Lok Sabha Question No. 1172 (UNSTARRED), answered on 2021-12-06
Subject: Purchase of Air India by Tata Group
Ministry: FINANCE
Asked by: Balashowry Vallabbhaneni, Adoor Prakash, Ritesh Pandey, Asaduddin Owaisi, Sougata Ray, Ravneet Singh, Anto  Antony, D. Ravikumar, P. Velusamy

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF INVESTMENT AND PUBLIC ASSET MANAGEMENT (DIPAM)

## LOK SABHA

## UNSTARRED QUESTION No. 1172

## TO BE ANSWERED ON MONDAY, DECEMBER 6, 2021

Agrahayana 15, 1943 (Saka)

## Purchase of Air India by Tata Group

1172: Shri Balashowry Vallabhaneni, Shri Asaduddin Owaisi, Shri Ravikumar D, Adv. Adoor Prakash, Shri Anto Antony, Shri Ritesh Pandey, Shri Ravneet Singh Bittu, Shri Velusamy P and Prof. Sougata Ray

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has finally sold out Air India to Tata Group, if so, the details  thereof  and  the  reasons  thereof  along  with  time  by  which  the  Tata Group is likely to take over Air India;
- (b) whether  the  guidelines  given  by  the  Ministry  of  Finance  (DIPAM)  has  been included in the Sale/Purchase Agreement of Air India, if so, the details thereof;
- (c) whether the issues of assets and liabilities have been settled out including any outstanding dues, if so, the details thereof along with the total money received by the Government as sale proceed of Air India;
- (d) whether it is fact that many Government departments/autonomous bodies owe a huge sum to Air India for availing credit facilities;
- (e) if so, whether these dues have been cleared, if so, the details thereof; and
- (f) the fate of exiting Air India employees after the sale along with the steps taken by the Government to protect the interest of the employees?

## ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KISHANRAO KARAD)

(a) to (c): 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 these guidelines and have been finalized after detailed Inter- Ministerial 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 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.

The transaction can be closed after the CPs are satisfied.

(d) & (e): Government Departments / Autonomous Bodies owe Air India Rs 244.78 crore as on September 30, 2021. Out of this, Rs 30.38 Crore has been recovered as on 30.11.2021.

(f):  The  sale is on a 'going concern' basis and the employees shall continue to be employees in terms of the agreed SPA signed on 25 th October, 2021. Employees cannot  be  retrenched  for  a  period  of  one  year  from  the  closing  date  and  will  be eligible for voluntary retirement scheme  with maximum  benefits in case of retrenchment in the second year from closing. The employees will also be eligible for other  benefits  like  gratuity,  provident  fund  benefits,  passage  rights,  in  accordance with applicable law/ industry practice. Employees have been allowed to stay in the residential colonies for a six-month period from closing. There is a provision postclosing  for  ESOP  scheme  for  employees.  Medical  benefits  will  be  provided  to existing employees by the strategic buyer as per industry practice. Government has the  obligation  to  provide  medical  facilities  to  all  retired  employees  (as  on  closing date) and eligible existing employees (who have attained 55 years of age or above or have completed 20 years of service) and their spouses, post retirement.

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