The transaction does not include non-core assets including land and building

The Tata group has won the bid for Air India's disinvestment withTalace Pvt Ltd, a wholly-owned subsidiary of Tata Sons, placing the winning bid for Rs 18,000 crore.

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.

The winning bid by Tata Sons is for Rs 18,000 crore as Enterprise Value (EV) consideration for AI (100% shares of AI along with AI’s shareholding in AIXL and AISATS), the Union Ministry of Finance announced on Friday.

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).

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 the Union Minister for Home Affairs and Cooperation Amit Shah; Union Minister for Finance & Corporate Affairs Nirmala Sitharaman; Union Minister for Commerce and Industry Piyush Goyal and Union Civil Aviation Minister Jyotiraditya Scindia.

The transaction saw keen competition with seven EOIs being received in December, 2020.

Five of the bidders, however, had to be 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 (LoI) 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 added 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 27 January 2020 with issue of Preliminary Information Memorandum (PIM) and request for Expressions of Interest (EOI).

The finance ministry pointed out that the January 2020 PIM envisaged:

(i) pre-determined, fixed amount of debt to be retained in AI (with balance to be transferred to Air India Asset Holding Limited (AIAHL)

(ii) 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 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.

It has been ensured that the interest of the employees and retired employees would be taken care of.