The government may raise between Rs 2,400 and Rs 3,800 crore by taking India?s international flag carrier Air-India (A-I) to the capital market. Merchant banking sources base this on the assumption that government will make available 20-25 % of the airline stock to investors in the Initial public offer (IPO), which going by its paid-up capital of Rs 153.84 crore, will translate to around 3-3.82 crore shares (of face value Rs 10).

If the Jet Airways book building price band (Rs 950 /1,100) is taken as the benchmark, even after discounting because it?s a government company, the A-I share may be placed at Rs 800 -1,000. The IPO can fetch between Rs 2,400 -3,000 crore for 20 % stake at Rs 800 and Rs 3,000-3,800 crore for 25 % equity at Rs 1,000.

Sources said this is a ballpark estimate and the final numbers will depend on the airline valuation and how much money government wishes to raise through this process. It will also depend on whether the government still proposes to use these funds ? partly or fully ? to support the airline?s 7-8 bn fleet expansion programme.

While A-I?s paid-up capital is a modest Rs 153.84 crore, its authorised capital is Rs 500 crore. While technically, the government can float shares with total face value of around Rs 150 crore (15 crore shares at Rs 10 each giving the new investors just under 50 %) and retain 51 % or more in the company, the civil aviation minister has already given indications that not more than 20-25 % stake will be sold.

Jet Airways, the only other airline to hit the market recently, raised nearly Rs 1,900 crore by offloading 20 % equity, leaving the promoters with 80 % stake. DSP Merrill Lynch, which has been engaged by A-I to draw a roadmap leading to the IPO, is likely to revert to the airline in November with its report. While the valuation of the airline will depend on several factors, sources say of importance will be its firm plan to acquire 68 planes to grow its international market share and brand eminence.

The airline also holds critical landing slots in a string of international airports, which has become a tradeable commodity for many carriers in the current scenario of high competition and demand. The airline has also been consistently clocking profits for the past four years. Despite the sharp jump in its fuel bill, A-I still expects to stay profitable this fiscal year. Last fiscal year, its EBITDA was Rs 1,200 crore, net profit Rs 92.32 crore, topline of Rs 7,500 crore. This year, the airline is aiming at a turnover of about Rs 8,200 crore, which clubbed with the revenues of group companies (Hotel Corporation of India, A-I Charters, A-I Air Transport etc), may well touch the $2bn mark (Rs 8,500/8,600 crore at Rs 44 to a dollar).