These longer-tenure loans will replace the short-term loans of ₹18,000 crore the Tata Group had taken from State Bank of India (SBI) and Bank of Baroda (BoB) in 2022 and renewed in 2023. Top public and private sector banks will be competing for a part of the deal likely to be finalised as early as next month, people cited above said. “Air India is already gauging interest from banks and has now initiated talks through a request for proposal. All banks are evaluating how they can participate,” said a person aware of the plans.
ET OnlineWider Set of Banks Likely
“The company now has an idea of its cash flows in the short-to-medium term, and wants to tie up long-term funding to match these flows,” the person said.
In February, ET had reported that Air India had renewed Rs 18,000 crore worth of one-year facilities with State Bank of India (SBI) and Bank of Baroda (BoB). Those loans were a continuation of the debt facility availed by the company after the completion of the Tata Group’s takeover of the national carrier in January 2022.
“The new term-loan facilities that Air India is seeking will replace those loans and are a part of the company’s long-term debt strategy,” said a second person aware of the transaction. “Talks are at an advanced stage and could conclude by next month.”
SBI and Bank of Baroda, by virtue of being a part of the short-term facilities, are likely to be part of the term-loan consortium as well. Lead lender SBI did not respond to an email seeking comments. Officials at Bank of Baroda were not immediately reachable for comments. “All top public and private sector banks are taking a good look at what they can do with this loan. But it is ultimately Air India’s prerogative to decide whom to go with,” said the second person cited above. “This is a rupee facility and hence it is unlikely that there will be any foreign banks involved. But it is fair to assume that this loan will have a wider set of banks likely – unlike the short-term loan given in January.”
Air India is still finalising the amounts it wants to borrow in different tenures and the total amount could either exceed or fall short of the short-term loan the company took earlier this year, the second person said.
An Air India spokesperson said the company “would not prefer commenting” on this loan.
A third person aware of the transaction said that pricing for the loan is likely to be tight with very little margins for banks to make. “Hence, it is not lucrative to all banks and only the large lenders with different relationships with the group that could be harnessed later will be interested,” said the third person.
