Talace Private Limited, a wholly owned subsidiary of Tata Sons, has won the bid for Air India, the government announced on Friday; stating that the company bid ₹18,000 crores. This amount was ₹2,900 crores more than the runner-up: a consortium led by SpiceJet's promoter Ajay Singh. The bid includes a debt retention of ₹15,300 crores and a cash component of ₹2,700 crores.
The sale does not include non-core assets, and a large portion of Air India's debt. which will be hived off to a government-held special purpose vehicle: Air India Assets Holding Limited (AIAHL). "It (assets being retained by AIAHL) includes Nariman Point, Air India's headquarters, some other buildings; there are subsidiaries where Air India has investments, these will be hived off", said Tuhin Kant Pandey, Secretary of Department and Public Assets of the Ministry of Finance, on the non-core assets that will be retained by the government.
An SPV is a body or corporation set up to achieve a particular purpose, and is commonly used to isolate risk.
"Just to make it clear, debt of ₹46,262 crore will be the debt taken over to AIAHL. ₹14,718 crores are the assets which will be taken over by AIAHL, and 2,700 crores cash, equity. So net impact will be ₹28,845 crores", said Pandey on the arithmetic behind the assets and liabilities of the airline being retained by the government.
The transaction will be completed by December this year.
This brings the ownership of Air India full circle after 68 years, as the group initially operated the airline till the Indian government nationalised it in 1953.
Ratan Tata, the Chairman Emeritus of Tata Sons has welcomed this development of Air India coming back into its fold.
The announcement by the government follows a high-level meet of the Air India Specific Alternative Mechanism formed in 2020 that comprises of the Union Minister of Home Affairs (Amit Shah), Commerce and Industry (Piyush Goyal), Finance and Corporate Affairs (Nirmala Sitharaman) and Civil Aviation (Jyotiraditya Scindia), which approved of the price bid on October 4. Before that, the bids for Air India were opened on September 29.
Air India has become the third airline in India to be associated with the Tata Group in India. The conglomerate already operates Vistara in association with Singapore Airlines and Air Asia in India.
This announcement fulfils an objective of the government to finish the privatisation process of the loss-making airline, which they had repeatedly said would be completed by financial year 2022. In financial year 2020 (FY20), the airline made a loss of near ₹7,700 crores as compared to a loss of ₹8,470 crores in the previous year.
In fact, the airline has suffered a loss every year since its merger with Indian Airlines in 2007 - 2008.
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History of Air India
JRD Tata, India's first holder of a commercial pilot license, started an airline called Tata Airlines in 1932.
In 1946, the company becomes public, and was known as Air India. The international arm of the airline, called Air India International, was launched in 1948, with flights to Europe.
According to a blog by the Tatas, this was the first joint enterprise between a public and private enterprise in the country, as the government owned a 49% stake, the Tatas a 25% stake and the rest was held publicly.
In 1953, the airline was nationalised as a single state entity. JRD Tata served as the chairman of a nationalised Air India and on the board of Indian Airlines for the next 25 years.
During his term as Chairman of the Tata Group in the 1990s, Ratan Tata once again made a bid to take over Air India. The Tata group in alliance with Singapore Airlines offered to buy Air India but the deal couldn't go through, a move reported to have been foiled by rivals in the aviation sector.
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