Tata group’s bid for Air India to be aided by SBI

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Tata group, one of the top bidders for the soon to be privatised Air India, will be supported by India’s largest lender State Bank of India (SBI) by subscribing to Tata Sons debentures or funding the Special Purpose Vehicle (SPV) set up by Tata Sons for the acquisition, Business Standard reported on Tuesday. Many banks have given Tata group’s holding company a ‘AAA’ rating signifying higher safety and with the combination of Air India’s existing airline business would make it a formidable player in the market with IndiGo.

The publication said that it would also open many business opportunities, including in the retail segment. It also added that it was not clear about the form of instrument to be issued by the Tata group.

TCS key investor in Tata Sons

With a cash chest of Rs 912 crore as of March 2021, Tata Sons has already received shareholder’s nod to raise an additional Rs 40,000 crore as debt from banks and institutions. It holds 72% stake in Tata Consultancy Services (TCS), worth Rs 10.18 trillion, which gives the financial muscle to raise funds with ease.

In the last three years TCS has contributed Rs 20,000 crore per annum in the form of dividends and paybacks in order to raise additional funds. As of August 27, 2021, TCS has an outstanding amount of Rs 4,350 crore.

Presently, banks do not provide direct funding to corporates for acquisitions. Tata Sons cannot raise funds directly from Life Insurance Corporation of India (LIC), as it became a private limited company in 2017. Tata is yet to make any formal proposal to raise funds, according to the publication.

Last week, Tata group had confirmed that it made a financial bid for Air India, without giving much details. Apart from the Tata group, SpiceJet promoter Ajay Singh also made a bid.