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Air India Limited Guidebook for Monetisation of Real

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Air India Limited Guidebook for Monetisation of Real Guidelines for Monetisation of Real Estate Assets AIR INDIA LIMITED GUIDEBOOK FOR MONETISATION OF REAL ESTATE ASSETS / ARTEFACTS Page 1 Guidelines for Monetisation of Real Estate Assets Introduction Monetisation of Real Estate Assets is key to any revival plan or Financial Restructuring Plan particularly for any sick or loss making company. It is preferable to unlock the value of unutilised immovable assets by way of sale or lease of such Real Estate Assets. Such a measure would bring more revenue to the PSUs and they would be less dependent on the government for a bail out. The Vijay Kelkar panel set up by the government has also recommended monetisation of surplus Real Estate Assets of PSUs. Accordingly, Ministry of Heavy Industries has circulated a draft Cabinet note to put in place a mechanism for such monetisation. In Air India, while formulating Financial Restructuring Plan, Deloittee has also recommended proper monetisation of its immovable assets. Later, when AI has finalised its Turn Around Plan (TAP) and Financial Restructuring Plan (FRP), monetisation of its Real Estate Assets form an important ingredient. The Group of Ministers (GOM) and the Committee of Officers (COO) constituted for finalising TAP & FRP has also strongly recommended such a monetisation. Finally, when Cabinet Committee on Economic Affairs (CCEA) in its meeting on 12th April, 2012 approved the FRP & TAP for Air India, it has also approved monetisation of Real Estate Assets in Air India to the tune of Rs.5000 crore over the next 10 years period with the annual target of Rs.500 crore from the Financial Year 2013 onwards. In this background Air India has chalked out its plan to monetise its unutilised/ surplus immovable Real Estate Assets over the next few years. In order to put in place a transparent and credible mechanism, it is found prudent to come out with a hand book detailing all finer aspects of the proposed monetisation procedure along with relevant rules and instructions. Efforts have been taken to include relevant CVC and Ministry of Finance guidelines along with a broad check list in this hand book. However, this hand book is only a guide book and due care is required to be taken during actual implementation of monetisation plan on the basis of relevant rules and regulations in vogue at the time of taking a decision. Transparency and creditability however, remains the key to the successful monetisation process. Page 2 Guidelines for Monetisation of Real Estate Assets INDEX SL.No CHAPTER PAGE No I Turnaround Plan (TAP) & Financial Restructuring Plan (FRP) 4 Cabinet Committee on Economic Affairs (CCEA) decision II A. Purpose of monetisation 5 III Appointment of Consultant 6 IV Board Approval 7 V Oversight Committee – Terms of reference 7 VI CVC guidelines 8 Ministry of Finance Circulars (i) Procedure to be followed with respect to Monetisation of immovable assets A. Monetisation of properties through sale / alienation VII 10 B. Monetisation of immovable assets through lease rentals C. Monetisation through JV D. Monetisation of movable artefact assets. VIII E Auction 13 Module for Tendering 1. Introduction 1.1 Objective of the report 2. Pre Bidding Process 2.1 Setting Up An Overview Committee 2.2 Preparation of „Bid Document‟ 2.3 Preparation of „Property Information Docket‟ 2.4 Asset Marketing 2.4.1 Advertisement Campaign 2.4.2 Networking Activity IX 3. Bidding Process 14 3.1 Notice Inviting Tenders 3.2 „Expression of Interest‟ To Bid 3.3 Site Visits 3.4 Access To Data Room 3.5 Pre Bid Conference 3.6 Receipt Of Bids 3.6.1 Receipt of Bids in „Sealed Bid‟ format 3.6.2 E-Auction of Subject Property 3.7 Bid Opening 3.8 Selection and Intimation 4. Post Bidding Process X Disposal Platform 29 XI Annexures A to H 34 Page 3 Guidelines for Monetisation of Real Estate Assets I. TURNAROUND PLAN & FINANCIAL RESTRUCTURING PLAN In the year 2011 Turnaround Plan (TAP) and Financial Restructuring Plan (FRP) of Air India was submitted to the Ministry of Civil Aviation (MoCA), Govt. of India, for its consideration. MoCA after processing it through Group of Ministers (GoM) and Empowered Committee of Officers (CoO) has placed it before Cabinet Committee on Economic Affairs (CCEA) for its consideration and approval. CCEA in its meeting held on 28th October 2011 approved TAP and FRP of Air India. In this regard, Para 4.8.4 of FRP states as under: “Air India proposes to increase its non-operating revenues in order to augment its core passenger revenues. According to its strategic intent and as envisaged in the TAP, the Company proposes to monetize its Real Estate Assets and generate Rs 5,000 crores over a period of 10 years starting from FY 2013.” Air India is in possession of a number of properties at various International and domestic locations, which are considered