The Tata Group may ask for an indemnity clause in the Air India privatisation deal to protect itself from unexpected claims or ‘hidden contracts’ once the deal is done. Nevertheless, the company has been intensifying its due diligence on the Air India deal. This development comes on the back of possible risks arising out of claims made by Cairn Energy and Devas Multimedia that are seeking to seize the airline’s overseas assets.
In the light of such risks, the company aims to protect itself from resultant court cases and hidden contracts that might emerge after the deal is done, stated officials in the know to The Economic Times.
Tata has put together a team of merger and acquisitions specialists from its companies including Vistara, Tata Steel, AirAsia and Indian Hotels, apart from the conglomerate’s M&A team to cross-check every minute details before the transaction is completed.
Air India was sued by Devas last month as it tried to recover the money it had won in arbitration awards against the Indian government. Devas and its affiliates are owed more than $1.5 billion by the government. Before that, Cairn Energy had sued the airline for the $1.2 billion arbitration award it had won in a tax dispute case.
A Tata official told the daily that they have undertaken massive and complicated exercises before like VSNL and Bhushan Steel which gives them the knowledge and understanding to handle such issues.
In the due diligence process too, the group has roped in top external aviation experts. The extended due diligence and prolonged negotiations is likely to delay the deal to the first quarter of next year, the daily stated.
The total debt of Air India according to provisional figures of 2019-20 stands at Rs 38,366.39 crore, after the transfer of debt of Rs 22,064 crore to the special purpose vehicle, Air India Assets Holding Ltd, as mentioned by the Civil Aviation Ministry in the Rajya Sabha.
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