AI returns to it after 68 yrs as Tatas win bid for Rs 18,000 cr
After a gap of 68 years, debt-laden national carrier Air India returned to its founder Tata Sons, ending a decades-long move for its divestment.
The Centre on Friday announced that Tata Sons has emerged as the winner in the Air India bidding with an offer of Rs 18,000 crore for acquiring 100 per cent shareholding. The Government has assured that there will be no sacking of the employees for a year.
“A Special Purpose Vehicles of Tata Sons — the holding company of conglomerate Talace Pvt Limited — has emerged as a successful bidder,” Tuhin Kanta Pandey, Secretary to the Department of Investment and Public Asset Management (DIPAM), said.
Minutes after the winning bid for Air India was announced, Tata Sons chairman Emeritus Ratan Tata tweeted, “Welcome Back, Air India.”
“The Tata Group winning the bid for Air India is great news. While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group in the aviation industry,” Ratan Tata said.
Along with the assets, the new owner will also take on around Rs 15,300 crore of debt. The remaining Rs 2,700 crore will be paid to the Government in cash. This was higher than SpiceJet CMD Ajay Singh-led consortia’s enterprise value (EV) bid at Rs 15,100 crore with debt to be retained at Rs 12,835 crore and a cash component of Rs 2,265 crore.
For Tata Group, Air India adds a third airline brand to its stable, considering the conglomerate already holds a majority interest in AirAsia India and Vistara. Three airlines are likely to be integrated first.
The DIPAM Secretary said as on August 31, 2021, Air India has a total debt of Rs 61,562 crore, out of that Rs 15,300 will be taken over by the bidder. So, Rs 46,262 crore will be transferred to Air India Assets Holding Limited (AIAHL), he added. AIAHL is a SPV formed by the Government. The transaction is expected to close by the end of December 2021, he said.
On an emotional and nostalgic note, Ratan Tata said Air India under the leadership of JRD Tata had at one time gained the reputation of being one of the most prestigious airlines in the world.
“Tatas will have the opportunity of regaining the image and reputation enjoyed in earlier years. JRD Tata would have been overjoyed if he was in our midst today,” he said.
Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932. It was called Tata Airlines then. In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe. In 1953, Air India was nationalised. Tata also thanked the Central Government for its recent policy of opening up select industries to the private sector.
Pandey said they received two financial bids on September 15. The panel of Ministers cleared the winning bid. Tata is the winning bid. He further said the process of Air India sale began in July 2017 and the government has received seven expressions of interest by December 2020. The DIPAM secretary said. Both bidders had quoted above the reserve price.
The DIPAM secretary said a group of Ministers comprising Union Home Minister Amit Shah, Union Finance Minister Nirmala Sitharaman, union commerce minister Piyush Goyal and Union civil aviation minister Jyotiraditya Scindia has cleared the winning bid for Air India on October 4. The Government will divest its 100 per cent stake in Air India, Air India Express and 50 percent stake in ground handling company AISATS.
Civil Aviation Secretary Rajiv Bansal said the winning bidder will not retrench any employee for a minimum period of one year and if retrenched after a year, they will have to be offered VRS (voluntary retirement scheme).
Gratuity and Provident Fund (PF) benefits will be provided to all employees, he added. Bansal also mentioned, “As of today, there are 12,085 employees in Air India out of which 8,084 are permanent and 4,001 are contractual. Besides this, Air India Express has employee strength of 1,434.”
SpiceJet CMD Ajay Singh on Friday said the Government ran a transparent and flexible process to sell Air India, and it was an honor and privilege to participate in the national carrier’s bidding.
Air India still controls more than 4,400 domestic and 1,800 international landing and parking slots at domestic airports and 900 slots overseas.
Four bidders entered the race, with the Tatas and Ajay Singh the only ones to make it to the final stages.