The Tata Sons is likely to make a formal bid for Air India close to the official deadline at the end of this month. The company has begun the due diligence, but the focus at the moment is to examine business synergies and viability, the Economic Times reported citing sources.
The government has extended the deadline to bid for Air India by two months till August 31 as the COVID-19 fallout has disrupted economic activities globally. This is the third time the deadline has been extended.
The divestment process for the national carrier was initiated on January 27. While issuing the EoI in January, the last date for bids was kept at March 17, which was later extended till April 30. This was further extended to June 30, and now till August 31.
“Tata Sons is currently evaluating the proposal and will consider a bid after due consideration and at the appropriate time. There is no plan to bring in a financial partner," the report quoted a Tata Sons spokesperson. While speculations were rife that the Tata Sons would be bidding for the national carrier, which it founded 87 years ago, the company had kept a safe distance from commenting on any developments.
The report, citing officials, said it was too early for discussions around funding or the possible business structure till the due diligence is complete.
The Tata Group already runs two aviation joint ventures—full-service airline Vistara, in which Singapore Airlines is the strategic partner (with 49 per cent shareholding), and budget carrier AirAsia India, in which Tony Fernandes’ AirAsia Berhad is the partner.
Last year, when asked about Tata Sons's interest in bidding for Air India, Chairman N. Chandrasekaran had opined that he was not keen on running a third airline. Reportedly, the Tata Group was actively exploring a structure for Air India acquisition with Singapore Airlines, its joint venture partner in Vistara. The combination of Air India and Vistara, on the other hand, will help the Tatas to monopolise the full-service space in India. In March this year, Vistara chairman Bhaskar Bhat said they were evaluating Air India. "We are evaluating Air India. Which company would not be interested in evaluating a sovereign airline of the country?" Bhat asked. "Whether we bid or not comes later." On being asked if Vistara or Tata Sons were evaluating Air India, Bhat replied: "We (Vistara) are a joint venture."
At the same time, rumours were also doing the round saying that the group was planning to merge AirAsia India (in which Tata Sons owns 51 per cent stake) and Air India into a single entity after buying out joint venture partner Tony Fernandes.
With the two-pronged strategy to acquire Air India, the Tatas aims to up its ante in the aviation business that it had pioneered in the country. In India, Air India holds the highest number of slots, routes and real estate, which makes it a prize catch for any bidder. And hence, Air India acquisition would be a sure shot way for Vistara to expand its business.
However, amid the prevailing COVID situation where the airline industry has taken the biggest hit, it remains to be seen if Tata Sons would be ready to buy out a bleeding airline operator. Currently, the airline sits on a debt of Rs 58,000-crore. And the Centre's divestment target from Air India is around Rs 60,000 crore.