According to The Economic Times, Tata Group, One of the leading groups of India, is still in charge of the airline’s acquisition so that it may seek an indemnity clause. According to the newspaper, it may seek the clause as part of the Air India privatization deal to protect itself from unanticipated lawsuits.
The Tata Group’s holding company, Tata Sons, is one of the top competitors to buy Air India, with the government hoping to complete the transaction by the end of the year or the first quarter of 2022. In a joint venture with Singapore Airlines, Tata already runs Vistara.
To collect revenue and pay off its debt, Air India started an auction of hundreds of its assets across India. The bidding for dozens of Air India properties around India began on July 8th and concluded on July 9th of 2021. The two final bids for Air India are Tata Group and Ajay Singh, CEO of Spicejet. In the preliminary bidding round for Air India, the Tata Group reportedly offered a greater price than Singh.
Tata Group officials requested an indemnity clause to be inserted in the final transaction contract because of the recent claims made by Devas Multimedia and Cairn energy as they are convinced to seize Assets of Air India and other government-owned properties. Given these dangers, the Group is attempting to shield itself from subsequent legal actions and hidden contracts that may arise once the acquisition is completed.
The length and value of an indemnification contract in the acquirer’s favor may be limited. According to the article, the Tata Group may request a sovereign guarantee for the assets of Air India because the airline may face problems on those properties due to the claims.
No words from TATA
Tata Sons has not taken any words on Air India’s acquisition ambitions, but according to ET, the company has hired top external aviation specialists to assist with the process. Apart from the Tata Sons M&A team, the Tata Group has assembled a team of M&A specialists from group operational firms such as Vistara, Tata Steel, and Indian Hotels to analyze every aspect before the deal is signed between the parties.
The previous month, Devas Multimedia teamed up with Britain’s Cairn Energy, a major oil company- to seize Air India’s overseas assets, seeking $ 1.2 billion in international arbitration from India filing a petition explained as “Revise the Ego” of India with the US District Court of New York asking Air India to pay a sum or forfeit its US assets, including aircraft, equipment, and artifacts.
“It is a comprehensive and complex process,” a Tata Group official stated. However, like VCNL, we have previously gone into complex M&A deals with the government, and Bhushan Steel has lately approached us about such difficulties.” Has the necessary expertise and insight to deal with it.” A group official has confirmed this statement. Air India’s overall debt is Rs 38,366.39 crore, according to preliminary estimates for 2019-20 that will be between April to March. In FY20, a debt of Rs 22,064 crore was transferred to Air India Assets Holding Ltd, a unique purpose company.
“Many of the proceedings are based on the claim that Air India is part of the Government of India, which may attach its assets to meet the claims against the Government of India. It’s hard to justify this position in the proceedings. Over time, we’ll see how it affects Air India’s withdrawal transactions, “Virkar told the publication.
Even though the Tata Group is concerned with acquiring the assets as soon as possible. These Lengthy and risky negotiations with the government are expected to push the deal’s completion to the first quarter of the following year.