Tata Group to secure loans from SBI-led consortium for Air India

A consortium of lenders led by the State Bank of India (SBI) will soon provide loans to the Tata Group for Air India’s operations as well as to repay the airline’s high-cost borrowings. After nearly 70 years, Tata Group took over ownership of Air India on Thursday. With the conclusion of the agreement, the group will own a 100% stake in Air India, Air India Express and a 50% stake in AISATS. The bankers said the SBI-led consortium had agreed to provide both term loans and working capital loans depending on the airline’s needs. All major lenders including Punjab National Bank, Bank of Baroda and Union Bank of India are part of the consortium, they added. “Many banks have agreed to refinance Air Inida’s debt to Tatas and the process has begun,” said one of the bankers.

Existing lenders who do not wish to participate in the refinancing of debt to Tatas will be reimbursed from the refinanced amount, the banker said. Life Insurance Corporation of India (LIC) is among the entities that provided loans earlier to loss-making Air India. Now, the IPO-linked LIC has decided to stop lending to the airline and will not participate in the current funding round led by the SBI, the bankers said. Talace Private Limited – a subsidiary of the Tata Group’s holding company, Tata Sons – won the takeover bid for debt-ridden Air India on October 8, 2021. He had offered Rs. 18,000 crore, including Rs. 2,700 crore in cash which has now been paid to the government.

The term loans to Talace will help repay Air India’s high-cost borrowing, bankers said. The amount of the loans likely to be granted by the consortium could not be determined immediately. “Air India’s strategic divestment transaction has been successfully completed today with the transfer of 100% shares of Air India to M/s talace Pvt Ltd along with management control,” it said on Thursday. DIPAM secretary Tuhin Kanta Pandey in a tweet. As of August 31, 2021, Air India had a total debt of Rs 61,562 crore. Around 75% of this debt or Rs 46,262 crore was transferred to an AIAHL special purpose vehicle as part of the loss-making airline’s handover to the Tata Group. Air India has started to suffer losses every year since its merger with Indian Airlines in 2007-08. Over the past decade, more than Rs 1.10 lakh crore has been infused in the form of cash support and loan guarantees to Air India to keep it afloat.

With the acquisition, Tata Group will have access to a fleet of 117 wide-body and narrow-body aircraft, and 24 Air India Express narrow-body aircraft. In addition, it will get control of 4,400 domestic and 1,800 international landings, as well as parking spaces at domestic airports. Air India will be the third airline brand in the Tatas stable, as it already has a majority stake in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd.