October 2021
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Kerala News
Tata wins Air India bid for Rs 18,000 cr in two-player game, global aviation biggies and fund houses stay away
New Delhi, Tata group has won the bid to acquire flag carrier Air India adding another airline brand in its hangar with the other two being Vistara and Air Asia India.

"Talace Pvt Ltd, a wholly owned subsidiary of Tata Sons Pvt Ltd, has emerged as a successful bidder for the sale of equity shareholding of GoI (Government of India) in Air India, in AIXL which is a subsidiary of Air India as a part of this transaction and 50 per cent of Air India in AISATS which is another joint venture of Air India along with management control," Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) announced on Friday.

Union Home Minister Amit Shah-led Ministerial panel has approved the winning-bid.

The government had in January 2020 invited Expression of Interest (EoI) from private parties for selling 100 per cent stake in Air India along with its subsidiary Air India Express (AIXL) and 50 per cent stake in the carrier's ground-handling JV Air India SATS (AISATS).

Pandey said that Talace Pvt Ltd quoted an enterprise value of Rs 18,000 crore to acquire the airline.

The successful bidder will retain Rs 15,300 crore of Air India's debt and pay Rs 2,700 crore cash to the government.

"Debt to be taken over by the successful bidder is Rs 15,300 crore. The remaining debt of Rs 46,262 crore will go to AIAHL (the special purpose vehicle created for warehousing part of the airline's loans, four of its subsidiaries, non-core assets, paintings & artifacts and other non-operational assets), " Pandey said.

The other bidder, a consortium-led by SpiceJet promoter Ajay Singh, offered Rs 15,100 crore for taking control of the airline.

Both the bids were above the reserve price of Rs 12,906 crore.

Combined debt of Air India and Air India Express as on August 31, 2021 stands at Rs 61,562 crore.

The transaction does not include non-core assets including land and building, valued at Rs 14,718 crore which are to be transferred to GOI's Air India Assets Holding Ltd (AIAHL), DIPAM Secretary noted.

The government has said that the successful bidder cannot retrench the current airline staff for one year. Air India and Air India Express together have about 13,500 permanent and contractual staff.

Getting emotional after winning the bid for Air India, Tata Sons Chairman Emeritus Ratan Tata said, "Welcome back, Air India!"

The Tatas getting back the control of Air India completes the full circle for the airline which was founded in 1932 by JRD Tata, the legendary industrialist and an aviation enthusiast.

The salt-to-software conglomerate was widely seen as the front-runner in the two-player game.

Country's largest airline IndiGo and other aviation majors or fund houses stayed away from the Air India bidding.

Former India head of Qatar Airways and ClubOne Air CEO Rajan Mehra termed the airline business more a "passion game" than necessarily a commercially viable enterprise.

Meanwhile, senior BJP leader and Rajya Sabha member Subramanian Swamy has reiterated that he would move to court challenging the bid process for Air India.

While many aviation veterans see a turnaround of Air India in the hands of Tata group, some question the wisdom of acquiring the airline.

"There are known issues, known liabilities, union problems, all of that. Then there are unknowns. You don't know who will pursue what claim against Air India," said an aviation veteran who was at the helm of a private airline earlier.

Rajan Mehra, however, sees the Tata-Air India deal as a game changer.

"It will be a shot in the arm for the aviation industry because an airline like Air India in the professional hands of Tatas can really boost the sector," he said.

Asked why neither of the two Tata airline ventures -- Vistara and Air Asia India was able to make profit since their inception, Mehra said, "There will always be ups and downs. Aviation is a different sort of business. If you look around the world, not every airline will be making huge profits. It's a passion game. It's something away from the normal profit and loss. Tatas are very passionate about aviation."

As per Books of Account of Air India for the period 2020-21 (provisional), the net block of fixed assets after reducing the accumulated depreciation is Rs 40,078.11 crore. This includes Rs 17,871.93 crore on account of right of use assets (leased aircraft fleet/land).

The value of immovable assets in the balance sheet of Air India as on March 31, 2019 was Rs 7,988 crore. The value of the movable assets including aircraft, engines, plant and equipment among others stood at Rs 24,347.02 crore, the then Aviation Minister Hardeep Singh Puri had told Rajya Sabha in a written reply.

Under the NDA government led by Prime Minister Narendra Modi this was the second attempt to sell the national carrier. In the previous term, the disinvestment bid proved to be a damp squib with no private entity submitting Expression of Interest (EoI).

As the transaction advisor for the sale of Air India cited the government retaining 24 per cent stake in the airline as one of the reasons for receiving no bids, it was decided to sell the airline lock, stock and barrel this time.

The other reasons listed out by transaction advisor EY for no-show were high amount of allocated debt for the prospective acquirer, changes in macro environment, individuals not being allowed to bid, profitability track record and bidders not being able to form a consortium within a given time period.

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