In response to the bids invited from Air India's existing lenders for a one-year general purpose loan of Rs 23,000 crore, Tata Sons' Talace has received offers extending more than Rs 35,000 crore. The lenders are reportedly ready to provide the loan at a rate of 4.25%.
Talace's bid of Rs 23,000 crores includes Rs 18,000 crore for taking over the airline's debt, and an additional Rs 5,000 crore for initial operating costs, according to a report by Economic Times.
The response to the bid is overwhelming, considering that the loan is unrated and unsecured. It shows the lenders' confidence in Tata's subsidiary Talace, which has already informed the banks that it would take at least six months before they can make any business projections for Air India's business. The interest rate of 4.25% is much below the marginal cost of the fund-based lending rate (MCLR), which is pegged at 7% for most banks.
Banks such as State Bank of India, Union Bank of India, Punjab National Bank and Bank of Baroda have approved the credit limits between Rs 12,000 crore and Rs 3,000 crore. Tatas will most likely convey to the banks about the allocation in the first week of January 2022. It may draw the sanctioned limits between January 10 and 15, Economic Times cited some unnamed sources.
Delay in handing over Air India to Talace
Talace Private Limited is a wholly-owned subsidiary of Tata Sons that has won the bid for acquiring India's national carrier Air India. The company was incorporated in August 2020.
Talace made the bidding win for Air India as Rs 2,700 crore as cash and Rs 15,300 crores debt takeover. In December 2021, Competition Commission gave a green signal to Talace's proposed bid to acquire Air India and its subsidiaries – Air India Express and Air India SATS Airport Services.
Government is yet to complete the transaction of handing over Air India and its subsidiaries to Talace. There are delays in terms of approvals and procedures.
Air India is returning to Tata Group after 68 years. The legendary industrialist and India's first pilot with commercial license JRD Tata launched Air India in 1932. The first service offered by the airline was between Karachi and Madras (current Chennai) via Ahmedabad and Bombay (present Mumbai). It started passenger services in 1938.