Logistics

SpiceJet’s Ajay Singh taps SBI to mount Air India bid

Forum Gandhi Mumbai | Updated on September 13, 2021

May pledge shares, personal property as security for guarantee

With just three days left to place a final bid, Ajay Singh — promoter of cash-strapped SpiceJet — has approached State Bank of India to get a bank guarantee for his potential bid for Air India.

Singh is making the bid in his personal capacity.

The Tata group is the other entity which has confirmed bid for the debt-laden national carrier.

A banking source told BusinessLine that Singh has approached the Delhi branch of the State Bank of India to get a bank guarantee for which he is likely to pledge shares or his personal property as security.

Both Singh and SBI did not respond to BusinessLine’s query.

While there is no clarity on the amount that Singh may quote for Air India, BusinessLine has been told that he is likely to place a firm bid on September 15, the last day for submitting a firm offer.

Singh has already submitted the Expression of Interest for Air India.

$1-billion war chest

According to recent reports, Singh had set aside a $1-billion warchest for the bid, which is set to be made through a special purpose vehicle (SPV). The SPV is likely to see investments from two US-based funds.

Singh will reportedly hold a minimum 26 per cent shareholding in the SPV, while the US funds are likely to contribute around $700 million.

The reports had also stated that Singh had decided to hive off SpiceJet’s cargo business to raise $300 million for his personal contribution.

On the other hand, BusinessLine had recently reported, citing court documents submitted by SpiceJet, that Singh was unable to fund the company in his personal capacity at this point in time.

The low-cost carrier had to approach its existing lenders to further lend approximately ₹570 crore along with bank guarantees to pay off its dues to the Indian fuel companies.

AI valuation, assets

Air India has over ₹40,000-crore debt; the government had decided to divest the company’s assets last year. Expressions of interest came in by the end of 2020.

BusinessLine had reported that Ernst & Young was commissioned as the transaction advisor for the divestment.

According to the presentation made by EY to the Department of Investment and Public Asset Management, four of the six AI subsidiaries were not likely to be included in the valuation exercise. But the minority stakes held by the airline in Cochin International Airport and French telecom company Orange S.A. are likely to be included to ascertain the business value of the company.

Also included will be Air India Express, the airline’s low-cost subsidiary, and Air India SATS Airport Services Private Ltd, which provides gateway services and cargo handling. The airline’s other assets are likely to be sold off separately to reduce Air India’s debt.

Tata Sons, too, have been doing aggressive due diligence for its bid. It is said to have hired Bain & Company and Seabury Group along with independent experts from Delta Airlines and United Airlines.

Published on September 12, 2021

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