Ajay Singh, chairman, managing director, and majority owner of loss-making low-cost carrier SpiceJet (SG, Delhi International), is putting together a USD1 billion war chest for his Air India (AI, Delhi International) bid, unnamed sources close to the matter have told The Economic Times.

While Singh would have a shareholding minimum of 26% in the special purpose vehicle he is arranging, the fundraising effort will also include USD700 million in contributions from two US-based private equity funds, which were also unnamed in the article.

As his personal contribution, the businessman plans to use a combination of his shares in SpiceJet and equity that will be allocated to him as part of a planned separation of his airline’s cargo business as security to raise about USD300 million. He would offload part of his stake in the cargo unit through an offer for sale (OFS) mechanism, the sources claimed.

The government has set a deadline of the third week in August for the submission of financial bids for a 100% stake in the state-owned flag carrier including full ownership in its low-cost unit Air India Express (IX, Delhi International) and 50% of AISATS, a 50:50 cargo and groundhandling joint venture between Air India and Singapore’s SATS Limited.

The Economic Times noted that although Singh owns around 60% of SpiceJet, more than a third of his stake is encumbered. It estimated the value of Singh’s holding, according to the current share price, at about INR29 billion rupees (USD387 million).

Air India reportedly has debts of around INR370 billion (USD4.94 billion), but the two likely bidders - the other being Indian conglomerate Tata Sons - will seek a significant reduction on that amount.