Salt-to-software conglomerate Tatas have won the bid to acquire debt-laden state-run Air India offering Rs 18,000 crore for acquiring 100 per cent shareholding, a senior government official said on Friday.
An SPV of Tata Sons – the holding company of conglomerate – has emerged as successful bidder, Tuhin Kanta Pandey, secretary to the Department of Investment and Public Asset Management (DIPAM) — the government department responsible for privatisation – said.
The DIPAM secretary said Tatas’ bid of Rs 18,000 crore comprises taking over of 15,300 crore of debt and paying the rest in cash. Govt to get Rs 2,700 cr cash from Tatas for sale of its 100 pc stake, said DIPAM Secretary. Tata Sons’ winning bid of Rs 18,000 crore for Air India higher than reserve price of Rs 12,906 crore set by government, the official added. The transaction is expected to close by the end of December 2021, said Pandey.
Both bidders had quoted above the reserve price, he said adding the transaction is planned to be closed by December.
He said a group of ministers comprising Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal and Civil Aviation Minister Jyotiraditya Scindia has cleared the winning bid for Air India on October 4.
This marks the return of Air India to the Tatas. “Welcome Back Air India,” said Ratan Tata, Tata Sons’ chairman emeritus on Twitter after the announcement.
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 per cent, the Tatas keeping 25 per cent and the public owning the rest. In 1953, Air India was nationalised.
The government is selling 100 per cent of its stake in the state-owned national airline, including Air India’s 100 per cent shareholding in AI Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.
The stake sale process, which began in January 2020, faced delays due to the COVID-19 pandemic. In April 2021, the governThement 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.
With previous attempts since 2017 failing to get any significant interest and after receiving feedback from potential investors, the government had in October last year sweetened the EoI clause relating to the transfer of Air India’s debt to the new investor, giving bidders flexibility to decide on the quantum of humongous debt they want to absorb.
As per the Air India EoI floated by DIPAM in January 2020, 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.
The airline will give Tata control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas.