Tata Sons is the successful bidder for a 100% stake in Air India, the government announced on October 8, 2021.
Tata’s bid at an enterprise value of Rs18,000 crore ($2.4 billion) was higher than a rival bid of Rs15,100 crore ($2 billion) from a consortium led by Ajay Singh, the founder of SpiceJet. Both bids were above the reserve price of Rs12,906 crore set by the government.
The bid means Air India is returning to its original home. The carrier was founded by Jehangir Ratanji Dadabhoy Tata in 1932 as Tata Airlines, renamed Air India in 1946 and then nationalized in 1948, a year after India gained independence.
Ratan Naval Tata, chairman emeritus of Tata Sons, said JRD Tata would have been “overjoyed” if he were alive today and said the Tata Group will work to restore the image and reputation of Air India.
He admitted it would not be an easy road ahead, however.
“While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group’s presence in the aviation industry,” Ratan Tata wrote on Twitter.
Welcome back, Air India pic.twitter.com/euIREDIzkV— Ratan N. Tata (@RNTata2000) October 8, 2021
Air India joins two other airlines in the stable of conglomerate Tata. It currently has a 51% stake in Vistara, a joint venture with Singapore Airlines (SIA1) (SINGY), and an 83.67% share in AirAsia India.
Natarajan Chandrasekaran, chairman of Tata Sons, said in a statement: “This is a historic moment, and it will be a rare privilege for our group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline which makes every Indian proud.”
The government has been trying to divest loss-making Air India for years. An initial process in 2017 did not result in any expressions of interest. A further attempt at the start of 2020 was derailed by the COVID-19 pandemic. The government then revised the bidding process to allow interested parties to bid on the total consideration for equity and debt, instead of a pre-determined, fixed debt.
The transaction is set to be completed by December 2021, the government said. The winning bidder will retain all the group’s employees, with a guarantee that nobody will be retrenched for one year. After a year they will be offered a voluntary retirement scheme if not required. The airline’s brands will also be handed to Tata Sons, which cannot transfer them for five years.
The transaction does not include non-core assets, such as land and buildings, valued at Rs 14,718 crore. Those will be transferred to the government’s Air India Asset Holding Limited.