New Delhi, October 10, 2021
The transaction does not include non-core assets including land and building
The Tata group has won the bid for Air India’s disinvestment with Talace Private Limited, a wholly-owned subsidiary of Tata Sons, placing the winning bid for Rs 18,000 crore (about US$ 2.4 billion).
The other bidder for the airline was a consortium led by SpiceJet owner Ajay Singh in his individual capacity.
Both the bids were above the reserve price of Rs 12,906 crore (about US$1.73 billion).
According to the Finance Ministry, the winning bid by Tata Sons as Enterprise Value (EV) consideration for AI (100% shares of AI along with AI’s shareholding in AIXL and AISATS).
The transaction does not include non-core assets including land and building, valued at Rs 14,718 crore (about US$ 1.97 billion) which are to be transferred to Air India Asset Holding Limited (AIAHL), owned by the Indian government.
The bid by Tata Sons (Talace Pvt Ltd) was approved by the Cabinet Committee on Economic Affairs (CCEA), empowered Air India Specific Alternative Mechanism (AISAM).
It comprised Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal and Civil Aviation Minister Jyotiraditya Scindia. The transaction saw keen competition with seven Expression of Interest letters received in December 2020. Five of the bidders were disqualified as they could not meet the requirements set out in the PIM/EOI, even after allowing them an opportunity for clarification.
The next step will be to issue the Letter of Intent 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.
According to the Finance Ministry, the transaction is expected to be completed by December 2021.
Air India disinvestment process
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.
This involved the 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.
The Finance Ministry said that Transaction Adviser, Legal Adviser, Asset Valuer, professionals in their respective fields had supported the entire process.
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 January 27, 2020 with issue of Preliminary Information Memorandum (PIM) and request for Expressions of Interest (EOI).
The deal process
According to the Finance Ministry, PIM in January 2020 envisaged (a) pre-determined, fixed amount of debt to be retained in AI (with the balance to be transferred to Air India Asset Holding Limited (AIAHL) (b) 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).
This allowed prospective bidders an opportunity to resize the balance sheet and increase their 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.
The transfer process will take care of the interest of the employees and retired employees.
Source: India News Network, New Delhi