Maharaja heads back home to the Tatas after 68 years

Shishir Sinha New Delhi | Updated on October 08, 2021

Tata SPV Talace places a winning bid of ₹18,000 crore enterprise value, beating ₹15,100-crore offer from Ajay Singh

The Maharaja has come a full circle. Come January, Air India will be piloted by the Tata Group, again after 68 years, with the government deciding to sell the national carrier to Talace Private Limited, a special purpose vehicle of Tata Sons.

Tuhin Kanta Pandey, Secretary, Department of Investment and Public Assest (DIPAM), told the media here today that there were two bidders — Talace and a consortium led by SpiceJet chief Ajay Singh. The government had set the reserve price at ₹12,906 crore. While Tata Sons’ SPV bid ₹18,000 crore enterprise value, the second bid was for ₹15,100 crore.

JRD’s pilot

This signals the end of the process of Air India's sale that began in July 2017, and the start of a new flight path, with the return of the airline to the Tatas. In 1932, Jehangir Ratanji Dadabhoy (JRD) Tata founded the carrier, calling it Tata Airlines.

In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe. The international service was among the first public-private partnerships in India, with the government holding 49 per cent, the Tatas 25 per cent and the public owning the rest.

In 1953, Air India was nationalised, and it kept the national flag flying till declining service quality, an ageing fleet, excess staff, low productivity meant it was no more the preferred airline. All eyes are now back on the airline and the Tatas, which already owns two carriers. Of the ₹18,000 crore, the government will get ₹2,700 crore in cash, while the remaining amount will be in the form of debt transferred to the new entity. With this, the entire 100 per cent shareholding of Air India along with AI’s shareholding in Air India Express Limited (AIXL) and AISATS will pass on to new the owner.

The ₹46,262-crore debt of the national carrier will go to Air India Asset Holding Limited, a government SPV, which will be responsible for repayment of remaining debt by raising funds through government guaranteed bond and by disposing of non-core assets (with a book value of ₹14,718 crore).



VRS only in 2nd year

On AI staff, he said the new owner cannot retrench any employee in the first year from the date of transfer while in the second, it can offer a Voluntary Retirement Scheme. As on date, Air India has 12,085 employees (8,084 permanent and 4,001 on contract), while Air India Express has 1,434. Civil Aviation Secretary Rajiv Bansal said that all employees will now be brought under the EPF & MP Act, 1952 from the PF Act, 1925. This means from a trust-based arrangement to the Employees Provident Fund (EPF) system, which is managed by the Employees Provident Fund Organisation (EPFO).

On brand

On the Air India brand and logo, Pandey said, “These cannot be sold in the first five years. Also, after five years, these can be transferred only to an Indian person, neutral and legal entity.” He said that there will be one-year lock in on the equity transferred while three years have been prescribed for business continuity. Therefore, the Tatas can sell AI equity only after one year, but they will have to ensure that the airline is in operation for at least three years.

He said that there are some standstill obligations. “The day we sign, the company will have some standstill obligations that they will be able to take business decisions of a certain type. They can’t make any capital commitment or give out large contracts. They can’t make an expenditure of over ₹50 crore. They can only do normal business,” he said.

It has been decided that government will give three buildings of Air India to the Tatas for two years and the apartments for six months. These buildings are likely to include the iconic Nariman Point (Mumbai) building and headquarters building and the building at Safdarjung (Delhi).

Asked who will bear the daily loss of ₹20 crore till the company is transferred in December, Pandey said on the day closure is reached, the government will issue a balance-sheet incorporating these (₹20-crore daily losses).




Published on October 08, 2021

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