh preliminary information memorandum in October 2018 and invited bids.
This bid process was not successful as the single bid received was unacceptable. With the onset of code of conduct ahead of Lok Sabha elections, the divestment process was put on hold.
The Narendra Modi government, in its second term, floated an expression of interest on Jul 11 for 51 percent stake. It was reiterated that ONGC will also sell its 49 percent to the successful bidder.
The deadline for submission of bids has been extended three times already since then despite several sweeteners in this round.
In 2017-18, Pawan Hans recorded a net profit of Rs 19.6 crore and in 2016-17, it posted a bottom-line of Rs 254 crore.
However, the profit was higher in FY 17 because the government converted dues of Rs 130.91 cr (principal amount) into equity share capital and waived off balance Rs 339.31 cr (interest cost). Accordingly, the interest amount waived-off was recognised as an extraordinary gain for FY17.
The company has also struggled with high insurance cost in FY17 and FY18 because of the rise to accidents of its helicopters, insurance cost of PHL helicopters has increased significantly in FY 17 and FY 18. However, PHL is taking steps to reduce insurance cost by inviting tenders for insurance advisors with an aim to reduce the insurance cost.
Till July, only 35 helicopters (including one helicopter taken on lease from HAL) had valid airworthiness review certificate.
As per the revised terms of the transaction, the government eased restrictions on asset stripping. As against three years earlier, the successful bidder can now sell, transfer, mortgage, lease, pledge, etc. the assets of Pawan Hans after two years.
The government also promised that it will indemnify the contingent liabilities related to tax and statutory dues, to the extent to 51 percent of Rs 576.99 crore (as on March 31, 2019), which amounts to Rs 294.27 crore, in case such contingent liabilities are crystalised against Pawan Hans.
The Union Budget has set a disinvestment target of Rs 1.05 lakh crore for the current fiscal. SBI Capital, the investment banking arm of State Bank of India, is the advisor to the government on the strategic disinvestment of Pawan Hans.
Pawan Hans Limited is a public sector undertaking set up under administrative control of civil aviation ministry in October 1985. It primarily provides helicopter services for exploration activities of Oil and Natural Gas Corporation Limited (ONGC) and to the North East Region of India.It is also engaged in providing helicopter services for various purposes such as offshore operations, inter-island transportation, connecting inaccessible areas, pipeline surveillance, casualty and rescue work, charter services, VIP transportation, services under Regional Connectivity Scheme and various other customised services.