BENGALURU -- Tata Sons, the holding company of top Indian conglomerate Tata Group, on Thursday gained control of national carrier Air India, ending the government's two-decade hunt for a buyer for an airline that has been kept afloat with taxpayer money.
"We are excited to have Air India back in the Tata Group and are committed to making this a world-class airline," Tata Sons Chairman N. Chandrasekaran said in a statement. "I warmly welcome all employees of Air India to our group and look forward to working together."
The airline was established by J.R.D. Tata in 1932, only for it to be nationalized in 1953.
The conglomerate's offer of 180 billion rupees ($2.4 billion), made through wholly owned subsidiary Talace, in October had emerged as the highest bid for the cash-strapped carrier. Tata's offer surpassed that of the next-highest bidder, SpiceJet founder Ajay Singh, by 29 billion rupees.
The acquisition entailed a cash payment of 27 billion rupees to the government, while 153 billion rupees go toward repaying part of the airline's debt. However, 460 billion rupees of Air India's debt will remain parked with a government-owned entity, backed by real estate assets that may not cover the debt.
The deal gave Tata Group full control of Air India, a full-service airline, and Air India Express, a low-cost carrier focused on short-haul international operations, particularly in the Middle East. Tata also got 50% ownership of the airlines' airport services and cargo handling unit, Air India SATS.
"The Air India strategic disinvestment transaction has been completed today," the government said Thursday, adding that it received the 27 billion rupees from Talace.
Tata Group will have about 25% of the domestic airline market by capacity, second to IndiGo. The group's empire now spans Air India, full-service airline Vistara through a 51% joint venture with Singapore Airlines, and low-cost carrier AirAsia India, in which Tata Sons holds an 83% stake. For the financial year ended March 2021, the entities cumulatively posted revenue of 157.06 billion rupees while losses stood at 101.6 billion rupees.
The homecoming for Air India also marks the end of the government's protracted divestment.
It all began in 2001, when the government initially sought to pare its stake in Air India. Up for sale was 40% equity in the airline, which had drawn interest from global carriers including Lufthansa, Emirates, British Airways and Singapore Airlines along with corporates such as Tata Group and the Hinduja Group.
Their interest fizzled after the government made it mandatory for a foreign buyer to partner with an Indian company to make an offer. A consortium of Tata Group and Singapore Airlines pulled out of the deal at the last moment.
In 2018, New Delhi put 76% of the carrier on the block, but found no takers. In January 2021, the government offered to sell its entire stake in the company.