Air India To Be Valued At Over Rs 36,000 Crore After Vistara Merger
Air India's equity valuation is at a slight premium to IndiGo's on market cap-to-market share multiple.
Air India will be valued at Rs 36,114 crore after Vistara's merger in the third such consolidation in the domestic aviation sector, according to calculations by BQ Prime.
Tata Sons Pvt. and Singapore International Airlines have agreed to merge their joint venture Vistara with Air India, which the Indian conglomerate acquired from the government.
The deal was preceded by a 60% reduction of Air India's equity from Rs 10 to Rs 4. It will be followed by the merger of Talace, a wholly owned subsidiary of Tata Sons that houses other airlines, with Air India before merging Vistara is merged with it.
The deal will give Singapore Airlines a 25.1% stake in Air India. The merged entity will include Air India Express and AirAsia India, a 50% interest in Air India SATS Airport Services, and Vistara.
Singapore Airlines will get a 19.4% stake in exchange for its stake in Vistara, valuing the full-scale airline at Rs 7,006 crore, according to calculations based on disclosures made by Singapore Airlines to the Singapore Stock Exchange.
In addition, SIA will also infuse Rs 2,058.5 crore for a 5.7% additional stake in the merged Air India, giving the foreign airline 25.1% of Air India, which will have a 23% market share of the domestic and international traffic.
In comparison, SpiceJet Ltd. is valued at Rs 2383.3 crore, and InterGlobe Aviation Ltd., which operates Indigo, is valued at Rs 73,409 crore, according to BSE data. Air India Group had a market share of 25.9% in October, and IndiGo led with 56.7%.
Air India's equity valuation is at a slight premium to IndiGo's on a market cap-to-market share multiple. The combined Air India will have 218 aircraft and will fly to 52 domestic and 38 international destinations.
Fund Infusion Plan
Singapore Airlines has indicated that it would infuse more funds worth Rs 5,020 crore over the next two years, subject to business plans and targets. That means Tata Sons will have to inject up to Rs 15,000 crore to maintain proportionate stake in the carrier.