New Delhi [India]: Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons, has won the bid for acquiring Air India, marking the end of the process to privatise the national carrier with the government approving its disinvestment.
The CCEA-approved Air India Specific Alternative Mechanism (AISAM) approved the highest price bid of Talace Pvt Ltd for the sale of 100 per cent equity shareholding of the Government of India in Air India along with equity shareholding of Air India in AIXL and AISATS.
The winning bid is for Rs 18,000 crore as Enterprise Value (EV) consideration for AI (100 per cent 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, which are to be transferred to GoI’s Air India Asset Holding Limited (AIAHL).
AISAM included Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce and IndustryMinister Piyush Goyal and Civil Aviation Minister Jyotiraditya Scindia.
Addressing a press conference, Tuhin Kant Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) said Talace was the highest bidder while Ajay Singh-led consortium had placed a bid of Rs 15,100 crore.
Pandey said that a reserve price of Rs 12,906 crore had been set before opening sealed financial bids to ensure complete independence between bidding and fixation of the reserve price. He informed that the transaction of the bid will be completed by December 2021.
He said that this deal will have to be approved by the Competition Commission of India (CCI).
Rajiv Bansal, Secretary, Civil Aviation assured that the winning bidder will retain all employees for the period of one year. In the second year, if anyone is not retained, VRS will be offered.
At present, Air India has a strength of 12,085 employees, out of which 8,084 are permanent employees and 4,001 are on a contract basis.
“Employees will be provided gratuity and provident fund benefits. Post-retirement medical benefits are to be provided,” Bansal said.
DIPAM Secretary said that there are eight logos under the Air India brand and they will go to the successful bidder and cannot be transferred to anyone else for five years. After five years, the logos can be transferred but to only Indian persons (legal persons), not to any foreign entity.
Explaining the debt position after disinvestment, Pandey said that the total debt as of August 31, 2021 is Rs 61,562 crore.
Debt to be taken over by the successful bidder is Rs 15,300 crore while the remaining debt of Rs 46,262 crore will go to AIAHL.
Pandey said that the government has put in Rs 54,584 crore as cash support and Rs 55,692 crore as guarantee support since 2009-10 and total government support is Rs 1,10,276 crore since 2009-10.
He said continuous losses borne by Air India have been funded largely by government-guaranteed debt and Air India is suffering a loss of Rs 20 crore per day.
Pandey said that the bid places no restriction on the successful bidder in going ahead with mergers and acquisitions. The restriction is that during the equity lock-in period, ownership has to remain with the successful bidder.
DIPAM Secretary said that non-core assets such as land and building, valued at Rs 14,718 crore are being transferred to AIAHL.
He said that after ensuring the technical qualification of bids for disinvestment of Air India, two financial bids were opened by the Inter-Ministerial Group in presence of bidders on September 29. Both bids were well above the reserve price and the H1 bid was approved on October 4, 2021.
An official release said that the process for disinvestment of Air India and its subsidiaries commenced in June 2017 with the ‘in-principle’ approval of Cabinet Committee on Economic Affairs (CCEA).
The first round did not elicit any Expression of Interest. The process was re-commenced on January 27, 2020 with the issue of Preliminary Information Memorandum (PIM) and request for Expressions of Interest (EOI).
The original construct as per the January 2020 PIM envisaged that a pre-determined, fixed amount of debt would be retained in AI (with balance to be transferred to Air India Asset Holding Limited (AIAHL).
It also envisaged 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 release said that 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) to allow prospective bidders an opportunity to resize the balance sheet and increase chances of receiving bids and competition.
The EV construct allowed the bidders to bid on the total consideration for equity and debt.
“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. It has been ensured that the interest of the employees and retired employees would be taken care of,” the release said.
It said the next step will be to issue the Letter of Intent (LoI) and then signing of Share Purchase Agreement after which, the conditions precedent would need to be satisfied by the successful bidder, the company and the Government.
The transaction is expected to be completed by December this year, the release said. (ANI)