Thu. May 26th, 2022

NEW DELHI / MUMBAI: It’s a lost and found story unparalleled in business folklore. A 153-year-old conglomerate recovers an airline after 68 years and several governments and traces a policy arc from nationalization to disinvestment to privatization. It is also a homecoming that has been two decades in the making, with Tatas first making an unsuccessful bid to buy, and the then government then making an unsuccessful bid to sell its stake. The Tatars finally succeeded for the third time, marking the first successful privatization of a government in almost 17 years.
Tata Sons-which offered through its wholly owned subsidiary Talace Pvt Ltd-listed a company value of 18,000 cr. To the bleeding national carrier. This includes the $ 15,300 debt it will take over and the $ 2,700 cash that will flow into the treasury. The rest of AI’s debt of 61,562 crore (at the end of August) will be borne by the government.

Tata’s offer was almost 40% higher than the reserve price of Rs 12,906 crore set by the government and 19% more than what a competing bidder, a consortium led by Spicejet CMD Ajay Singh, had offered. Seven bidders had initially shown their interest by 14 December 2020, but five were disqualified as they did not meet the requirements set by the government. One of the disqualified bidders had appealed to the Delhi High Court but its plea was rejected in August this year.

The Tata group that wins the bid for Air India is good news! While it will require considerable effort to rebuild Air India, it will hopefully give the Tata Group’s presence in the aviation industry a very strong market opportunity … Welcome back, Air India! Tata Son’s chairman, emeritus Ratan Tata, said in a note posted on his Twitter handle. Aviation is widely regarded as a passion for him — he has a pilot license — and while the Tata group re-entered the industry via Vistara (in partnership with Singapore Airlines) and AirAsia, it is AI’s return to the fold that has been a long-cherished dream. .
During the period of Atal Bihari Vajpayee, the Tata group had taken a hand in Singapore Airlines to offer a 40% stake in Air India, which at the time was the national airline flying only abroad. Adding Air India to the hangar will make it the largest player from the country on international routes, while it will be the second largest player in the domestic sector, after IndiGo.
“Air India provides a unique and attractive international footprint,” Tata Sons said in a statement, adding that more than two-thirds of AI’s revenue comes from international markets such as North America, Europe and West Asia. The airline’s frequent flyer program has more than three million members.
The Salt-to-Software conglomerate was seen as the frontrunner when the government restarted the sales process after another failed attempt in 2018. The transaction marks a return to an aggressive privatization plan demanded by the Modi administration, which has made it clear that the government should leave non-strategic companies. It has taken seven years to complete a major privatization of a state-run entity.
The government seeks to spend the money spent on keeping the national carrier afloat for social welfare schemes. Air India had accumulated losses of almost Rs 84,000 crore and the government took a daily hit of Rs 20 crore.
“If you have year after year after year of losses, all these losses have actually been financed, part of the equity, which was a small part, and largely through the government-guaranteed debt … The taxpayers have actually introduced Rs 1,10,276 crore in Air India since 2009-10, ”DIPAM Secretary Tuhin Kanta Pandey said at a news conference, adding that the transaction would be completed by the end of December.
The sale came with the assurance that none of the 13,500 employees at Air India and Air India Express will be removed by the new owner during the first year. After that, the 8,084 permanent AI employees can be offered a voluntary pension scheme, said Civil Aviation Secretary Rajiv Bansal at the press conference.
The terms of the transaction allow Tatas to sell up to 49% of Air India after one year, even though they may reorganize the airline during the first year itself. The Tata group will also sign a three-year business continuity plan.
While the brand and eight logos will also be transferred to Tatas, they come with a five-year lock-in and the new owner cannot sell them to a foreign entity.
“Air India’s return to @TataCompanies marks a new dawn for the airline! My best wishes to the new management, and congratulations to @SecyDIPAM & @MoCA_GoI for a successful completion of the difficult task of constructing a new runway for the airline to take off! I hope the airline will continue to deliver on its mission to bring people closer through its successful operations, ”tweeted Civil Aviation Minister Jyotiraditya Scindia.

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