Monday, January 18, 2021
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Tata Group to Bid for Air India

Mumbai: India’s biggest conglomerate, Tata Group, is believed to have presented an expression of interest for the beleaguered national carrier Air India throughout the weekend. It is found out that the vehicle utilized to document the interest in AI is AirAsia India, where Tata Sons have a substantial majority stake.

A group of 200 Air India employees also are expected to put an expression of interest, the deadline for which is Monday 5 pm. The group says to have a financial investor on board. Ajay Singh of SpiceJet also is eyeing AI yet the domestic carrier refused to remark. Dissimilar to May 2018 when the first effort to sell AI concluded without any suitors, this time around, there are several interests.

Aviation minister Hardeep Singh Puri, who in the previous year said that AI will have to close down if not privatized, said on Sunday: “It (AI divestment) is a confidential procedure. The department concerned (DIPAM) will comment at the appropriate time.”

Although Tata Sons operates a premier full-service carrier, Vistara, in partnership with Singapore Airlines, it chose to direct its AI interest through budget carrier AirAsia India. Singapore Airlines was not eager in partaking in the privatization program of the already troubled AI as it would just add to Vistara’s and its own financial difficulties.

The Southeast Asian organization is amidst raising liquidity after it posted its largest quarterly loss because of a plunge in travel demand due to COVID. In the interim, AI’s debt-cum-liabilities’ mixed burden is nearly Rs 90,000 crore.

Sources stated that since AirAsia India was established before Vistara, the former’s charter permits it to enter the full-service business. As of late, Tata Sons expanded its stake in AirAsia India from 51 percent after the Malaysian partner communicated its failure to infuse new funds into the joint effort because of monetary difficulties in its home country. The Tata Group—which established AI as Tata Airlines in October 1932—is being viewed as the most probable winner, as indicated by industry watchers. The government assumed control of AI in 1953.

The government has this time considerably sweetened the sale terms for AI. It has offered for sale its 100 percent stake in AI and AI Express — rather than 76 percent in the initial attempt— and the whole 50 percent it possesses in ground handling with joint venture AI-SATS. Furthermore, potential purchasers will presently bid on an enterprise value (EV) basis.

This implies instead of being needed to take on a pre-fixed level of Rs 23,000 crore debt of the airline, they will currently quote an EV based on their estimation of the combined value of AI’s debt and equity. Winning bidders will be determined who quotes the highest EV value and at least 15 percent of this value will be required to be paid in cash while the rest can be taken as debt.

Bidders had looked for an explanation from the Department of Investment and Public Asset Management (DIPAM) concerning the changes. One of them, referring to large money requirements for things like up-gradation of the AI fleet and VRS scheme, recommended the government sell AI without asking for any upfront cash payment.