Tata Sons plans to raise USD4 billion in an effort to inject fresh capital into Air India (AI, Mumbai Int'l) and refinance its costly debt, two anonymous sources close to the matter have told the Indian financial daily Mint.

They claimed that the conglomerate aims to drum up the funds by using hybrid financing to help revamp the airline, which it acquired for USD2.4 billion and assumed control of in January.

“Tata Group will soon start the process of hiring investment advisers, although informal discussions with a few foreign lenders and some private equity funds are already underway,” according to one insider.

The second informer added: “The debt refinancing part will be relatively easier as lenders within Tata’s existing banking relationships will step in. The equity component of the transaction may take a bit longer, given that globally the number of private equity funds that invest in airline businesses are relatively few.”

The first claimed: “The fund infusion is crucial for Air India’s operational efficiency to regain market share. The funds will be used to bring in new aircraft and offer differentiated customer service initiatives, which will attract passengers.”

Tata Sons wants to overhaul and expand Air India and its low-cost unit Air India Express (IX, Mumbai Int'l), they said, and is about to close orders for around 200 A320neo narrowbody and widebody jets in the expectation deliveries can start by the beginning of the next fiscal year (from April 1, 2023). But it also has to deal with ballooning losses at its other two airlines, AirAsia India and Vistara.

According to the latest figures from the Directorate General of Civil Aviation, released last month, full-service carrier Air India climbed to 8.4% of the domestic market share in July from 7.5% in June, although its share has decreased from 10.2% in January. Budget airline IndiGo Airlines (6E, Delhi Int'l) gained even more market share to reach 58.8% in July from 56.9% the previous month.

Air India did not immediately respond to ch-aviation’s request for comment.