Explained | The challenges that await the Tatas and Air India
The Hindu
Tata Sons would have to deal with several operational mandates and circumstances put forth by the COVID-19 pandemic as they take control of the erstwhile national carrier
The strategic disinvestment of the erstwhile national carrier Air India was completed on January 27 this year. Having taken over Air India’s operations, the winning bidder, Tata Sons faces the challenge of making the carrier profitable toggling through the several operational mandates, it agreed upon during the bidding process. The coronavirus pandemic too could potentially create hurdles of sorts.
Secretary of the Department of Investment and Public Asset Management (DIPAM) Tuhin Kanta Pandey had stated on Oct 8 last year that Air India’s total debt stood at ₹ 61,562 crore, as of August 31, 2021.
Tata Sons’ winning bid was for ₹ 18,000 crore. The number consisted of a cash component of ₹ 2,700 crore, which would be directly transferable to the Government of India. The rest, that is, ₹ 15,300 crore would be the debt that the bidder would have to absorb.
This implies, Air India’s remaining debt amounted to ₹ 46,262 crore. This would be transferred to the Govt of India’s Air India Asset Holding Limited.
Mr. Pandey had stated back then that Air India was operating at a daily loss of ₹ 20 crore.
To bail out the erstwhile national carrier, the Government of India had infused a total of approx. ₹ 1.10 lakh crore since FY 2009-10, Mr. Pandey had mentioned on Oct 8.
As per the terms laid out in the Share Purchase Agreement, Tata Sons would not be able to offload more than 51% stake in the erstwhile national carrier for a period of one year. The new owner, though allowed to go ahead with mergers and acquisitions, is required to be in compliance with the mentioned clause.
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