What Tata Sons Paid To Get Air India Back
After some four years of trying to sell it the Indian government has finally found a buyer for its beleaguered national carrier, Air India and its subsidiaries. The process which began in June 2017, concluded on Friday with Air India being bought for Rs 18,000 crore in enterprise value terms—that is, debt plus equity.
The winning bidder is Tata Sons—the privately owned holding company of one of India's largest conglomerates. The bid was placed by its wholly-owned subsidiary Talace Pvt. The only other bidder in the fray was a consortium led by Ajay Singh, the principal shareholder of Spicejet Ltd. It bid Rs 15,100 crore.
The reserve price for Air India was pegged at Rs 12,906 crore by valuation advisors to the central government.
The Acquisition In Numbers
Air India had accumulated losses worth Rs 83,916 crore as of March 2021 and a total debt of Rs 61,562 crore at the end of August 31.
Of that, Rs 46,262 crore of debt will remain with government entities.
Tata Sons will assume a debt of Rs 15,300 crore, thereby pegging the equity value at Rs 2,700 crore.
Tata Sons will get 100% shares of Air India along with AI’s shareholding in low cost carried Air India Express and its shareholding in ground and cargo handling business AISATS.
To be clear, the government will get Rs 2,700 crore in cash from the divestment of Air India.
The government will also keep Air India's non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to the government-owned Air India Asset Holding Ltd. (AIAHL).
In Air India, Tata Sons will get a fleet of 117 aircraft, a significant number of them owned by the national carrier, and bilaterals.
Other Deal Conditions
As per the deal, there are no restrictions on the successful bidder undertaking mergers and acquisitions. That opens the door for the Tata Group to consider combining Air India with its two existing aviation businesses—Vistara Airlines, a joint venture of Tata Sons (51%) and Singapore Airlines Ltd. (49%); and Air Asia India, a Tata Sons (83.7%) joint venture with AirAsia Investment Ltd. (16.3%).
The restriction is that during the equity lock-in period, ownership has to remain with the successful bidder, said the finance ministry.
No employee to be retrenched for the first one year after acquisition. And for the second year, if anybody is to be retrenched, they will be offered VRS, ministry officials said in a press briefing.
The eight logos under the Air India brand will go to Tata Sons. These cannot be transferred for five years. After five years, the logos can be transferred but only to Indian persons (legal persons), not to any foreign entity.
The next step will be to issue the Letter of Intent and then sign the Share Purchase Agreement. "It is expected that the transaction will be completed by December 2021," a finance ministry statement said.