Tatas bid 39% more than floor price
Tata Sons won the country’s flagship carrier Air India (AI) for ₹18,000 crore after bidding 39% higher than the reserve price and surpassing the offer of SpiceJet promoter Ajay Singh-led consortium by little more than 19%, the government announced on Friday, putting an end to a five-year struggle to privatise the debt-laden airline.
The transaction is expected to be completed by December this year as the share-purchase agreement (SPA) was already agreed between the government and the bidder, disinvestment secretary Tuhin Kanta Pandey said.
The financial bid, submitted on September 15, was opened in presence of bidders on September 29 and after due process, an empowered ministerial panel -Air India Specific Alternative Mechanism (AISAM) – on October 4 (Monday) approved the highest price bid of Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons, for the sale of government’s 100% equity shares in AI, Pandey said.
AISAM is headed by home minister Amit Shah, with finance minister Nirmala Sitharaman, commerce minister Piyush Goyal and civil aviation minister Jyotiraditya Scindia as its members.
In line with the approved procedure for strategic disinvestment, a reserve price was fixed after the receipt of sealed financial bids for the transaction, based on valuation using methodologies as per the established process, Pandey said.
After the reserve price was fixed, the sealed financial bids were opened in the presence of the bidders. Talace Pvt Ltd quoted an enterprise value of ₹18,000 crore, while a consortium led by Ajay Singh quoted an EV of ₹15,100 crore, he said. The reserve price was ₹12,906 crore.
“The transaction does not include non-core assets including land and building, valued at ₹14,718 crore, which are to be transferred to governmentowned special purpose vehicle (SPV) Air India Asset Holding Ltd (AIAHL), he said.
According to Pandey, the successful bidder (Tatas) will take over debt worth ₹15,300 crore and the rest, ₹46,262 crore, will go to government-owned SPV, AIAHL. This remaining debt will have a sovereign guarantee.
Consequent to the acquisition, the Tatas will own 100% stake in Air India as well as its subsidiary Air India Express Ltd (AIXL), and 50% in the joint venture Air India SATS Airport Services Pvt Ltd (AISATS), a Tata Group statement said.
“This is a historic moment, and it will be a rare privilege for our Group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline that makes every Indian proud. On this occasion, I would like to pay tribute to JRD Tata, pioneer of Indian aviation, whose memory we cherish,” Tata Sons chairman N Chandrasekaran said.
Through this acquisition, the Tatas will get ownership of iconic brands like Air India, Indian Airlines and the Maharajah, the company said. Air India has a fleet of 117 wide-body and narrow-body aircrafts and AIXL has a fleet of 24 narrow-body aircrafts. Air India also has a frequent flyer program with more than 3 million members.
According to the government, AI is one of the most extensive flight service providers in India with network coverage of 98 destinations (56 domestic destinations with around 2,712 departures per week and 42 international destinations with around 450 departures per week) as of November 1, 2019.
AI offers 75 additional destinations through its secondary network of codeshare operations covered under 25 agreements with foreign carriers. During FY2019, AI carried around 22.1 million passengers.