SIA to invest additional Rs 3,195 cr in Air India after Vistara merger

Singapore Airlines will make an additional investment of Rs 3,194.5 crore in Tata Group-owned Air India post-merger of Vistara in November.

The merger, announced on November 29, 2022, and set to be completed on November 11, 2024, will result in Singapore Airlines having a 25.1 per cent stake in the enlarged Air India.

Full-service carrier Vistara, which started flying on January 9, 2015, is a joint venture between Tatas and Singapore Airlines, where the latter holds a 49 per cent shareholding.

Singapore Airlines (SIA) Group on Friday said its consideration for the merger comprises the 49 per cent interest in Vistara and Rs 20,585 million (Rs 2,058.5 crore) in cash in exchange for a 25.1 per cent equity interest in the enlarged Air India.

Post-merger, SIA expects to recognise a non-cash accounting gain of around 1.1 billion Singapore dollars and also start equity accounting for its share of Air India's financial results.

According to a release on Friday, the merger includes an agreement for SIA to contribute its share of any funding previously provided by Tata prior to the completion of the merger, together with relevant funding costs up to Rs 5,020 crore that would allow it to maintain 25.1 per cent stake in Air India.

"SIA's additional capital injection is expected to be Rs 3,194.5 cr (equivalent to SGD 498 million), based on Tata's funding to Air India to date. This will occur after the completion of the merger and within November 2024 through subscription to new Air India shares.

"Future capital injections will be considered based on Air India's requirements and available funding options," according to the release issued while announcing the airline's financial performance for the six months ended September 2024.

The merger of Vistara with Air India will mark a major consolidation in the fast-growing Indian aviation space.

SIA said the merged entity will have a significant presence across all key Indian air travel segments, including domestic, international, full-service, and low-cost operations.

"This will strengthen SIA's multi-hub strategy, allowing it to continue participating directly in India's large and fast-growing aviation market," it added.

Recently, Air India and SIA recently agreed to significantly expand their codeshare agreement, adding 11 Indian cities and another 40 international destinations to their network.