Cabinet Committee on Economic Affairs (CCEA) – empowered Air India Specific Alternative Mechanism (AISAM) comprising Union Minister for Home Affairs and Cooperation Shri Amit Shah; Nirmala Sitharaman, Minister of Finance and Union Affairs; Union Trade and Industry Minister Piyush Goyal and Union Civil Aviation Minister Jyotiraditya Scindia approved the highest-priced offer from M / s Talace Pvt Ltd, a subsidiary of 100% of M / s Tata Sons Pvt. Ltd for the sale of the Indian government’s 100% stake in Air India as well as Air India’s stake in AIXL and AISATS.
The winning bid is Rs18,000cr as enterprise value (EV) consideration for AI (100% of AI shares plus AI’s stake in AIXL and AISATS).
The transaction does not include non-core assets, including land and buildings, valued at Rs 14,718cr, which are to be transferred to GoI’s Air India Asset Holding Limited (AIAHL).
The process of divestment of Air India and its subsidiaries began in June 2017 with the approval in principle of the CAMC. The first round did not generate any expression of interest. The process resumed on January 27, 2020 with the publication of a Preliminary Information Memorandum (PIM) and a Request for Expression of Interest (EOI).
The original construction according to the January 2020 PIM envisioned (i) a fixed and predetermined amount of debt to be kept in AI (the balance to be transferred to Air India Asset Holding Limited (AIAHL) and (ii) the sum of some of the current liabilities and non-current assets (other than debt) to be retained in AI and AIXL would be equal to the sum of certain identified current and non-current assets of AI and AIXL (excess liabilities to be transferred to AIAHL).
The deadlines had to be extended due to the situation arising from the COVID-19 pandemic. In view of Air India’s excessive debt and other liabilities resulting from huge accumulated losses, the structure of the bid was revised in October 2020 to enterprise value (EV) to allow potential bidders to resize the balance sheet and increase the chances of receiving offers. and competition. The EV construction allowed bidders to bid on full equity and debt consideration instead of predetermined fixed debt with a minimum cash consideration of 15% for equity. In accordance with the original and revised construction, all non-core assets (land, buildings, etc.) must be transferred to AIAHL and therefore are not part of the transaction. It was assured that the interests of employees and retirees would be taken into account.
The transaction faced stiff competition with seven EOIs received in December 2020. However, five of the bidders had to be disqualified as they could not meet the requirements set out in the PIM / EOI even after giving them the opportunity to obtain clarification. The Request for Proposal (RFP) and the Draft Share Purchase Agreement (SPA) were published on March 30, 2021. Air India provided full information via the virtual data room to qualified bidders who also had access to inspection of proposed assets and facilities. as part of the transaction. A large number of requests from bidders were answered.
At the request of the bidders, the deadline for the bids has been extended until September 15, 2021 so that they can perform their due diligence before the submission of bids. The final SPA containing the detailed terms and conditions and the respective responsibilities to meet the conditions precedent to the closing of the transaction, including the release of government guarantees before the closing, has been agreed before the submission of the bids. Two sealed bids were received by the due date along with non-financial tender documents and a bid bond from the two qualified bidders.
In accordance with the approved strategic divestment procedure, a reserve price was set after receipt of sealed financial offers for the transaction, based on an assessment using methodologies consistent with the established process. After the independent fixing of the Reserve Price, the sealed financial offers already received were opened in the presence of the bidders, who were as follows:
- M / s Talace Pvt Ltd, a 100% subsidiary of M / s Tata Sons Pvt Ltd for an EV of Rs18,000cr
- Consortium led by Sh Ajay Singh for EV of Rs15,100cr.
- Both offers were above the reserve price of Rs12,906cr.
The entire divestment process was carried out in a transparent manner, respecting the confidentiality of bidders, thanks to multi-level decision-making involving the Interministerial Group (IMG), the Restricted Group of Secretaries on Divestment (CGD ) and the India Specific Alternative Mechanism (AISAM) at the supreme ministerial level. Transaction Adviser, Legal Adviser, Asset Valuations, professionals in their respective fields, supported the entire process.
The next step will be to issue the letter of intent (LoI), then sign the share purchase agreement, following which, the conditions precedent will have to be met by the successful bidder, the company and the government. The transaction is expected to be finalized by December 2021.