INDIA. Mumbai: A Rs 18,000 crore bid of Tata Sons to take over the debt-ridden national career Air India was cleared by the group of ministers comprising Union Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal, and Civil Aviation Minister Jyotiraditya Scindia on Monday.
A Special Purpose Vehicle (SPV) of Tata Sons – the holding company of conglomerate – has emerged as the successful bidder, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey, told media on Friday that the Tata Sons bid was cleared who beat SpiceJet in the deal.
Apart from a 100% stake in Air India and its low-cost arm, “Air India Express”, the winning bid also includes a 50% stake in the ground-handling company “Air India SATS Airport Services Private Limited” (AISATS). The process of Air India’s sale began in July 2017 and the government had received 7 expressions of interest by December last year, the Pandey said.
For Tata Group, Air India adds a third airline brand to its stable, considering the conglomerate already holds a majority interest in “AirAsia India” and “Vistara”. Tatas’ bid of Rs.18,000 crore comprises taking over Rs.15,300 crore debt and paying the rest in cash. Both bidders (Tata Sons and SpiceJet) had quoted above the reserve price. The transaction is planned to be closed by December, Pandey said.
The stake sale process, which began in January 2020, faced delays due to the ongoing coronavirus pandemic. In April this year, the government asked potential bidders to put in financial bids. September 15 was the last day for putting in financial bids. Tata Group was among the multiple entities that had put in an initial expression of interest (EoI) in December 2020 for buying the “Maharaja”.
Air India reeling under the debt
As per the Air India Expression of Interest floated by DIPAM in January last year, of the airline’s total debt of Rs.60,074 crore as of March 31, 2019, the buyer would be required to absorb Rs.23,286.5 crore. The rest would be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle.
Air India has been in losses ever since its merger with domestic operator “Indian Airlines” in 2007. Now the Tata Sons will get control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas.
Air India history
This marks the return of Air India to the Tatas. Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932. It was called Tata Airlines then. In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe. The international service was among the first public-private partnerships in India, with the government holding 49%, the Tatas keeping 25% and the public owning the rest.
In 1953, Air India was nationalized and was split into two – a domestic airline and an international carrier. When the then Prime Minister late Jawaharlal Nehru nationalized Air India, JRD had fought vehemently against it.