Tata group among bidders for debt-laden Air India

The AI sale will be the first incidence of outright privatisation of a state-owned firm in the country after a gap of 17 years.The AI sale will be the first incidence of outright privatisation of a state-owned firm in the country after a gap of 17 years.

Tata Group, seen as the top contender to acquire Air India, has put in a financial bid to buy the debt-laden national carrier, which still has lucrative bilateral rights and parking slots across the world. A Tata Sons spokesperson confirmed the development.

SpiceJet’s chairman Ajay Singh has also reportedly submitted a financial bid for AI, but FE could not independently confirm this.

“Financial bids for Air India disinvestment received by Transaction Adviser (EY India). Process now moves to concluding stage,” department of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey tweeted.

Tata Sons was among the ‘multiple’ suitors that had put in preliminary bids for the loss-making airline in December 2020.

The government is selling its entire 100% stake in AI that has been bleeding ever since its amalgamation with Indian Airlines in 2007. Tata Group already owns about 84% stake in AirAsia India and 51% in Vistara.

Tata Sons has been conducting due diligence of the carrier for the past three months, including scrutinising of its books and employee records. A proposal to bid for the carrier was placed before Tata Sons’ board last year, a source said.

Only the bids of investors who have received security clearance from the ministry of home affairs will be opened soon, official sources said.

The AI sale will be the first incidence of outright privatisation of a state-owned firm in the country after a gap of 17 years.

Having failed to attract substantial interests since 2017, the Centre has this time had sweetened the AI deal by giving potential suitors the flexibility to decide how much of the airline’s debt they would like to take on as part of the deal. Earlier, the buyer was required to take over as much as Rs 23,286 crore of AI’s total debt of over Rs 60,000 crore (as on March 31, 2019); the government was supposed to absorb the rest.

However, the buyer will require to pay 15% of the enterprise value quoted by it in cash. The bids for AI are likely to be under Rs 20,000 crore, of which 15% or up to Rs 3,000 crore could flow in cash to the government.

Besides making huge losses annually, the national carrier has substantial legacy issues for winning bidder with regard to manpower (over 9,600-strong permanent workforce) and social security benefits.

On September 10, the government allowed losses incurred by disinvested PSUs in previous years to carry forward and set off, a move aimed at facilitating AI privatisation.

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