The Tatas are learnt to be interested in acquiring the cash-strapped Jet Airways, which has been put up for sale by its Indian lenders.
In a bid to find a buyer at the earliest to mobilise an estimated ₹8,500 crore for revival, banks, led by the State Bank of India (SBI), on Thursday decided to invite expression of interest (EoI) from interested parties on April 6, 2019 and the Tatas are planning to submit a bid, people familiar with the development said. The last date for submission of bids is April 9. A Tata Sons spokesperson said, “We do not comment on market speculation.”
Preliminary talks
In November last, the Tatas, who run Vistara and AirAsia India in joint ventures, held preliminary discussions to invest in Jet Airways. Tata Group chairman N. Chandrasekaran even took the proposal to the Tata Sons board for approval. However, they withdrew because Jet’s promoter wanted to retain control over the airline, which was not acceptable to the Tatas.
Now that Mr. Goyal is out of the scene, the Tatas may be interested in making a bid.
Earlier, it was estimated that they would invest about $1 billion to acquire a controlling stake in Jet, but now there has been a sharp erosion in value as the airline is on the brink. Analysts estimate Jet’s total liability at more than $2 billion, including bank and aircraft loans of ₹7,500 crore. Little is known about how much debt had been accumulated in last six months.
“The last six months has been damaging for Jet Airways. The delay has eaten away the company. Six months back, the valuation could have been better. Now, it is up to the banks on how much haircut they can accept,” said Ansuman Deb, aviation analyst, ICICI Securities.
It is understood that Singapore Airlines, which holds 49% stake in Tata SIA Airlines that runs Vistara, is assisting in the bidding process and may pick up a stake.
Broader plan of Tatas
According to analysts, the broader plan of the Tatas is to integrate its existing airlines ventures with Jet Airways. A combination of Jet, Vistara and AirAsia India can pose a tough challenge to IndiGo, which is heading towards a near monopoly situation.
“The Tatas will be a good option for Jet Airways. They can consolidate and combine the strengths. The Indian aviation sector needs consolidation,” said an analyst asking not to be named.
“Air India will survive because it is running with government money, IndiGo will be getting all powerful with $2 billion cash on its books of account. We need one more large airline to match up to IndiGo. Tatas can make it and give a tough competition to IndiGo. Others like SpiceJet and GoAir are too small,” he said.
