Monetary loan

Tata secures loan commitment from SBI-led consortium for Air India: report

A consortium of lenders led by the State Bank of India (SBI) has agreed to provide loans to the Tata Group for the smooth running of the loss-making Air India.

Tata Group, which won the flag carrier’s takeover bid with Air India Express and a 50% stake in AISATS in October last year, is expected to formally take control of the airline on Thursday.

Sources said the SBI-led consortium had agreed to provide both term loans and working capital loans depending on the airline’s needs.

All major lenders including Punjab National Bank, Bank of Baroda and Union Bank of India are part of the consortium, they added.

Talace Private Limited – a subsidiary of the Tata Group’s holding company, Tata Sons – won the takeover bid for debt-ridden Air India on October 8, 2021.

A unit of the salt-software conglomerate’s holding company 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 to be paid in cash to the government.

On October 11, 2021, a Letter of Intent (LoI) was sent to the Tata Group confirming the government’s willingness to sell its 100% stake in the airline. On October 25, the Center signed the share purchase agreement for the transaction.

The term loans to Talace will help repay Air India’s high cost borrowings, the sources said.

The agreement with the government does not include land and buildings. Under the agreement, Tata Group will retain all Air India employees for at least one year.

With the acquisition, Tata Group will have access to a fleet of 117 wide-body and narrow-body aircraft, and 24 Air India Express narrow-body aircraft. In addition, it will gain control of 4,400 domestic and 1,800 international landings, as well as parking spaces at domestic airports.

The Tata Group had beat a bid of Rs 15,100 crore from a consortium led by SpiceJet promoter Ajay Singh and the reserve price of Rs 12,906 crore set by the government for the sale of its 100% stake in the loss carrier.

Although this is the Centre’s first privatization since 2003-2004, Air India will be the Tatas stable’s third airline brand, as it owns a majority stake in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd.

As of August 31, Air India had a total debt of Rs 61,562 crore. Around 75% of this debt or Rs 46,262 crore will be transferred to an AIAHL special purpose vehicle before handing over the loss-making airline to the Tata Group.

Air India has started to suffer losses every year since its merger with Indian Airlines in 2007-08.

A Reorganization Plan (TAP) and a Financial Restructuring Plan (FRP) were approved for Air India by the previous UPA regime in 2012. However, the TAP did not work as expected and Air India continued to incur losses .

Over the past decade, more than Rs 1.10 lakh crore has been infused in the form of cash support and loan guarantees to Air India to keep it afloat.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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