Air India divestment: Tata Sons wins a bid for the national airline

Tata Sons won the final bid to acquire Air India.

Tata Sons won the final bid for the acquisition of the national carrier Air India, according to government sources. The software salt conglomerate had submitted the final bid for the airline on September 15 and established itself as the frontrunner to acquire the airline.

While SpiceJet promoter Ajay Singh also submitted a bid for the airline, government sources confirmed that Tata Sons submitted a higher bid to acquire the airline. Sources said a ministerial panel headed by Union Home Secretary Amit Shah approved the offer submitted by Tata Sons.

The move comes a day after a report said the government had finalized the minimum reserve price for the airline. The government had finalized the minimum reserve price for the national carrier, based on projections of future cash flows, brand value and slots at foreign airports.

Sources said the offer submitted by Tata Sons was Rs 3,000 crore more than the minimum reserve price set by the government committee.

Important sources from the Ministry of Civil Aviation said all formalities for Air India’s divestment process will be completed by December 2021.

Read | Government can select successful bidder for Air India in 3 weeks: report

Numerous reports had previously indicated that Tata Sons had become the frontrunner to acquire Air India as it submitted a higher bid for the debt-laden airline.

Former Air India director Jitendra Bhargava recently told Bloomberg TV that the Tatas would get government approval as they have the capacity to pour in a large amount of money needed to revamp the national carrier.

“Tatas is very, very passionate about Air India,” Bhargava said.

FUTURE PLANS

While the details of the offer Tatas submitted are not entirely clear yet, it is believed that it includes an indemnity clause to avoid any unexpected claims that arise later.

More than 200 Tata Group staff were involved in the process, including specialists in mergers and acquisitions from units such as Vistara, AirAsia India, Tata Steel and Indian Hotels. It should be noted that the Tatas are planning to merge all of their aviation activities under one entity if they are successful in bidding for Air India.

The Tatas have already performed extensive due diligence involving three teams from AirAsia India, TCS and other external consultants. The group has also formed a separate company Talace Private Limited to participate in the Air India acquisition process.

It should be mentioned that the offer for the national carrier was sought at enterprise value instead of equity value. This is because the government had changed the tendering parameter for Air India.

After the acquisition, the Tata group will have to inject a substantial sum of money to help the airline recover from its financial difficulties.

Air India’s total debt has increased dramatically over the past two years due to the Covid-19 pandemic and currently stands at over Rs 40,000 crore. However, the government plans to hand over the airline with a debt of Rs 23,000 crore to the Tatas.

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