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Ashwini Phadnis

New Delhi March 22 The Government is keeping an open mind on the proposed listing of the newly merged State-owned airline. Official sources told Business Line that while the listing has not been put off, it was also not imminent for the moment.

"The newly merged entity has to come together, do reasonably well and only then does it make sense to think of entering the market. After all the idea of tapping the market is to broad base the ownership and also ensure that the new company makes some money," official sources said.

The merger process, already under way, is to be completed within 18-24 months. While officials refused to speculate on the timing of the IPO, the proposed move could actually work to the advantage of the merged entity as both airlines have gone in for huge borrowings to fund their fleet expansion programmes.

While Air India has ordered 68 Boeing aircraft at an estimated cost of Rs 30,000 crore, Indian has contracted to purchase 43 Airbus aircraft in a deal valued close to Rs 10,000 crore. The airlines are funding almost 85 per cent of the acquisition through loans.

"An IPO will not only strengthen the balance sheet but will also help the new company leverage its loans through attractive spreads in the international market," sources indicated.

Premium potential

The proposed IPO could also command a premium, as both airlines are brand names and have been in the airline business for over five decades, an analyst said.

"In the recent past several companies have been able to attract a premium just on the basis of their brand name and without actually having done much business in the field for which the monies are being raised. Both the airlines are established brand names that should provide a huge potential for any listing," sources said.

A decision to go in for a listing should be a smooth process, as the initial preparatory work had already been done by Merrill Lynch for Air India and by Kotak Mahindra for Indian.

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