Tata's Air India after 68 years

Ratan Tata said 'welcome back', the deal was finalized for Rs 18000 crore Air India is back home. Tata Group is buying it for Rs 18,000 crore. This was announced by the Finance Ministry's Department of Investment and Public Asset Management (DIPAM). Air India and Air India Express will be commanded by Tata. DIPAM Secretary Tuhin Kant Pandey said that when Air India goes into the hands of the winning bidder, the Rs 46,262 crore debt on its balance sheet will go to the state-owned AIAHL.

He said that the government will get cash of Rs 2,700 crore in this deal. Ratan Tata, Honorary Chairman of Tata Sons, in his tweet called the Tata Group winning the Air India bid as big news. He said that rebuilding Air India will take a lot of effort, but it will also provide huge business opportunities for the Tata group in the aviation industry. Ratan Tata praised the government for the policy of opening some industries to the private sector.

Ajay Singh, chairman of SpiceJet and leader of the consortium, the second-highest bidder for Air India, has congratulated both the Tata Group and the government for the deal. He said it was a matter of pride for him to be shortlisted for the bidding of Air India. He expressed confidence that the Tata Group would be able to bring back the company's prestige and make India proud. The deal will not sell any non-assets, including Air India's land and buildings.

These assets worth Rs 14,718 crore will be handed over to the government company AIAHL. Cargo and ground handling company AISATS will also get half the stake. DIPAM secretary said that SpiceJet chairman Ajay Singh's consortium had placed a bid of Rs 15,000 crore. He said that the deal will be closed by December, that is, the transaction will be completed. The tender of five bidders for Air India was rejected.

They could not fulfill all the conditions of the government. Under the deal, the new bidder will also have to retain Air India employees for one year. After that, if the bidder wants, VRS can be given to them from the second year onwards. The government will give the responsibility of the entire airlines to the new bidder i.e. Tata in 4 months. After 15 days from today, the process of its transfer will start. The reserve price of Air India was Rs 12,906 crore. Air India was priced at its enterprise value. Enterprise value means the valuation of the company.

Air India is not listed on the stock exchange, so no valuation of its equity was done. Maybe Tata will list it in the stock market later. Tata Group has 28 companies listed. The winning Tata Group will also have to take a loan of Rs 15,300 crore. Air India has a total debt of Rs 43 thousand crores. Out of this, the debt of 20 thousand crore rupees has increased in the last two years. However, the government will take this loan on its own and the winner of the bid i.e. Tata will only have a debt of Rs 23 thousand crores. Last Friday, October 1, a Bloomberg report claimed that Tata Sons' offer to buy Air India has been accepted. But the government rubbished the news that the Tata Group's bid was approved and said no decision had been taken in this regard.

According to the same report of Bloomberg, Tata Group had bid about Rs 3,000 crore more than SpiceJet chairman Ajay Singh. The last date for bidding for Air India was September 15, after which it was speculated that the Tata group might buy Air India. The government has failed in its plan to sell the huge debt-ridden Air India for many years. It had invited bids in 2018 to sell a 76% stake and had promised to retain management control. When no one showed interest in it, the government decided to sell it with management control.

The decision to sell Air India was first made in 2000. On May 27 that year, the government had decided to sell 40% stake in it. In 2000, the NDA government led by Atal Bihari Vajpayee had disinvested several companies, including the Centaur Hotel in Mumbai. Arun Shourie was then the disinvestment minister. The government then decided to give 10% share to employees and 10% to domestic financial institutions. After this, the government's stake in Air India would have come down to 40%. For the last 21 years, there were many attempts to sell Air India, but every time the matter got stuck due to one reason or the other. JRD Tata started Tata Airlines in 1932.

After the Second World War, the aviation sector was badly affected worldwide. In such a situation, to deal with the slowdown, the Planning Commission had suggested the nationalization of all airline companies. In March 1953, Parliament passed the Air Corporations Act. After this eight airlines of the country were nationalized. Among them was Tata Airlines. Indian Airlines and Air India were formed by merging all the companies. Air India was given the responsibility of international and Indian Airlines for domestic flights.



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