Tata Group's airport plans hit ownership hurdle

Tata Sons' plans to make another big splash in the aviation space have been hit due to ownership hurdles. CNBC-TV18's Aastha Maheshwari says Tata Group which was planning to bid for 100 percent stake in Chennai airport has represented to the government on a cross ownership clause in the RFQ, which may not allow Tata Group arm, Tata Realty and Infrastructure, to participate in the bid at all.

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According to the request for qualification, the SPV which is planning to bid should not include any equity ownership of scheduled airline, cargo airline, or associates in excess of 10%. This condition shall be deemed to form part of the Joint Bidding Agreement. And since Tata Sons, the holding co of TRIL, has recently entered into a 51% joint venture with Singapore Airlines recently, TRIL as a subsidiary of Tata Sons will become as associate of the airline and thus will not be able to bid.
The government had allowed privatization of six airports in August this year. Tata Group's interest in this clearly comes at an appropriate time, considering that the Tatas have announced their two airline joint ventures (JVs), one with Air Asia and one with Singapore Airlines recently. Experts say that this airport foray will not only help them expand their base further but help them gain market share in the aviation space too.
Tata Realty and Infrastructure (TRIL) in their recent representation to the government had sought for change in this clause, by changing the term 'associate' with 'subsidiary' of the airline, so as to  ensure TRIL's participation in the bidding process. However, if the Tata Group is not allowed to bid for the airport project, it will impact the group's plans to expand in the aviation space significantly.
TRIL has also sought details on tariff regulations from the government for the next five years. They have sought clarity on the amount will they have to pay to AAI (Airport Authority of India).
In the past, other airport companies like GVK and GMR had also raised some concerns. Some of their concerns were that this time the government has not made it mandatory for a company to either have experience in airport development or tie up with an experienced airport developer to qualify for the project. Rather, a company only needs to have sufficient experience in construction in sectors such as telecom and power.
Seasoned airport developers such as GMR and GVK fear that this will open up projects for companies in the real estate and manufacturing space and dilute the selection process. The Airport Authority of India has already delayed the bidding process for the Chennai, Ahmedabad, Kolkata airports due to these concerns raised by the developers.