NCLT Green-lights Air India-Vistara Merger

DALLAS — The National Company Law Tribunal in Chandigarh gave its approval on Wednesday, June 5, for the merger between Air India (AI) and Vistara (UK).

As per details provided by the companies, the post-merger shareholding structure of Air India Ltd. will be as follows: Tata Sons Pvt. will have a 73.8% stake, Singapore Airlines Ltd. will have 25.1%, and SBICAP Trustee Co. will have 1.52%.

In March 2023, Vinod Kanna, CEO of Vistara, told Airways that as the airline embarked on this new phase of its growth journey, it looked forward to the merger with AI, "a legendary brand with a rich history and the pioneer of civil aviation in the country...," thus bringing "Indian aviation under the spotlight on a global stage."

"Having said that," Kanna added, "the integration process will take time; and until it is completed, it is business as usual for all stakeholders including customers, as we continue to operate as an independent airline and focus on our organic growth."

Condition for the Merger

The tribunal instructed that following the effective date of the merger, Talace and UK will be dissolved without undergoing liquidation. All rights, entitlements, and obligations of the merged entities will be transferred to AI.

Employees of the dissolved companies will transition to AI, retaining their existing terms and benefits. Additionally, contracts and liabilities will be assumed by AI, which will also proceed with any ongoing legal matters.

The merged entity is required to finalize all merger-related procedures, such as securing approval for foreign direct investment and obtaining essential security clearances, within nine months from the date of the order.

Ndtvprofit.com reports that the parties involved in the merger proceedings before the tribunal included Talace Pvt. (Transferor Company 1), the parent company of Air India; Tata SIA Airlines Ltd. (Transferor Company 2), operating as UK; and Air India Ltd. (Transferee Company).

Further, the merger plan encompassed the restructuring of AI's share capital, merging Talace and Tata SIA with AI, and issuing new shares to Singapore Airlines (SQ), a stakeholder in UK.

The companies also communicated with the Income Tax Department, the Competition Commission of India, the Ministry of Civil Aviation, and other relevant bodies. The tribunal noted the absence of objections.

Finally, the tribunal emphasized that the merger scheme must adhere to all legal requirements and financial obligations. It clarified that the order does not absolve the companies from tax liabilities, stamp duty, or other statutory dues, nor does it impact the tax treatment of transactions under the Income Tax Act.

Merger in the Making

In October 2022, SQ and Tata Group, the joint owners of UK, revealed they were looking at a possible merger AI. A month later, a report in India’s Economic Times revealed that SQ had reached an agreement with AI, lowering the former’s stake in UK to 20-25%.

The agreement included less board representation for SQ in the venture partner UK. The Changi-based carrier was more interested in developing hubs outside of its home airport but had been pleased with its investment in UK.

That same year, in an official stock market announcement, SQ stated, “SIA is currently in confidential discussions with Tata to explore a potential transaction in relation to the securities of Vistara and Air India Ltd, a subsidiary of Tata. The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India.”

On July 21, 2023, the NCLT sanctioned meetings for UK's secured and unsecured creditors, AI's unsecured creditors, and the preference shareholders of both Talace and AI. Notably, the need for meetings with the equity shareholders of the three companies was waived by the tribunal.

Subsequently, on Sept. 26, 2023, the companies filed a second motion petition and garnered nearly unanimous consent from their creditors. The scheme received 100% approval from UK's secured creditors, 99.79% from its unsecured creditors, and 99.99% from AI's secured creditors.

The Case for Vistara

Vistara has quietly become the second-biggest domestic airline in the country. The airline serves a dozen international destinations from its hubs at Delhi (DEL), Mumbai (BOM), and Pune (PNQ), including London (LHR), Paris (CDG), Dubai (DXB), and Bangkok (BKK), among others.

With over 70 aircraft, the backbone of the airline’s international fleet is the Boeing 787-9 Dreamliner, for which the carrier operates three examples.

Considering the headlining aircraft order from AI last year, the combined carriers would form a strong competitor to India’s largest airline Indigo (6E). The country has a strong domestic and international market, one which is expected to double over the next ten years.