 "Air India")
India’s largest public sector bank State Bank of India (SBI) will support Tata group’s bid for soon-to-be-privatised Air India by subscribing to Tata Sons debentures or funding the special purpose vehicle (SPV) set up by Tata Sons for the acquisition.
Bankers said the credit rating of Tata group’s holding company is “AAA” signifying high safety and a combination of Air India with its existing airline businesses would make it a formidable player — leading to a duopoly market with IndiGo. It would also open many business opportunities, including in the retail segment, an official said.
Another SBI executive said it was not clear about the form of instrument to be issued by the Tata group. But an option on the table is to subscribe to financial instruments such as debentures issued by bidding entity.
At present, banks in India do not provide direct funding (loans) to corporates for acquisitions. The SBI official said Tata has not yet made any formal proposal to raise funds. Tata Sons cannot raise funds directly from Life Insurance Corporation (LIC), another state lender, as it became a private limited company in 2017.
Tata Sons, which has a cash chest of Rs 912 crore as of March 2021, has already received shareholders’ nod to raise an additional Rs 40,000 crore as debt from banks and institutions. It holds 72 per cent stake worth Rs 10.18 trillion in Tata Consultancy alone, which gives it the financial muscle to raise funds comfortably.
The dividends and buybacks from TCS contributed Rs 20,000 crore per annum for the last three years to Tata Sons’ kitty and help it to raise additional funds. Tata Sons has outstanding NCD amount of Rs 4,350 crore as on August 27, 2021.
Bankers said the credit rating of Tata group’s holding company is “AAA” signifying high safety and a combination of Air India with its existing airline businesses would make it a formidable player — leading to a duopoly market with IndiGo. It would also open many business opportunities, including in the retail segment, an official said.
Another SBI executive said it was not clear about the form of instrument to be issued by the Tata group. But an option on the table is to subscribe to financial instruments such as debentures issued by bidding entity.
At present, banks in India do not provide direct funding (loans) to corporates for acquisitions. The SBI official said Tata has not yet made any formal proposal to raise funds. Tata Sons cannot raise funds directly from Life Insurance Corporation (LIC), another state lender, as it became a private limited company in 2017.
Tata Sons, which has a cash chest of Rs 912 crore as of March 2021, has already received shareholders’ nod to raise an additional Rs 40,000 crore as debt from banks and institutions. It holds 72 per cent stake worth Rs 10.18 trillion in Tata Consultancy alone, which gives it the financial muscle to raise funds comfortably.
The dividends and buybacks from TCS contributed Rs 20,000 crore per annum for the last three years to Tata Sons’ kitty and help it to raise additional funds. Tata Sons has outstanding NCD amount of Rs 4,350 crore as on August 27, 2021.
