Equity induction by the Government in the National Aviation Company of India Limited (NACIL)
The Cabinet Committee on Economic Affairs today approved release of Rs.800 crore as equity induction in the National Aviation Company of India Limited (NACIL). The equity induction would not only ease the cash flow situation of the company but would also preclude borrowings from the markets at a high cost.
The Hon’ble PM had taken a meeting in June last year on issues relating to NACIL and after a detailed deliberation, it was decided that NACIL would come out with a financial restructuring Plan and its turnaround plan would be closely monitored by Committee of Secretaries. Thereafter, a Group of Ministers was also constituted to consider the financial position of NACIL and its request for financial support.
Accordingly, the financial restructuring plan of NACIL was submitted before the GOM for consideration in its meetings held on 21st October, 2009 and 12th November, 2009. The GOM after detailed discussion, approved the release of funds to the extent of Rs.800 crore in tranches of Rs.400 crore a month in the form of equity and decided to recommend the equity induction in NACIL for approval of Cabinet Committee on Economic Affairs.
NACIL’s present paid up equity capital of Rs.145 crore is not sufficient for an aviation company of its size. The company is currently struggling to address costly legacy assets, a weakening revenue stream and high cost structure resulting in rising liabilities.
The Cabinet Committee on Economic Affairs today approved release of Rs.800 crore as equity induction in the National Aviation Company of India Limited (NACIL). The equity induction would not only ease the cash flow situation of the company but would also preclude borrowings from the markets at a high cost.
The Hon’ble PM had taken a meeting in June last year on issues relating to NACIL and after a detailed deliberation, it was decided that NACIL would come out with a financial restructuring Plan and its turnaround plan would be closely monitored by Committee of Secretaries. Thereafter, a Group of Ministers was also constituted to consider the financial position of NACIL and its request for financial support.
Accordingly, the financial restructuring plan of NACIL was submitted before the GOM for consideration in its meetings held on 21st October, 2009 and 12th November, 2009. The GOM after detailed discussion, approved the release of funds to the extent of Rs.800 crore in tranches of Rs.400 crore a month in the form of equity and decided to recommend the equity induction in NACIL for approval of Cabinet Committee on Economic Affairs.
NACIL’s present paid up equity capital of Rs.145 crore is not sufficient for an aviation company of its size. The company is currently struggling to address costly legacy assets, a weakening revenue stream and high cost structure resulting in rising liabilities.
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