Tata Sons wins bid for Air India

According to official sources, Tata Sons has won the final bid for national airline Air India. On September 15, the salt-to-software conglomerate filed the last proposal for the airline and emerged as the favourite to purchase it.

While SpiceJet founder Ajay Singh had also made a bid for the airline, government sources said Tata Sons made a better offer. According to sources, a ministerial panel chaired by Union Home Minister Amit Shah accepted Tata Sons’ proposal.

The news comes just one day after a report claimed that the government had finalised the airline’s minimum reserve price. Based on future cash flow projections, brand value, and slots in foreign airports, the government has set a minimum reserve price for the national airline. According to sources, Tata Sons filed a proposal that was Rs 3,000 crore higher than the government committee’s minimum reserve price. 

All requirements for the Air India disinvestment process would be completed by December 2021, according to top Ministry of Civil Aviation sources.

According to previous reports, Tata Sons emerged as the frontrunner to buy Air India after submitting a stronger proposal for the debt-ridden carrier. Former Air India director Jitendra Bhargava recently told Bloomberg TV that the Tatas will be given the green light by the government since they have the financial resources to overhaul the national airline.

“Tatas has always been quite enthusiastic about Air India,” Bhargava added.

FUTURE PLANS

While the details of Tatas’ proposal are still being worked out, it is thought to contain an indemnification clause to protect the company from any future lawsuits.

Over 200 Tata Group employees were involved in the transaction, including M&A experts from Vistara, AirAsia India, Tata Steel, and Indian Hotels. It should be emphasised that if the Tatas win the bid for Air India, they want to combine all of their airline operations into one organisation.

Three teams from AirAsia India, TCS, and other external experts have previously performed significant due diligence on behalf of the Tatas. In order to engage in the Air India acquisition process, the group has created a new business, Talace Private Limited. It’s worth noting that the national carrier’s proposal was sought at enterprise value rather than equity value. This is due to a change in the government’s bidding parameters for Air India.

Following the acquisition, the Tata company will be required to invest a significant sum of money to assist the airline recover from its financial difficulties.

Due to the Covid-19 epidemic, Air India’s overall debt has increased considerably over the last two years and presently stands at over Rs 40,000 crore. The government, on the other side, intends to give over the airline to the Tatas with a debt of Rs 23,000 crore.

GOVERNMENT ISSUES CLARIFICATION

The secretary of the Department of Investment and Public Asset Management (DIPAM) stated no financial bid has been authorised yet, only hours after government sources reported Air India’s bid for acquisition has been approved.

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