Tata Group may take up upto 15% of Air India's debt: Sources

The government is seeking to sell 100% of its stake in the state-owned national airline Air India (Representative Image)

As a part of its bids to acquire the government's 100 percent stake in Air India, the Tata Group may be willing to acquire around 15 percent of the airline's total debt, two people with knowledge of the matter told Moneycontrol.

"The Tata group as part of its bid has also proposed to negotiate and acquire a certain amount, at max 15 percent, of Air India's debt if the government is willing to meet certain requirements set by them," one of the people mentioned above told Moneycontrol.

While the sources did not mention the conditions under which the Tata group may be willing to acquire up to 15 percent of Air India's debt, they did mention that it is a big part of the discussions between the government and the Tata Group.

The Ministry of Civil Aviation, Ministry of Finance, Air India and Tata Sons did not reply to a request for comments at the time of publishing this story.

The government as part of its current attempt to sell its 100% stake in Air India has changed the bidding norms in October 2020, and sought bids based on enterprise value.

According to the new plan, the successful bidder does not have to absorb any predetermined debt. Air India has a net debt of around Rs 60,000 crore.

As part of the current plan, the government will also divest its 100% stake in Air India, Air India Express and a 50% stake in ground handling company AISATS.

Bids for the carrier are being sought at enterprise value. Of Air India's total enterprise value, as part of the formula, a minimum 15 percent will go to the government and the rest will be used to reduce existing debt.

Earlier this week, the government decided on the reserve price for Air India, when there was a meeting of the committee of secretaries, headed by Cabinet Secretary Rajeev Gauba.

The government has likely set the minimum reserve price for the sale of national carrier Air India at around Rs 15,000 crore. The reserve price set is the price below which the government will not accept offers for the national carrier.

As per reports, Tata Sons have sought a sovereign guarantee against any pre-acquisition financial or legal claims that Air India may face.

The reserve price of Air India is based on the valuation of all of Air India’s assets, including its buildings, fleet, international landing slots and working agreements.

In its earlier attempts to sell Air India bids for the airline were to be based on equity value and the successful bidder had to absorb debt of around Rs 23,300 crore.

The government had in March 2018 invited expressions of interest to sell its 76 percent stake in Air India, but failed to elicit any response, primarily on account of the airline's huge debt.

Air India has not turned a profit since its 2007 merger with Indian Airlines. But, it does have some attractive assets, including prized landing and parking slots at London.