Tata Sons has won the bid for the beleaguered state-owned airline Air India. The conglomerate will acquire Air India, Air India Express and 50 percent of Air India-Sats for ₹18,000 crore. This sale does not include non-core assets like land and building. However, Tata Sons will get 127 aircrafts owned by Air India.
It is important to note here that the government has been pushed to sell the Maharaja because of losses piling up. In March 2021, the civil aviation ministry had said that the government faces a choice between divestment and closing down of the airline.
How it led to disinvestment
Back in 1932, Air India was founded by the Tata Group under the leadership of J.R.D Tata. After several years of domestic and international operations, the airline was nationalised by the government in 1953, under the Air Corporation Act. In 2007, Air India was merged with Indian Airlines.
But with the sector facing intense competition and pricing pressure, Air India’s woes have been mounting for some time now. In 2013, the then-civil aviation minister said that privatisation was the key to Air India’s survival. Since then, the journey of Air India has been full of twists and turns.
On June 28 2017, the government approved its privatisation. For a long while, the government spoke about the disinvestment of the debt-ridden Air India, but the plans kept getting postponed due to multiple reasons. However, in July 2019, the government said it will re-initiate the plan to divest Air India. The airline had reportedly incurred a net loss of around ₹10,000 crore in FY21, up from a ₹8,000 crore loss in the previous financial year. In February 2021, the civil aviation ministry informed the Rajya Sabha that the total debt of the national carrier as per provisional figures of 2019-20 stood at ₹38,366 crore.
The bidding process
Almost after twelve months of its first announcement, the divestment process of the airline finally took off on December 14, 2020 when the interested parties put in their Expressions of Interest (EoIs). For the bid, the calculation of enterprise value was made by including both long-term and short-term debt along with the cash and cash equivalent of the company.
During her budget speech in February 2021, finance minister Nirmala Sitharaman said that all the proposed privatisation processes would be completed by the end of this financial year, including the much-delayed strategic disinvestment of Air India.
The selection of a few interested parties, including the Tatas, was made for the bidding round.
Final results
In April 2021, the government asked potential bidders to place their final bids by September 15. Tata Sons and Spicejet’s promoter Ajay Singh (in his personal capacity) were the two competitors, bidding for Air India. Last week, the government evaluated financial bids received from Tata Group and SpiceJet founder Ajay Singh on various parameters. Following which , it has emerged that Tata sons had won the bid by almost ₹3,000 crore.
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