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Windfall gain for Tatas: take over of Air India brings a stake in Cochin Airport

One of India’s most prestigious corporate houses, the Tata Group, is all set to take on Air India in January 2022 from the government of India, under its strategic disinvestment plans.
The Mumbai based conglomerate, with a valuation around $250 billion, will also be receiving a stake in Kerala’s Cochin Airport as part of this deal. This will make Tata the only airline to have an operational stake in a major airport at home.
The aforesaid acquisition is likely to be windfall gain for the Tata Group, which will get its share in the pie of Cochin International Airport and its subsidiary companies.
Cochin International Airports is a southern strategic centre and the third largest airport in the country in terms of international passenger traffic as it is a connecting hub for India to middle east nations.

Private carrier IndiGo, along with Air India and Air India Express, also uses Cochin to ferry rewarding ‘Malayali Gulf traffic’ to multiple places such as Jeddah, Dubai, Abu Dhabi, Riyadh, Sharjah, Doha, Kuwait, among other locations.

Air India has 3.27% stake in Cochin International Airport. According to a report of Business Standard, this stake has not been transferred to Air India Asset Holding Limited (AIAHL) as part of the pre-sale restructuring plan.

Under this plan, select assets and debts of the national carrier have been removed from the books of AIAHL. The stake in Cochin Airport will be with the buyer, as per the disinvestment documents released by the Centre.

The leading conglomerate producing coffee to cars, will get the stake in Cochin Airport as a buyer, according to disinvestment documents released by the Government of India. Air India had infused a sum of Rs 45 crore in this airport.

However, it will not get Air India’s stake in some other ventures including Hotel Corporation of India, Air India Engineering Services, Airline Allied Services and Air India Transport Services, which holds the cumulative worth of Rs 818 crore.

Tata Sons, the holding company of Tata Group, bid for Air India for the sum of Rs 18,000 and the deal was signed with the share purchase agreement with the centre in October this year.

Earlier, the government had accepted an offer to pay Rs 2,700 crore in cash and take over the airline’s debt worth Rs 15,300 crore for the servicing.

Barring the stake transfer to the Tata Group, State Bank of India (SBI), Bharat Petroleum (BPCL) and Housing and Urban Development Corporation (HUDCO) will collectively hold a 10 per cent stake in the Cochin International Airport.

Other than these state run players, the private non promoting shareholders of the Cochin International Airport include Synthite Industries (6.53%), Bavaguthu Raghuram Shetty (1.99%), Khadeeja Zeenath (1.57%), Shabira Yusuffali (1.45%) and Amina Mohammed Ali (1.31%).

In India, there is no precedent like Tata’s stake in Cochin Airport. More than 50 airlines in the world have a stake in airports and some even have outright ownership of airports, the report said citing data from the Center for Aviation.

The financials of the company have deteriorated in the financial year 2020-21, thanks to the coronavirus pandemic, which has put halt on the travelling and international flights.

In the financial year ended on March 31, 2021, Cochin International Airport reported a total income of Rs 296 crore with a net loss of Rs 92 and a negative EPS of -2.37 per share.

In the FY 2019-20, the company had reported a net profit of Rs 237 crore, supported by a total income of Rs 810 crore. The EPS stood at Rs 6.19 per share during the period under review.

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