Life Comes Full Circle for Air India; Tatas get Control after 68 Years
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Life has come a full circle for Air India. Tatas, which had started the airline in 1932, has once again got control of it after 68 years. The airline was taken over by the Government of India in 1953. A cabinet committee chaired by Amit Shah has decided to sell Air India to Tatas for Rs.18,000 crore. The transaction is expected to be completed by December this year.
Tata Group chairman emeritus Ratan Tata expressed pleasure on the deal saying, “Welcome back, Air India.”
Terming the deal a “great news”, Tata said: “While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group’s presence in the aviation Industry.”
“On an emotional note, Air India, under the leadership of Mr. 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 it enjoyed in earlier years. Mr. JRD Tata would have been overjoyed if he was in our midst today,” Ratan Tata said in a twitter post.
While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group’s presence in the aviation Industry
Ratan Tata, chairman emeritus, Tata Group
Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932. Back then it was called Tata Airlines. In 1946, the aviation division of Tata Sons was listed as Air India. In 1948, Air India International was launched with flights to Europe. It was the first public-private partnership initiative in India. In Air India International, Tatas held 25 per cent stake, the Government of India 49 per cent and the rest 26 per cent stake were controlled by public. However, in 1953, Air India was nationalised with the Government of India getting full control of the airline.
Talace Pvt Ltd, a wholly owned subsidiary of Tata Sons Pvt. Ltd, will acquire 100 per cent equity shareholding of Government of India in Air India along with equity shareholding of Air India in AIXL and Air India SATS Airport Services Private Limited (AISATS). The winning bid is for Rs.18,000 crore as Enterprise Value (EV) consideration for AI (100 per cent shares of AI along with AI’s shareholding in AIXL and AISATS).
In 1948, Air India International was launched with flights to Europe. It was the first public-private partnership initiative in India. In Air India International, Tatas held 25 per cent stake, the Government of India 49 per cent and the rest 26 per cent stake were controlled by public. However, in 1953, Air India was nationalised with the Government of India getting full control of the airline.
The transaction does not include non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to GoI’s Air India Asset Holding Limited (AIAHL).
With the acquisition of Air India, Tata Group adds a third airline brand to its stable. Tata Group already holds majority stake in AirAsia India and Vistara.
The process for disinvestment of Air India and its subsidiaries commenced in June 2017 with the ‘in-principle’ approval of Cabinet Committee on Economic Affairs (CCEA). The first round did not elicit any Expression of Interest. The process re-commenced on 27 January 2020 with issue of Preliminary Information Memorandum (PIM) and request for Expressions of Interest (EOI). The original construct as per the January 2020 PIM envisaged (i) pre-determined, fixed amount of debt to be retained in AI (with balance to be transferred to Air India Asset Holding Limited (AIAHL) and (ii) the sum of certain identified current and non-current liabilities (other than debt) to be retained in AI and AIXL would be equal to the sum of certain identified current and non-current assets of AI and AIXL (excess liabilities to be transferred to AIAHL).
There were only two bidder for the airline. Tata Sons subsidiary Talace Pvt Ltd made a bid for Rs.18,000 crore. A consortium led by SpiceJet chairman Ajay Singh made a bid for Rs.15,100 crore. Both the bids were above the reserve price of Rs.12,906 crore.
There were only two bidder for the airline. Tata Sons’ subsidiary Talace Pvt Ltd made a bid for Rs.18,000 crore. A consortium led by SpiceJet chairman Ajay Singh made a bid for Rs.15,100 crore. Both the bids were above the reserve price of Rs.12,906 crore.
“The entire disinvestment process has been carried out in a transparent manner, with due regard to confidentiality of the bidders, through multi-layered decision making involving Inter-Ministerial Group (IMG), Core Group of Secretaries on Disinvestment (CGD) and the empowered Air India Specific Alternative Mechanism (AISAM) at the apex Ministerial level. Transaction Adviser, Legal Adviser, Asset Valuer, professionals in their respective fields, have supported the entire process,” according to an statement released by the Union Ministry of Finance.
“The next step will be to issue the Letter of Intent (LoI) and then sign the Share Purchase Agreement following which, the conditions precedent would need to be satisfied by the successful bidder, the company and Government. It is expected that the transaction will be completed by December 2021,” it added.
