One of the famous low cost carriers, Spicejet promoter Ajay Singh, is now set to put in a $ 1 billion war chest to bid on the 100% stake in Air India.
The government decided to divest 100% in Air India as they were likely to withdraw from government assets due to the loss of several years amid the COVID 19 pandemic. To collect income and repay its debt of Rs About 37,000 crore, the government has put out a tender for 100 percent of its equity.
According to the Economic Times, the proposal will be made through a Special Purpose Vehicle (SPV) which will most likely include two US-based funds. This SPV will bid for the entire government share in Air India. As a result of the partnership, Ajay Singh is expected to own at least 26% stake in the Special Purpose Vehicle (SPV), with US funds contributing around $ 700 million. According to reports, several adjustments are expected in the final agreement of this plan, which is currently in its preliminary stages.
Ajay Singh intends to make a personal contribution of $ 300 million, using a mix of his company’s shares and the shares attributed to him. This could potentially cause it to sell part of its investment in Spicejet once the units are listed. The SpiceJet CEO is expected to reduce his stake once the airline’s cargo unit (OFS) offer to sell is announced. The final arrangement may change, depending on the article, because designs are always changing.
According to recent stock information, Singh owns more than 60% of SpiceJet, with the remaining third being weighed down. SpiceJet’s market capitalization was Rs 4,850 crore at the last closing price of Rs 80 per share, valuing Singh’s stake in the airline at Rs 2,900 crore.
Tata Sons, the holding company of the $ 113 billion software salt conglomerate, recently hired Bain and Company and Seabury Group to conduct a due diligence on the divestiture of Air India and its subsidiary Air India Express. Ajay Singh of SpiceJet, who is also preparing to bid for the state-owned airline, is a new challenger.
In the meantime, the government has set a deadline for the submission of Air India’s financial offers by the third week of August. The transaction also includes the airline’s investment in low cost carrier Air India Express and a 50% stake in the freight and ground handling joint venture with Singapore SATS. Air India, which has been listed for sale, has a debt of Rs 37,000 crore, which would most likely be deposited with a government-owned asset holding company.
Among all Indian airlines, Air India has an international market share of 50 percent and a domestic market share of 12 percent. Bidders for Air India will need to provide enterprise value for the airline, which means they will need to assess the government’s involvement separately from the amount of debt they are willing to take on.
The government had previously said it had received “several expressions of interest” and that the deadline for submitting financial offers was set for the third week of August.
Tata group on the run
Tata Group and Ajay Singh are the last two bidders for Air India. The Tata Group apparently offered a higher price than Singh in the preliminary tender for Air India, but the latest offer will undoubtedly encourage the Tata Group to do more.
Even if the Tata group is keen to acquire the assets as quickly as possible. They must outbid Ajay Singh to claim the 100% stake in Air India. The competition is going to be fierce. This will surely benefit Air India or the government itself.