Tata Sons has won the final bid for acquiring national carrier Air India, according to government sources. The salt-to-software conglomerate had submitted the final bid for the airline on September 15 and emerged as the frontrunner to acquire the airline.
While SpiceJet promoter Ajay Singh had also submitted a bid for the airline, government sources have confirmed that Tata Sons submitted a higher offer for acquiring the airline. Sources said a ministerial panel led by Union Home Minister Amit Shah approved the bid submitted by Tata Sons.
The development comes a day after a report indicated that the government finalised the minimum reserve price for the airline. The government had finalised the minimum reserve price for the national carrier, based on future cash flow projection, brand value and slots in foreign airports.
Sources indicated that the bid submitted by Tata Sons was Rs 3,000 crore more than the minimum reserve price set by the government committee.
Top sources from the Ministry of Civil Aviation said all formalities for the Air India disinvestment process will be completed by December 2021.
Many reports had earlier indicated that Tata Sons emerged as the frontrunner to acquire Air India as it submitted a higher bid for the debt-laden airline.
Former Air India director Jitendra Bhargava recently told Bloomberg TV that the Tatas are will get a nod from the government as they have the capability to pour in a large amount of money required to revamp the national carrier.
“Tatas have been very, very passionate about Air India,” Bhargava said.
While the specifics of the bid submitted by Tatas is not yet completely clear, it is believed to include an indemnity clause to prevent any unexpected claims that arise later.
More than 200 Tata Group personnel have been involved in the process, including M&A specialists from units such as Vistara, AirAsia India, Tata Steel and Indian Hotels. It may be noted that the Tatas are planning to merge all their airline business under one entity if it successfully bids for Air India.
The Tatas have already conducted extensive due diligence involving three teams from AirAsia India, TCS and other external consultants. The group has also formed a separate company Talace Private Limited to participate in the Air India acquisition process.
It is worth mentioning that the bid for the national carrier was sought at enterprise value instead of equity value. This is because the government had changed the bidding parameter for Air India.
After the acquisition, the Tata group will have to pump in a substantial amount of money to help the airline recover from its financial woes.
Air India’s total debt surged significantly over the past two years due to the Covid-19 pandemic and stands at over Rs 40,000 crore as of now. However, the government plans to hand over the airline with a debt of Rs 23,000 crore to the Tatas.