Govt Approved Air India Disinvestment; Tata Sons Won the Bid for Acquiring Air India for Rs 18,000 Crore

Tata Sons Private Ltd subsidiary Talace Pvt Ltd has won the final bid for acquiring the national carrier Air India by submitting Rs 18,000 crore bid. The Cabinet Committee on Economic Affairs  (CCEA) – empowered Air India Specific Alternative Mechanism (AISAM) approved the highest price bid of Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons Pvt. Ltd.

• The bid involves sale of 100 percent stake AI (the shareholding of Government of India), 100 percent stake in AI’s subsidiary Air India Express (AIXL) and 50 percent in the joint venture Air India SATS (Air India SATS Airport Services Private Limited).
• The total permanent and contractual employee strength of Air India & AIXL is 13,500.
• The winning bid of Rs 18,000 crore as Enterprise Value (EV) 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).

Disinvestment of AI Background:

i.2000-01: As part of its broader privatisation and disinvestment plan in 2000-01, the GoI tried to sell a minority stake (40 percent) in AI, but it didn’t execute due to opposition.

ii.2012: In order to mitigate the losses incurred by the airline, a turnaround plan (TAP) and financial restructuring plan (FRP) were approved for AI in 2012.

iii.2017: Through the ‘in-principle’ approval of CCEA, the process for disinvestment of AI and its subsidiaries started  in June 2017 but it didn’t obtain any Expression of Interest (EOI) for buying the 100 percent of AI stake and 50 percent of stake in ground handling arm AISATS.

iv.2020: The process of disinvestment again started on 27 January 2020 with issue of Preliminary Information Memorandum (PIM) and request for EOI.

v.2021: The Request for Proposal (RFP) and draft Share Purchase Agreement (SPA) was issued on 30 March, 2021 and the Government started inviting financial bids for Air India and fixed September 2021 as the deadline, in which Tatas and SpiceJet promoter Ajay Singh also made the bid.

• The reserve price was fixed at Rs 12,906 crore.

Key Points:

i.The financial bids were of – Talace Pvt Ltd, for an EV of Rs 18,000 crore; SpiceJet promoter Ajay Singh, for an EV of Rs 15,100 crore.

ii.The process of disinvestment was carried 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.

iii.The further process of disinvestment will be of Letter of Intent (LoI) and then sign the Share Purchase Agreement;  the transaction is expected to be completed by December 2021.

iv.The AISAM comprises Union Minister for Home Affairs and Cooperation Amit Shah; Union Minister for Finance & Corporate Affairs Nirmala Sitharaman; Union Minister for Commerce and Industry Piyush Goyal and Union Civil Aviation Minister Jyotiraditya Scindia.

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About Tata Sons Private Ltd:

Headquarters – Mumbai, Maharashtra

Executive Chairman – N Chandrasekaran