According to a report by Mint, which cited two persons who were closely involved in the subject, Tata Sons Ltd, the parent company of the Tata group, aims to raise $4 billion to refinance expensive debt and inject new cash into Air India.
According to the persons who spoke to Mint on condition of anonymity, Tata intends to raise money through a hybrid debt and equity mix to repay a portion of Air India’s debt and modernise the airline.
In October of last year, Tata Sons purchased the airlines from the government for an enterprise value of $2.3 billion.
“The Tata group will soon start the process of hiring investment advisers, although informal discussions with a few foreign lenders and some private equity funds are already underway,” one of the people told Mint.
“The debt refinancing portion will be relatively easier as lenders within Tata’s existing banking relationships will step in,” the second person told Mint. “The equity component of the transaction may take a bit longer given that globally, the number of private equity funds that invest in airline business are relatively few,” the person added.
When Mint asked Tata Sons representatives about the fundraising strategy through email on Friday, they did not respond.
Another report from last month claimed that Tata Sons would probably set aside Rs 2,600 crore for AirAsia India airlines’ accumulated losses. The request by Tata Group-owned Air India to fully buy the equity share capital of low-cost carrier AirAsia India was accepted by CCI in June of this year. Tata Sons, which owns 83.67 percent of AirAsia India, and AirAsia Investment Limited jointly own the remaining portion of the budget airline.
According to the most recent data, Air India’s domestic market share decreased from 11.6 percent in January 2020 to 10.2 percent in January 2021, shortly after Tata Sons closed the acquisition.
According to figures compiled by the Directorate General of Civil Aviation, Air India’s market share further decreased in July to 8.4%, while market shares for Vistara and AirAsia India, the other two airlines owned by the Tata group, were 10.4% and 4.6%, respectively (DGCA).
The market shares of SpiceJet and Go First were 8.2% and 8%, respectively.
The leading airline in India, IndiGo, with a 58.8% domestic market share in July as opposed to 56.9% in June. In July, Vistara carried 1.01 million passengers and Air India carried 810,000.
“The fund infusion is crucial for Air India’s operational efficiency to regain market share. The fund will be used to bring in new aircraft and offer differentiated customer service initiatives, which will attract passengers,” said the first person.
According to the two people, Tata is overhauling and expanding Air India and its subsidiary Air India Express and is set to finalise deals for roughly 200 narrow-body A320 Neo jets and widebody aircraft. By the start of the following fiscal year, these are most likely to be delivered.