Tata gets loan commitment from SBI-led consortium for Air India
A consortium of lenders led by State Bank of India (SBI) has agreed to provide loan to Tata Group for smooth functioning of loss-making Air India. The Tata group, which won a bid to acquire 50 per cent stake in the national carrier and AISATS along with Air India Express in October last year, is expected to formally take over the airline on Thursday.
Sources said the SBI-led consortium has agreed to extend both term loan and working capital loan depending on the requirements of the airline. He said that all major lenders including Punjab National Bank, Bank of Baroda and Union Bank of India are part of the consortium.
Tales Pvt Ltd, a subsidiary of Tata Sons, the holding company of the Tata group, won the bid to acquire debt-ridden Air India on October 8, 2021. A unit of the holding company of the salt-to-software conglomerate had offered Rs 18,000 crore as part of its winning bid – Rs 15,300 crore for Air India’s existing debt and Rs 2,700 crore in cash to the government. was to be paid.
On October 11, 2021, a letter of intent (LOI) was issued to the Tata group reaffirming the government’s desire to sell its 100 per cent stake in the airline. On October 25, the Center signed a share purchase agreement for the deal.
Sources said the term loan to Tales will help it eliminate Air India’s high-cost borrowings. Land and buildings are not included in the agreement with the government. As per the agreement, Tata Group will retain all employees of Air India for at least one year.
With the acquisition, the Tata Group will have access to 117 wide-body and narrow-body aircraft and Air India Express’s fleet of 24 narrow-body aircraft. In addition, it will gain control of 4,400 domestic and 1,800 international landings, and parking slots at domestic airports.
The Tata group had exceeded the Rs 12,906 crore reserve price set by the government for an offer of Rs 15,100 crore by a consortium led by SpiceJet promoter Ajay Singh and sale of its 100 per cent stake in the loss-making carrier.
While this will be the center’s first privatization since 2003–04, Air India will be the third airline brand in the Tata stable as it has a majority stake in Vistara, a joint venture with AirAsia India and Singapore Airlines Ltd.
As on August 31, Air India had a total debt of Rs 61,562 crore. About 75 per cent of this debt, or Rs 46,262 crore, will be transferred to AIAHL, a special purpose vehicle, before the loss-making airline is handed over to the Tata Group.
Air India started making losses every year since its merger with Indian Airlines in 2007-08.
A Turnaround Plan (TAP) and a Financial Restructuring Plan (FRP) for Air India were approved by the previous UPA government in 2012. However, TAP was not working as expected and Air India was making losses. Over the past decade, over Rs 1.10 lakh crore has been invested through cash support and loan guarantees to keep Air India running.
Read also | Tata Sons Chairman Chandrasekaran likely to meet PM Modi ahead of Air India acquisition
,