SpiceJet promoter Ajay Singh to bid for Air India

One of the famous budget carriers- Spicejet promoter Ajay Singh is now ready to set a 1 billion $ war chest to bid for the 100% share in Air India.

The government decided to disinvest 100% in Air India as they were likely to withdraw from the government assets due to the loss from several years amid the COVID 19 Pandemic. To collect revenue and pay off its debt of Rs 37000 crore around, the government invited bids for 100 percent of its equity.

Photo: SpiceJet Boeing 737-800

According to the Economic Times, the proposal will be made through a special purpose vehicle (SPV) that will most likely comprise two US-based funds. This SPV will make a bid for the government’s whole share in Air India. Following the partnership, Ajay Singh is expected to own at least a 26 percent stake in the special purpose vehicle (SPV), with US funds contributing roughly 700 million dollars. 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 firm shares and stock allotted to him. This might potentially lead to him selling a portion of his Spicejet investment once the units are listed. SpiceJet’s CEO is expected to reduce his stake once the airline’s cargo unit’s offer for sale (OFS) is announced. The ultimate arrangement may alter, according to the article, because the designs are still in flux.

According to recent stock market disclosures, Singh owns over 60% of SpiceJet, with the remaining third weighed down. SpiceJet’s market capitalization was Rs 4,850 crore as of its last closing price of Rs 80 per share, valuing Singh’s stake in the airline at Rs 2,900 crore.

Tata Sons, the $113 billion salt-to-software conglomerate’s holding company, recently hired Bain and Company and Seabury Group to do due diligence on divested Air India and its subsidiary Air India Express. SpiceJet’s Ajay Singh, who is also preparing to bid for the government-owned airline, is a fresh challenger.

In the meantime, the government has set a deadline for financial bids for Air India to be submitted 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 cargo and ground handling joint venture with Singapore’s SATS. Air India, which has been placed up for sale, has a debt of Rs 37,000 Crore, which would most likely be lodged in a government-owned asset holding firm.

Boeing 737 MAX 10 AK.13 Photography
Spice Jet Boeing 737 MAX 10 Photo by AK.13 Photography

Among all Indian airlines, Air India has a 50 percent international market share and a 12 percent domestic market share. Bidders for Air India will have to provide an enterprise value for the airline, which means they’ll have to evaluate the government’s holding separately from the amount of debt they’re ready to take on.

The government had previously stated that it had received “several expressions of interest” and that the deadline for submitting financial bids was set for the third week of August.

Tata group on the race

Tata Group and Ajay Singh are the two final bidders for Air India. The Tata Group apparently offered a higher price than Singh in the preliminary bidding round for Air India, but the latest bid will undoubtedly encourage the Tata Group to do more.

Vistara A320neo VT-TYB Photo by Eurospot

Even though the Tata Group is concerned with acquiring the assets as soon as possible. They have to outbid Ajay Singh to claim for the 100% share in Air India. The competition is going to be fierce. This will surely benefit Air India or the government itself.

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