Air India back with Tatas; Centre to pay ₹44,678 crore debt

Air India has finally gone back to its original promoters — salt-to-software conglomerate Tata Sons — in a deal worth ₹18,000 crore. This concludes the bidding process for privatisation of the national carrier.

“Finance minister Nirmala Sitharaman had said in her budget speech that the government wants to complete Air India disinvestment in 2021-22. CCEA-led Air India Specific Alternative Mechanism (AISAM) has approved the winning bid,” Department of Investment and Public Asset Management (Dipam) Secretary Tuhin Kanta Pandey said.

“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. 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 government said in a release.

“The winning bid is for ₹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 ₹14,718 crore, which are to be transferred to the government’s Air India Asset Holding Limited (AIAHL),” the release added.

According to the deal, Talace Pvt. Ltd. will retain the debt of ₹15,300 crore, while the cash component for the company will be to the tune of ₹2,700 crore. The trailing bid put in by a consortium led by Spicejet chairman and managing director Ajay Singh had offered an enterprise value of ₹15,100 crore with debt portion of ₹12,835 and cash component of ₹2,265 crore. “A letter of intent will be issued and an SPA will be signed with the successful bidder. The transaction is expected to close by the end of December this year,” Pandey added.

Sharing the details of the debt that will be transferred to AIAHL, Pandey said, “The total debt on the books of both Air India and Air India Express is ₹61,562 crore. Debt worth ₹15,300 crore will be taken over by the winning bidder while the remaining ₹46,262 crore will be transferred to AIAHL. This is government-guaranteed debt. It is a commitment of the government and it cannot be extinguished. Lenders are completely protected in government-guaranteed debt. It is lenders’ money and will have to be repaid."

The total debt impact on the government is to the tune of ₹44,678 crore, taking into consideration the excess liability of ₹15,834 crore as on August 31, 2021.

According to Dipam, the total debt of Air India and Air India Express was to the tune of ₹61,562 crore as on August 31 this year. After deducting the debt taken over by Tata Sons and the equity infused by the conglomerate, the debt impact on the government comes to ₹43,562 crore. The impact gets mitigated once the book value of non-core assets, too, worth ₹14,718 crore are adjusted in the residual debt. After factoring in the monetisation of non-core assets at the book value, the debt impact on the Central government comes to ₹28,844 crore.

However, sources in Dipam told Fortune India that it is the excess liability worth ₹15,834 crore as on August 31 that is jacking up the Centre’s debt liability to ₹44,678 crore (₹28,844 crore + ₹15,834 crore).