to be strategic assets and the same will be available for utilization for flight operations, Monetisation, leasing or any similar activity as deemed fit by Air India, as per future requirements. Air India has identified the Real Estate Assets which they propose to monetize over a period of time. The details of such Real Estate Assets are provided in the table below. Table 1: Prospective Real Estate Assets for monetisation Leased/ City Location Area Owned Freehold land and Residential flats at Palavanthangal 19.13 Chennai Owned Village and IA Staff Housing Colony Acres Freehold Vacant No. 504, Annasalai / Teynampet, Chennai 63,897 Owned Chennai Delhi Airlines House, 113, Gurudwara Rakabganj Road 0.77 Acres Owned 16,188 Sq. Delhi Baba Kharak Singh Marg, Connaught Place, New Delhi Owned Mt Delhi Staff Quarters, Vasant Vihar, Delhi 30 Acres Owned Unit No. 264, 297, 310, 489, 631, 678, 684, 714, Asiad 1900 Sq. Delhi Owned Village Complex, New Delhi Ft each Freehold Land (CTE Complex) and Buildings in Central 20.00 Hyderabad Owned Training Establishment Acres Land Mumbai Air India Building, Nariman Point 449,000 leased/Building Owned 23,989 Sq. Mumbai Building at old airport, Kalina, Santacruz Owned Mt Mumbai Office Building, NITC, Santa Cruz, Mumbai NA Owned Mumbai Land at CIDCO Plot, Nerul NA Leased 420 Sq. NCR, Gurgaon DLF, Qutab Enclave, Phase-III, Gurgaon, Haryana Owned Mt The above is an indicative Real Estate Assets identified for Monetisation may differ with actual Monetisation program considering prevailing market conditions. Page 4 Guidelines for Monetisation of Real Estate Assets II. CABINET COMMITTEE ON ECONOMIC AFFAIRS The Cabinet Committee on Economic Affairs (CCEA) took a decision on 12.04.2012 on the Turn Around Plan and Financial Restricting Plan of Air India, one of the key aspects of FRP is Revenue generation from Monetisation of Real Estate Assets. The projected revenue from such Monetisation is around Rs.5000 crores over the next 10 years. CCEA has also stipulated certain milestones which are linked to equity infusion by the Govt. of India. Milestones are as follows:- 1. The moderated growth scenario with a performance of PLF of 73% -75% for the operational Turn Around Plan. Yield and utilization parameters as indicated in the base case of the TAP. 2. The Financial Restructuring Plan – (a) Restructuring of short-term loans and working capital loans as proposed by the SBI Caps; and (b) Equity infusion as per scenario VII. 3. Induction of aircraft to be only based on route planning and economics; and to be reviewed after 2014-15. 4. Hiving off of MRO and Ground Handling as proposed in the TAP. 5. Revenue generation through Monetisation of Real Estate Assets as proposed in the TAP. 6. Cargo- Mail Revenue and other revenues as proposed in the TAP. 7. HR policy review across Air India including subsidiaries and right-sizing of staff through an appropriate VRS package. 8. Completion of integrated IT systems for improving performance. 9. Customer oriented services as proposed in the TAP to be focused. 10. Ownership of the Turn Around Plan by the employees and management of AI essential. In accordance with the direction of CCEA, an Oversight Committee had been constituted in MoCA with representative from Department of Expenditure, MoCA, SBI, AS & FA (MoCA), CMD (AI) and JS (MoCA-In-charge Air India) to monitor and ensure that the milestones are achieved before the release of equity. One of the stated milestone is progress on Monetisation of Real Estate Assets. A. Purpose of Monetisation Air India has a vast property bank accumulated over a period of time at various locations in India and abroad. Some of the properties are lying unused for a long time. Besides, some properties are lying vacant because of shifting to Airport Terminal Building, city location and also as a result of stopping of operation from some locations etc. This gives an opportunity to the company to monetise such properties by way of sale, putting it on rent or even developing it as a joint venture to raise considerable Page 5 Guidelines for Monetisation of Real Estate Assets revenue. The revenue so generated can be utilized to retire its huge debts. This will help in improving its fiscal health and better balance sheet. In this background, monetisation of Real Estate Assets has become an important ingredient of the FRP. III. APPOINTMENT OF CONSULTANT In pursuance to the decision of Govt. of India authorizing Management to monetize its immovable properties, Air India Board approved the appointment of Real Estate Consultants. On 16th January 2013, consultant M/s DTZ was appointed through a global tendering process, which had the approval of the management. M/s DTZ was appointed with the following brief terms and conditions: i. The Consultant would get the details of properties lying unused, under-utilized and of no use in the foreseeable future and shall prepare a roadmap for Monetisation of the properties.
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