Air India has gone back to the Tata Group, nearly 90 years after it was founded by JRD Tata in 1932. The airline, which sowed the seeds of aviation in India, has been sold by the government for Rs 18,000 crore to the Tata Group after incurring losses consecutively over the years at the expense of taxpayers’ money.
The Tata group has won the government's 100 percent stake in Air India and Air India Express as well as a complete 51 percent stake in AI SATS by quoting an enterprise value of Rs 18,000 crore out of which Rs 15,300 crore is for debt to be retained and Rs 2,700 crore is for cash consideration.
While there were seven bids in the preliminary stage, five of those expressions of interest were disqualified as they did not meet the PIM (preliminary information memorandum) requirement of the bidder’s minimum net worth of Rs 3,500 crore.
Hence, two bidders qualified for the financial bidding stage - Tata Group and a consortium led by SpiceJet CMD Ajay Singh. Singh submitted a bid in his personal capacity along with Amadeus and two high net-worth Indians.
The consortium led by Ajay Singh had submitted an enterprise value of Rs 15,100 crore, out of which Rs 12, 835 crore was for debt servicing and Rs 2,265 crore was to be given to the government in cash. The Tata group submitted the bid under Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons.
The government said it negotiated all terms and conditions of the share purchase agreement with the two bidders ahead of receiving financial bids and the reserve price or the minimum enterprise value for Air India was set before opening sealed financial bids on September 29.
The government set the reserve price for Air India at Rs 12,906 crore and after that, the ministerial panel led by Home Minister Amit Shah approved the highest bid placed by Talace Pvt Ltd, a wholly-owned subsidiary of Tata sons, on October 4.
The government aims to completely hand over Air India to the Tata Group by December.
The combined debt of Air India and Air India Express as of August 2021 stood at Rs 61,562 crore, DIPAM secretary Tuhin Kanta Pandey said. This is after the transfer of debt amounting to Rs 29,464 crore to Air India special purpose vehicle Air India Asset holding company, which was approved by the union cabinet in February 2019.
As per the winning bid, the Tatas will service debt amounting to Rs 15,300 crore. In addition, the government has estimated that it will receive Rs 14,718 crore from the sale of non-core assets of Air India which primarily includes real estate- land, buildings etc.
Hence, if we subtract Rs 15,300 crore and Rs 14,718 crore from the total debt of Rs 61,562 crore, we arrive at a debt figure of Rs 31,544 crore. So, along with the earlier debt of Rs 29,464 crore and Rs 31,544 crore, the total debt which the government has to retain is Rs 61,008 crore.
The government is currently selling Air India and Air India Express with a total of 141 aircraft, out of which 24 are of Air India Express.
The Tata Group currently owns two airlines in India - 51 percent stake in full service carrier Vistara in partnership with Singapore Airlines, and 84 percent in AirAsia India. Vistara currently has 48 aircraft and AirAsia India has 34 aircraft in its fleet.
The government has clarified that the Tata Group will be mandated to have at least a 51 percent equity stake in Air India for at least one year and ensure business continuity for at least three years. The share purchase agreement also allows Tata Group to implement mergers among airlines as it takes control, provided that it maintains at least a 51 percent stake in Air India. This means that if Tatas were to combine Vistara and Air India, they may do that provided that they maintain at least 51 percent equity control and adhere to substantial ownership and effective control norms of FDI.
Air India currently has over 12,000 employees, out of these more than 8,000 are permanent and over 4,000 are contractual. Air India Express has 1,434 employees. On average, around 1,000 Air India employees are retiring every year.
The government has clarified that the Tata group will be mandated to retain all permanent employees for a minimum period of one year. Post that, employees can be offered voluntary retirement. The government also said the employees will be given gratuity, provident fund benefits and post-retirement medical benefits of employees will be protected by the government. Currently, the total count of retired Air India employees and their spouses is around 55,000.
BRAND AND LOGO
The government has also clarified that the Tata Group cannot transfer the eight brands that Air India currently have and the Maharaja logo for at least five years. If the Tatas were to transfer the brand or logo after five years, then they can transfer these only to a legally Indian person or group.