Tata Sons, the holding firm of the Tata group, plans to raise $4 billion to pump in fresh funds into Air India and refinance costly debt, citing two people privy to the matter, Mint has reported. The sources have told Mint that the Indian conglomerate looks to raise funds through a mix of equity and hybrid debt to refinance a part of Air India’s debt and revamp the airline.
“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.
Tata Sons acquired Air India in October last year at an enterprise value of $2.3 billion from the government.
Tata Sons spokespersons, however, did not respond to an emailed query by Mint on the fundraising plan.
Last month, another report pointed out that Tata Sons will likely make a provision for Rs 2,600 crore as accumulated losses for AirAsia India airlines.
The CCI in June this year approved Tata Group-owned Air India’s proposal to fully acquire the equity share capital of low-cost carrier AirAsia India. Tata Sons, which majorly owns AirAsia India with a shareholding of 83.67 percent and AirAsia Investment Limited controls the rest of the stake in the budget carrier.
Reportedly, according to the latest figures, Air India’s domestic market share shrank to 10.2 per cent in January 2021, just after Tata Sons completed the acquisition, from 11.6 per cent in January 2020.
In July, Air India’s market share further shrank to 8.4 per cent, while market shares of Vistara and AirAsia India, the Tata group’s other two airlines, stood at 10.4 per cent and 4.6 per cent, respectively, according to data compiled by the Directorate General of Civil Aviation (DGCA).