India’s government has reportedly shortlisted the Tata Sons conglomerate and the owner of SpiceJet (SG, Delhi International) for its long-planned Air India (AI, Delhi International) divestment, and due diligence on the hoped-for sale is expected to begin in early April, the business television news channel Zee Business reported on March 23.
The channel’s executive editor, Swati Khandelwal, claimed that sources close to the matter had told her that only Tata and SpiceJet would proceed to the next round of bidding. Other prominent local news sites such as The Times of India later corroborated the development.
“Tata Group and SpiceJet had given their expressions of interest, which have been accepted by the government, facilitating the Air India acquisition process. Soon they will be given an invitation to submit financial bids. Before that, due diligence, which will begin in a couple of weeks, will be taken care of. This process may take two to three months,” she said.
The government has been trying to find ways to write off much of Air India’s debt, which has been the biggest hurdle to a sale, before putting the company in private hands in an effort to make it a profitable exercise.
“This has been done to encourage a good bidding process, as we have seen in the past that private players expressed a reluctance to acquire this state-owned public sector carrier due to the debt issue. The government will try to ensure it does not pass off the debt to a private party,” Khandelwal added.
Sources appeared to confirm the shortlist to The Times of India, saying that Tata and SpiceJet chairman, managing director, and principal shareholder Ajay Singh were the remaining contenders to buy the flag carrier. While Tata Group has filed its bid via AirAsia India (Bengaluru International), in which it holds a controlling stake, Singh has linked up with a Middle Eastern sovereign fund for the acquisition, they claimed.
The sources also said that the two parties would soon start examining the airline's books before submitting a final bid, at which stage they will have to state how much of its debt they would be willing to take on. At least 15% of Air India’s enterprise value must be paid in cash and the balance can be taken as debt.
Estimates vary widely as to the size of the debt pile held at Air India, which has been loss-making since 2007. Reports in October 2020 put it at about USD3.3 billion, but according to the Times of India it stands at INR900 billion rupees (USD12.4 billion). The company is expected to report another loss for the current fiscal year, this time INR100 billion (USD1.38 billion).
