Onerous terms likely to deter Tata Group from bidding for Air India
Photo Credit: Shah Junaid/VCCircle

India’s steel-to-autos conglomerate Tata Group, widely seen as a potential suitor for Air India, is unlikely to consider a bid for the state-run carrier as the government’s terms are just too onerous, two sources familiar with the matter said.

India, keen to sell the loss-making, debt-ridden airline, finalised plans in late March to divest a 76 percent stake and offload about $5.1 billion of its debt.

But the government has stipulated the winning bidder cannot merge the airline with existing businesses as long as the government holds a stake. The winner may also be required to list Air India and would need to abide by conditions designed to safeguard employee interests, restricting its ability to cut staff.

Since the terms were disclosed, no company has come forward to say it is interested or to reaffirm previous interest, while Jet Airways and rival IndiGo, have already publicly opted out of the race.

Tata Group, which already owns stakes in two airline joint-ventures in India, does not see “how a deal would be workable” under the current terms, said one of the sources, who asked not to be identified due to the sensitivity of the matter.

The same source also said the airline had too much debt and noted there was little clarity on what a buyer would be allowed to do with the airline’s large workforce.

“Anyone who puts money upfront ... even for Tata to put in that kind of money, it would want complete control,” added the second source.

Tata Sons, the holding company for the conglomerate Tata Group, declined to comment.

Prior to the disclosure of the terms, there had been some expression of interest from the group.

In January, Leslie Thng, the chief executive of Vistara, a joint-venture between Tata and Singapore Airlines told reporters its owners were open to evaluating a bid for Air India. Vistara declined to comment and Singapore Airlines had no immediate comment on Wednesday.

Last October, Tata Group Chairman N. Chandrasekaran, said in a TV interview the group would “definitely look” at Air India once the privatisation process was finalised.

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