Following the anticipated merger of Vistara with Air India, Singapore Airlines is all set to invest Rs 3,194.5 crore into the Tata Group owned airline. The announcement of the merger was made on 29 November 2022 and is scheduled to be completed on 11 November, 2024. Once the merger is complete, Singapore Airlines will own 25.1 per cent stake in the combined entity.
Details of the investment
Vistara was established in January 2015 and is a joint venture between Tata Group and Singapore Airlines with the latter holding a 49 per cent stake. As per the merger rules, Singapore Airlines (SIA) will contribute its 49 per cent stake in Vistara along with an additional Rs 2,058.5 crore, a total of 25.1 per cent equity interest in the newly consolidated Air India. This commitment has been confirmed by the SIA Group on Friday, outlining a one-time accounting benefit of approximately 1.1 billion Singapore dollars.
According to the merger deals, SIA will also cover any funding contributions done by Tata prior to the merger’s completion, with related funding costs up to Rs 5,020 crore. The arrangement has been made in such a way so that SIA retains its 25.1 per cent stake in Air India and lines up with Tata’s capital commitments to the airline till today.
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Merger impact on Indian aviation sector
After the completion of the merger in November 2024, SIA’s additional investment is likely to be total Rs 31,945 million, with the help of subscription to new shares in Air India. As per the release, the further capital injections into Air India will be made after evaluating the airline’s funding demands and the financial options which will be available.
The merger indicates a remarkable shift in India’s aviation sector and will bring substantial consolidation in an industry which continues to witness rapid development. The new entity will spread its footprint across various segments. Singapore Airlines outlined that under the latest agreement, the multi-hub strategy will get a boost and will also provide assistance in its direct engagement in India’s expanding aviation sector.
(With inputs from PTI)