DIPAM Secretary Tuhin Kanta Pandey said: “Over 200 queries asked seeking clarifications, revisions to share purchase agreement”
The Indian government announced on Friday that TATA Sons has been chosen as the winning bidder to take over state-run carrier Air India, bringing an end to years of negotiations to privatise the financially ailing airline.
TATA Sons, the holding company for the autos-to-steel TATA conglomerate, bid Rs 180 billion ($2.40 billion) for the government’s 100% stake in Air India, a finance ministry official told reporters.
On October 4, a panel of ministers led by Home Minister Amit Shah authorised the bid, according to Pandey.
Financial proposals submitted by the salt-to-software conglomerate and SpiceJet promoter Ajay Singh were opened a few days ago and evaluated by the Cabinet Secretary-led Core Group of Secretaries on Disinvestment.
The offers were compared to the reserve price, and TATAs was the top bidder.
In the opening remarks and presentation by DIPAM, Tuhin Kanta Pandey said: “The FM had said in her Budget speech that the Govt of India aims to complete the Air India divestment in FY22. The competitive process has been carried out in a transparent manner.”
He added: “Bidders had to quote min 15% of enterprise value for cash consideration. Bidders were to quote max 85% of quoted enterprise value for retained debt.”
Key Takeaways From The Air India-TATA Agreement
TATA Sons’ winning bid of Rs 180 billion ($2.4 billion) for Air India was more than the federal government’s reserve price of Rs 129 billion, DIPAM Secretary said, adding that the Centre will get Rs 27 billion in cash from TATAs for the sale of its whole share.
Notably, TATAs’ winning proposal of Rs 180 billion includes taking over Rs 153 billion in debt and paying the remainder in cash, according to DIPAM Secretary. The central government has imposed constraints on TATA.TATAs, according to the DIPAM Secretary, are not permitted to transfer the Air India trademark and logo for a period of five years. After five years, they may only be transferred to Indians.
TATAs will have to retain all the staff of Air India for one year. However, the group can subsequently offer a voluntary retirement scheme (VRS) in the second year, the Aviation Secretary was quoted as saying by PTI.
TATA Group-Air India Relationship
The link between the TATA Group and Air India dates back to 1932, when famous businessman and India’s first commercially certified pilot JRD TATA founded the national airline. The original service provided a weekly airmail service from Karachi to Madras via Ahmedabad and Bombay.
The airline quickly grew to include passenger planes, and in 1938 it began international flights.
With the addition of Columbo to its list of destinations, the airline’s name was changed to TATA Air Services, and then to TATA Airlines.
During World War II, the famous airlines performed support flights for the British Royal Air Force in Burma.
After the war, the airline changed its name to the now-iconic Air India.
The Union government then became interested in Air India and purchased a 49 percent share in it.
Soon after, the government seized control of the airline from TATA Sons and nationalised it under the Air Corporations Act in 1953.