Tata Sons, SpiceJet-led consortium place final bid to claim Air India

Issac John /Dubai Filed on September 16, 2021
AFP file photo

The Indian government seeks to sell 100 per cent of its stake in the iconic yet troubled national airline

Tata Sons, India's largest conglomerate holding company, and a consortium led by Spicejet Chairman Ajay Singh placed financial offers for the country's troubled national carrier Air India.

Tata Sons made the offer on Wednesday, the last day to submit bids, through its 100 per cent arm Talace Private Ltd, while Singh reportedly placed the bids in his personal capacity along with some investment funds.

The Tata group, which already has a footprint in the aviation business, has shown keen interest in acquiring the iconic airline founded 88 years ago.

The government is seeking to sell 100 per cent of its stake in the loss-making state-owned airline, including Air India's 100 per cent shareholding in AI Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.

The stake sale process, which began in January 2020, faced delays due to the Covid-19 pandemic. In April 2021, the government asked potential bidders to put in financial bids.

Tuhin Kanta Pandey, secretary of the department running the privatisation process, said in a tweet that the transaction adviser received financial bids for Air India.

"Process now moves to concluding stage," he said without revealing names of the parties. Tata Sons confirmed their participation.

EY is the transaction adviser to the government on Air India's disinvestment. The government will soon set a floor price for the sale of the airline. Whoever quotes the highest bid over the floor price will claim the national carrier.

The financial bids will be evaluated against an undisclosed reserve price, and the bid offering the highest price above that benchmark will be accepted. The transaction advisor will initially examine the bid before the recommendation is sent to the cabinet for approval, industry sources said.

If successful, this will mark the return of Air India to the Tata fold after 67 years.

Air India was founded as a division of Tata Sons Ltd. in 1932 with the legendary industrialist-cum-aviator JRD Tata at the helm. It was operated as Tata Airlines until 1946. After 1946, the airline became a public limited company and was renamed Air India.

In 1953, when New Delhi nationalised Air India, JRD Tata became the airline's chairman, and under his leadership, the carrier thrived until he was removed in 1977 by the government led by Prime Minister Morarji Desai.

After abandoning a previous plan of retaining a minority 24 per cent in Air India, the Indian government has been trying to fully exit the embattled carrier with an accrued debt pile-up of 582.83 billion rupees. However, the move to disinvest 76 per cent received only a lukewarm response and consequently, the deadline for submitting an expression of interest was put off from March 17 to August 31.

Airline sources said bidders would need to absorb Rs232. 86 billion, or almost one-third of the total debt accrued by Air India and its subsidiary Air India Express. The remaining debt will be transferred to Air India Assets Holding Ltd, a special purpose vehicle of the national carrier.

Tatas operate a premier full-service carrier, Vistara, in partnership with Singapore Airlines. It was not immediately known if the group put in the bid on its own or through budget carrier AirAsia India.



Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.

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