The Cabinet move to divest stake in Pawan Hans Helicopter (PHHL) can help the ailing state-owned chopper firm take off again. The company holds immense potential despite a chequered past.

Pawan Hans was set up in 1986. Initially, it only had a fleet of Westland and Dauphin helicopters. The Westland machines had been given as a grant-in-aid by the British Government. The company ran into trouble soon as several of its helicopters crashed. In 1991, the Government decided to ground the entire fleet after the Directorate General of Civil Aviation raised safety issues. PHHL had to sell the entire Grant in Aid fleet and deposit the money in Government coffers. Oil PSU ONGC and the Centre became primary equity owners in PHHL.

PHHL’s woes did not end there. The Government’s financial requirements lay down that in the case of project tied aid (which is what helped PHHL start) the Company has to repay the amount to the Government. This meant PHHL had to pay ₹ 130.9 crore failing which there would be a penalty of 18 per cent interest per annum. Between 1986 and March 2001, the Company owed ₹ 339 crore to the Government as interest on the principal. The amount that PHHL owes was frozen at about ₹480 crore.

Fifteen years later, when the Government is moving towards divesting its stake in PHHL, many believe the Company could use the prevailing business environment to its advantage.

For starters, the Government now allows 100 per cent FDI in aviation and the Finance Ministry has indicated its “willingness” to waive the outstanding amount against PHHL, making it a hot favourite among foreign companies looking to invest in India.

Given the low per capita penetration of helicopters in India — about 276 helicopters; that’s one helicopter for every 47 lakh people — there is a huge opportunity waiting to be tapped. Besides, the DGCA is also looking at liberalising operating rules for helicopters.

Also, PHHL has contracts, all won through competitive bidding, which will run for the next three to five years. The contracts vary from providing machines to various State governments to ferrying people and essentials. Whoever invests in the company, therefore, does not need to start from scratch to build it up. An enterprising buyer can look at many ways of using the 43 helicopters that PHHL has.

The Company has also undertaken several measures to professionalise its functioning including restructuring the board and is expected to appoint independent directors within the next two months, all of which are being looked at signs that it is keen to divest.

In sum, divesting PHHL will also be a win-win for the Government as PHHL has been a profit making and dividend paying Company for most of its existence.

This should ensure that the Government gets a profit from the sale of its stake.

While it is difficult to immediately gauge how much money the sale will yield, parallels can be drawn with Global Vectra Helicorp, which is the only one to be listed on Indian stock exchanges. Though much smaller than PHHL and having incurred losses initially, the company is doing well as its ₹10 share currently quotes at over ₹ 90 or shows a nine times growth.

Given PHHL’s strong credentials, HR resources and helicopter base, it can fetch the Government handsome returns.

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