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Air India appoints advisor for IPO

Staff Correspondent

Plans non-stop services to the U.S.

MUMBAI: Air India has selected DSP Merrill Lynch Ltd. (DSPML), a leading investment banking and securities company, to be its advisor for its proposed initial public offer (IPO) of capital.

This followed a bidding process wherein 15 merchant bankers applied out of whom six parties were short-listed for presentation and a final selection was made based on the presentations.

According to a release issued by the airline, the terms of reference for the advisor will include preparing a broad road map for the IPO for submission to the Ministry of Civil Aviation advising on capital restructuring and various options regarding the type of issue, timing, size of the offer, valuation methodologies, employee stock options and corporate governance requirements.

Air India at present has a share capital of Rs. 153.84 crore fully subscribed by the Central Government and an authorised capital is Rs. 500 crore. Its debt:equity ratio is 2.3:1.

The airline is planning a huge expansion involving acquisition of 50 aircraft at an approximate cost of $7.1 billion.

In addition, it plans to induct 18 B737-800 aircraft at a cost of about $1.2 billion, for its subsidiary Air India Charters Limited under whose banner Air India Express is being run as a low cost airline.

The acquisition proposals are now before the PIB (Public Investment Board) for approval.

Pursuing leasing plans

Air India is pursuing a leasing plan as an interim strategy. Its present fleet strength of 42 is likely to increase to 50 by the winter of 2006-07.

It also plans to introduce non-stop services to the U.S. by acquiring Ultra Long Range aircraft and has issued a Letter of Intent to augment its cargo capacity from Kerala to the Gulf and from India to Germany in pursuance of a cargo business plan. It proposes to convert two of its A310 into freighter aircraft in August and September 2007.

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