NEW DELHI :
The government has issued a letter of intent (LoI) to the Tata group, the winning bidder for national carrier Air India, and hopes to sign a share purchase agreement (SPA) with India’s largest conglomerate soon, Tuhin Kanta Pandey, secretary of the finance ministry’s department of investment and public asset management (Dipam), said on Monday.
“LoI issued to the successful bidder in the strategic disinvestment transaction of AI (Air India). SPA will be signed soon,” Pandey said in a Twitter post.
An LoI is a document declaring the preliminary commitment of one party to do business with another and outlines the chief terms of a deal.
On Friday, India’s largest conglomerate was named the winning bidder for Air India, ahead of a consortium-led by SpiceJet Ltd chairman and managing director Ajay Singh.
Tata group holding company, Tata Sons Pvt. Ltd, through its wholly owned unit Talace Pvt. Ltd, submitted the winning bid of ₹18,000 crore as the enterprise value of Air India, against a reserve price of ₹12,906 crore.
The group will also assume ₹15,300 crore of Air India’s debt, with the remaining ₹46,262 crore taken over by the government’s Air India Asset Holding Ltd, a special company set up to hold the airline’s loans, four of its units and non-core assets. The Tata group will have to pay ₹2,700 crore in cash to the government.
Upon the completion of the transaction, which the government hopes to conclude by December end, the Tata group will be given full control of Air India and its low-cost unit Air India Express, as well as a 50% stake in ground handling company Air India SATS Airport Services Pvt. Ltd (AISATS), according to a finance ministry statement.
The Tata group now has to accept the LoI, after which the share purchase agreement will be signed, while conditions precedent to the transactions would need to be satisfied by the Tatas before they actually take over the operations, Pandey told PTI on Monday.
“Normally, within 14 days of acceptance of LoI, the SPA is signed. We expect the SPA to be signed fairly fast,” he said, adding that after SPA is signed, the regulatory approvals will have to come in, following which the handover process will start.
“When they give the letter of acceptance, they will give payment security of 1.5% of enterprise value which is ₹270 crore. ₹270 crore will be payment security in bank guarantee, which will be received by us along with acceptance letter to the LoI,” Pandey added.
With inputs from PTI.
Source: Live Mint