Financial bids for Air India in process with bids from Tata Sons and SpiceJet

At least two entities are expected to submit financial bids on Wednesday, September 15 for Air India, marking an important milestone in the government’s plan to privatise the national carrier.

A subsidiary of Tata Sons, Talace Pvt Ltd, and SpiceJet promoter Ajay Singh have officially bid for Air India, paving the way for the government to fully exit the loss-making national carrier. The national carrier and its subsidiary Air India Express may have together been valued in the range of INR 15,000-20,000 crore by Tata, according to people familiar with the bidding process.

“The valuation is a rough estimate of the assets (aircraft) owned by the beleaguered airline being sold by the government,” said the people cited above.

Tata winning Air India would be a homecoming of the airline for the group, which had transferred the company to the government in 1953. (Image Courtsey – MoneyControl)

The board of Tata Sons had given a free hand to its chairman on the bid, mentioning a price range the group would be comfortable paying for the troubled carrier. “The bid is quite within that range mentioned,” an official aware of the matter said.

Among the suitors, sources confirmed is the Tata Group, which is also the frontrunner. Tata winning Air India would be a homecoming of the airline for the group, which had transferred the company to the government in 1953.

The Tata Group is set to bid through a holding company and the group has also convinced SIA, its joint venture partner in Vistara, to integrate the network with Air India, if they get it.

The government will sell a 100% stake in Air India and its low-cost subsidiary Air India Express, and 50% in ground handling company Air India SATS. “Financial bids for Air India disinvestment received by transaction adviser. The process now moves to the concluding stage,” Tuhin Kanta Pandey, secretary in the Department of Investment and Public Asset Management (DIPAM), tweeted on Wednesday, September 15.

‘Future Plans to Keep Evolving’ The winning bid is likely to be announced before the end of this month and the government plans to transfer the airline by the end of this fiscal year. Once the government announces the winner, Tata Sons (if it is shortlisted) is expected to create one holding company for all its aviation businesses, possibly under Talace.

“Talace has just put in the bid. Future plans will keep evolving. What the group is looking at in terms of valuations is just pureplay aircraft on the books of Air India and Air India Express, especially the ones owned by them,” the people close to the bidding process said.

Talace was incorporated in August 2020 purely to make an official bid on behalf of Tata Sons, sources said. Directors include Eruch Noshir Kapadia, Saurabh Mahesh Agrawal and Nipun Aggarwal. SpiceJet promoter Ajay Singh has also put in a bid in his personal capacity along with two other investors

As per the Air India EoI floated by DIPAM in January 2020, of the airline’s total debt of INR 60,074 crore as of March 31, 2019, the buyer would be required to absorb INR 23,286.5 crore.

The government has finally succeeded in getting financial bids for Air India in its second attempt, as the first in 2018 did not elicit any interest because it had planned to retain a 26% stake even after privatising the national carrier.

Debt Transfer Air India will be transferred with a debt of INR 23,000 crore, while the rest of its debt will be transferred to government-owned Air India Asset Holdings Ltd (AIAHL), which will house the carrier’s assets like the Air India building in Mumbai, Airlines House in Delhi, four acres of land in Delhi’s Connaught Place and various housing societies in Delhi, Mumbai and other cities.

Subsidiaries such as Air India Engineering Services Ltd and Air India Air Transport Services Ltd will also be part of AIAHL. The government plans to monetise these assets and repay that portion of Air India’s debt which it will hold on to after handing over the carrier to its new owners. Before the handover, the government may have to take on at least INR 20,000 crore more of debt which the airline had accumulated over the past two years. In 2018, the government had transferred to itself debt worth about INR 22,000 crore from the airline.

At present Air India has control over 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots abroad.

As per the Air India EoI floated by DIPAM in January 2020, of the airline’s total debt of INR 60,074 crore as of March 31, 2019, the buyer would be required to absorb INR 23,286.5 crore. The rest would be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle.

Air India’s subsidiaries such as Air India Engineering Services and Air India Air Transport Services will also be part of AIAHL. At present Air India has control over 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots abroad.

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