Tata Sons, the holding company of the Tata group, plans to raise a massive $4 billion to infuse fresh capital into Air India and refinance its costly debt, according to a report by Mint, citing two people directly aware of the matter.
Tata plans 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 people told as per the report, requesting anonymity.
Tata Sons had acquired the airline in October last year at an enterprise value of $2.3 billion from the government.
¡°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.
Last month, it was reported that Tata Sons will likely have to make a provision of Rs 2,600 crore as accumulated losses for AirAsia India. The company is seeking to absorb AirAsia India into Air India and merge with Air India Express, as per ET report.
Earlier this year in April 2022, Tata Group-owned Air India had proposed to buy the entire equity share capital of AirAsia India, in which Tata Sons already has a majority stake of 83.67%.
In July 2022, Air India¡¯s market share was 8.4%, while market shares of Vistara and AirAsia India, the Tata group¡¯s other two airlines, stood at 10.4% and 4.6%, respectively, according to data compiled by the Directorate General of Civil Aviation (DGCA), as per the report. Whereas Go First and SpiceJet¡¯s market share stood at 8.2% and 8%, respectively.
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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, as per Mint report.
Tata Sons is also reportedly about to close orders for around 200 narrow-body A320 Neo jets and wide-body aircraft. These are likely to be delivered by the beginning of next fiscal year.
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