The Cabinet Committee on Economic Affairs  (CCEA) – empowered Air India Specific Alternative Mechanism (AISAM) comprising of Union Minister for Home Affairs and Cooperation Shri Amit Shah; Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman; Union Minister for Commerce and Industry Shri Piyush Goyal and Union Civil Aviation Minister Shri Jyotiraditya Scindia approved the highest price bid of M/s Talace Pvt Ltd, a wholly owned subsidiary of M/s Tata Sons Pvt. Ltd for sale of 100% equity shareholding of Government of India in Air India along with equity shareholding of Air India in AIXL and AISATS. The winning bid is for Rs 18,000 crore as Enterprise Value (EV) consideration for AI (100% shares of AI along with AI’s shareholding in AIXL and AISATS).  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).

The process for disinvestment of Air India and its subsidiaries commenced in June 2017 with the ‘in-principle’ approval of 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).

The timelines had to be extended on account of the situation arising from the COVID-19 pandemic. In view of the excessive debt and other liabilities of Air India arising out of huge accumulated losses, the bidding construct was revised in October 2020 to Enterprise Value (EV) to allow prospective bidders an opportunity to resize the balance sheet and increase chances of receiving bids and competition. The EV construct allowed the bidders to bid on the total consideration for equity and debt instead of a pre-determined, fixed debt with minimum cash consideration of 15% for equity. As per both the original and revised construct, all non-core assets (land, buildings, etc.) are to be transferred to AIAHL and are therefore not a part of the transaction. It has been ensured that the interest of the employees and retired employees would be taken care of.

The transaction saw keen competition with seven EOIs being received in December, 2020. Five of the bidders, however, had to be disqualified as they could not meet the requirements set out in the PIM/EOI, even after allowing them an opportunity for clarification. The Request for Proposal (RFP) and draft Share Purchase Agreement (SPA) was issued on 30 March, 2021. Air India provided comprehensive information through the Virtual Data Room to the qualified bidders who were also provided access to inspect the assets and facilities being offered as a part of the transaction. A large number of queries from bidders were responded to. On request of bidders, the bid due date was extended to 15 September, 2021 so that they could complete their due diligence before submission of bid. The final SPA containing detailed terms and conditions and the respective responsibilities to meet the conditions precedent for closing the transaction including release of Government guarantees prior to closing was agreed upon prior to bid submission. Two sealed bids were received on the due date along with non-financial bid documents and bid security from the two qualified bidders.

In line with the approved procedure for strategic disinvestment, a reserve price was fixed after the receipt of sealed financial bids for the transaction, based on valuation using methodologies as per the established process. After the independent fixation of Reserve Price, the already received sealed financial bids were opened in the presence of the bidders, who were as follows:

    1. M/s Talace Pvt Ltd, a wholly owned subsidiary of M/s Tata Sons Pvt Ltd for an EV of Rs 18,000 crore
    2. Consortium led by Sh Ajay Singh for an EV of 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.

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.

Tata Group to Acquire100% Stake in Air India

Wins competitive bid for acquiring entire company including wholly-owned subsidiary Air India Express and 50% stake in Air India SATS.

Tata group has emerged as the successful bidder of the divestment process of the national carrier Air India. The Tata group’s holding company, Tata Sons through its wholly-owned subsidiary Talace Pvt Ltd submitted a winning bid of Rs 18,000 Crore as the Enterprise Value of Air India.

Consequent to the acquisition, the Tatas will own a 100% stake in Air India (a full-service airline operating in domestic and international markets) as also 100% in its subsidiary Air India Express (a low-cost carrier airline that focusses on short-haul international operations especially in the Middle East market) and 50% in the joint venture Air India SATS (airport services on ground and cargo handling). The total permanent and contractual employee strength of Air India & AIXL is 13,500.

Commenting on the development, N. Chandrasekaran, Chairman, Tata Sons Pvt Ltd said, “At the Tata group, we are delighted to be declared as the winner of the bid for AIR INDIA. This is a historic moment, and it will be a rare privilege for our group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline that makes every Indian proud. On this occasion, I would like to pay tribute to JRD Tata, pioneer of Indian aviation, whose memory we cherish.”  

The Tatas will get ownership of iconic brands like Air India, Indian Airlines & the Maharajah. Air India has a fleet of 117 wide-body and narrow-body aircraft and AIXL has a fleet of 24 narrow-body aircraft. A significant number of these aircraft are owned by Air India.

Air India provides a unique and attractive international footprint. More than 2/3rd of Air India’s consolidated revenues come from the international market. It is the number one player from India in the international market having a strong footprint across geographies like North America, Europe, and the Middle East with attractive slots & bilateral rights. The Air India frequent flyer program has more than 3 million members.

About Talace Private Limited

Talace Pvt Ltd is a wholly-owned subsidiary of Tata Sons Pvt Ltd.

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