Lok Sabha Question No. 109 (STARRED), answered on 2021-12-06
Subject: Sale of Air India
Ministry: FINANCE
Asked by: Andimuthu Raja

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF INVESTMENT AND PUBLIC ASSET MANAGEMENT (DIPAM) LOK SABHA STARRED QUESTION No.*109 TO BE ANSWERED ON MONDAY, DECEMBER 6, 2021 Agrahayana 15, 1943 (Saka)

## Sale of Air India

*109:  SHRI A. RAJA

Will the Minister of FINANCE be pleased to state:

- (a) Whether it is a fact that Air India was sold off to Tata for a sum of Rs. 18,000/crore  of  which  Rs.  3,000/-  crore  is  cash  and  rest  Rs.  15,000/-  crore  is  a  loan transfer on paper;

(b) if so, the details thereof;

(c) whether apart from the other aircrafts, the 30 new 777 Jumbo jets each costing Rs. 2,000/- crore delivered in 2018 are also a part of the deal;

(d) if so, the details thereof; and

(e) the reason for diluting the assets of more than Rs. 1 lakh crore of Air India for Rs. 3000/- crore, which is actually three per cent of its value?

## ANSWER

## THE MINISTER OF FINANCE

## (SMT. NIRMALA SITHARAMAN)

- (a) - (e): A statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PART (a) to (e) OF LOK SABHA STARRED QUESTION No. *109 TO BE ANSWERED ON MONDAY DECEMBER 6, 2021 REGARDING ' SALE OF AIR INDIA'

(a),  (b)  &  (e):  On  account  of  huge  accumulated  debt  of  Air  India,  Government followed Enterprise Value (EV) bidding approach for strategic disinvestment of  Air India  and  its  identified  subsidiaries/JVs  (100%  shareholding  in  AIXL  and  50% shareholding  in  AISATS).  Under  the  EV  approach,  bidders  were  to  quote  a combined debt and equity value with a split of 85% as debt and minimum 15% as equity  consideration  for  allocation  of  quoted  EV.  The  strategic  disinvestment transaction has been carried out for the entire company as a going concern. Assets other  than  non-core  assets  and  liabilities  other  than  those  excluded  from  the transaction  will  remain  with  the  acquirer.  Non-core  assets  of  Air  India  and  its subsidiaries (book value of Rs 14,718 crore as on August 31, 2021) are not a part of the disinvestment transaction and will not be taken over by the successful bidder but transferred to Air India Asset Holding Company (AIAHL), 100% owned by GoI. The strategic disinvestment transaction has been carried out through an open, transparent and competitive process.

- (i) In the first stage of the transaction, seven Expressions of Interest (EOIs) were received  of  which  five  EOIs  were  rejected  on  grounds  of  non-fulfilment  of eligibility criteria and two EOIs were shortlisted for the second stage.
- (ii) Information  was  made  available,  under  confidentiality  undertaking  through Virtual Data Room (VDR) to the Qualified Interested Bidders (QIBs), who also inspected the assets and facilities of the companies under the transaction.
- (iii) The  Request  for  Proposal  (RFP)  was  issued  to  the  bidders.  The  Share Purchase Agreement (SPA) was then finalized and issued to the QIBs before submission  of  bids.  DIPAM  has  a  set  of  indicative  guidelines  for  strategic disinvestment  transactions  which  are  to  be  suitably  customized  to  each specific transaction. The Share Purchase Agreement (SPA) are based on

guidelines and have been finalized after detailed InterMinisterial consultations  at  several  fora,  the  Inter-Ministerial  Group  (IMG),  the  Core Group  of Secretaries on Disinvestment (CGD)  and  Air India Specific Alternative Mechanism (AISAM).

- (iv) In keeping with the best market practices and extant guidelines, the Reserve Price  for  the  transaction  was  fixed  at  Rs  12,906  crore  on  the  basis  of Business valuation carried out by the Transaction Adviser and  Asset Valuation carried out by the Asset Valuer. The Reserve Price was fixed only after receipt of sealed financial bids.
- (v) Two  financial  bids  were  received  following  a  competitive  and  transparent disinvestment  process.  The  highest  bidder,  M/s  Talace  Pvt  Ltd,  a  wholly owned subsidiary of M/s Tata Sons Pvt Ltd quoted an EV of Rs 18000 crore with a retention of debt in AI + AIXL of Rs 15,300 crore (85% of EV quoted) and the cash component of Rs 2,700 crore (15% of EV quoted).
- (vi) The SPA has been signed on 25 October, 2021. As per the SPA, a set of Conditions Precedent (CPs) have to be satisfied by the successful bidder, Air India and Government of India before closing of the transaction.
- (vii) The  transaction  has  been  supported  by  professional  advice  from  experts  Transaction  Adviser,  Legal  Adviser  and  Asset  Valuer,  who  have  been appointed through a transparent, competitive process.

(c) and (d): Sixteen B777 aircrafts in Air India are part of the transaction, of which fifteen aircrafts have been inducted during the period 2007 to 2010 and one aircraft in 2018.

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