“Business, as I have seen it, places one great demand on you: It needs you to be self-impose a framework of ethics, values, fairness and objectivity on yourself at all times”
-Ratan N Tata ,2006
In the domestic market, Air India now has the third-largest (9.4%) traffic share. Air Asia India and Vistara, both owned by the Tata group, were fifth and sixth largest, respectively, with 7.1%and 6.4% market share. JRD Tata launched Tata Aviation Service in 1932 with a Rs 2 lakh investment and piloted the maiden flight of Air India, then known as Tata Air Mail, three years later.
It was a freight flight, after all. It quickly turned into a profitable business. Tata Air Mail's profit increased from Rs 60,000 in 1933 to Rs 6 lakh in 1937 in just five years
THE COLLABORATION
Tata's relationship with the government changed after independence. In October 1947, the Tata Group proposed to the government that Air-India International be established.
The government planned to own a 49 percent part in the Air India business, with the option to buy another two percent. The Tatas were to own 25% of the company, while the balance would be owned by the general public. Within weeks, the idea was approved by the Nehru government.
NATIONALISATION
With the end of WWII, it was evident that British dominance of India was only a matter of time. By 1946, there were discussions in India about nationalising privately held airlines.
Despite this, the Nehru government opted to nationalise Air India five years after Tata agreed to give the government a 49 percent stake. JRD Tata was caught aback and expressed his "indignation" at the government's treatment of the aviation business.
TATA SONS ATTAINED AIRINDIA
After India's economy liberalised in the early 1990s, Tatas formed a joint venture with Singapore Airlines, which initially failed, but the two companies reunited in 2012 to start the Vistara, a local airline.
The Tatas will receive a 100% share in Air India and its low-cost arm, Air India Express, as well as a 50% investment in ground-handling company Air India SATS Airport Services Private Limited (AISATS)., as part of the winning bid
On Tuesday, the board of directors of Tata Sons, the Tata Group's holding company, addressed the acquisition of Air India and fundraising plans for the Rs 18,000 crore deal.
EFFECT ON CAPITAL MARKET
The stock market's newfound resilience, which was boosted by the Reserve Bank of India's (RBI) decision to maintain its liberal monetary policy on Friday, might drive the Nifty over the 18,000 level in the coming days. While investors will turn their attention to the September quarter results season, which begins this week, analysts warn that disappointments might take the wind out of investors' sails, as higher profits are considered as necessary to support high stock prices.
Last week, the Tata Group's overall market value increased by Rs 1.31 lakh crore to over Rs 23.42 lakh crore on Friday, owing to a rally in most Tata enterprises. Tata Consultancy Services, the group's cash cow, soared to a new high of Rs 3,990 ahead of the company's September quarter results, which were released after market hours on Friday.
The Tata Group's acquisition of Air India's businesses is likely to alter the profitability and valuation dynamics of listed airline companies InterGlobe Aviation and SpiceJet. Better pricing power, mostly due to consolidation, lower player aggression, and a rigorous focus on cost-efficiency are some of the factors that analysts believe will boost the industry's normalised operating profit before tax (Ebitda) in the long term. Analysts believe that in the medium run, players will have more bargaining power, resulting in higher yields.
The company's shareholders had already approved a capital increase of up to Rs 40,000 crore for the acquisition of Air India and the launch of its TataNeu app.
The board meeting elicited no public response from Tata Sons.
According to a banker, they are awaiting loan proposals from Tata Sons for the Air India takeover, and given the company's solid balance sheet and credit rating, it will have no trouble obtaining cash at lower rates. According to the official, the corporation would also consider raising capital through external commercial borrowings.
As of August 31, 2021, Tata Sons' net debt was Rs 25,396 crore, and the company's liquidity situation was backed by a cash and liquid investments balance of Rs 2,718 crore as of March 31, 2021.
CONCLUSION
The acquisition of Air India will let a number of Tata group companies to offer their products to the airline, including TCS, a software giant, and the soon-to-be-launched TataNeu smart app.
The company is also looking for chances for Tata Capital, its fast-growing financial services division, and Indian Hotels, the owners of the Taj hotel chain, which will be able to cross-sell products to Air India's customers and crew. Several Tata group enterprises, according to a source, are already delivering their products to the Tata group's two airlines.
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Well written!