| Ratan Tata
Mumbai, Dec. 10: Aviation pioneers Tatas have made a modest return to the business by picking up a stake in SpiceJet, a low-cost airline.
In the middle of the international battle to take over Anglo-Dutch steel company Corus, the Tata group has bought close to 7.5 per cent in SpiceJet for $75 million.
Tata officials confirmed the development, but called the move merely an investment. “The Tata group through one of its financial arms will pick up the stake. The investment is purely of a financial nature and not a strategic one. It also should not be construed as our re-entry into the aviation business,” sources said.
The group could take the stake through a preferential allotment.
Senior executives of SpiceJet had recently disclosed plans to raise over $60 million through sale of equity to upgrade technology and other facilities like reservation, customer support and airport services.
Spicejet has already raised $80 million through an overseas bond issue since it started operations in May 2005.
The airline, based in New Delhi, was promoted by Ajay Singh, the non-resident Indian Kansangra family and Sanjay Malhotra, also an NRI businessman.
Earlier known as Royal Airways, an avatar of ModiLuft, it made a name offering Rs 99 fares for the first 99 days.
Although the entry of new airlines, several of them offering throwaway prices, has revolutionised Indian aviation, the businesses make heavy losses, including such established players as Jet Airways.
The Tata cash would, therefore, come in handy for SpiceJet. The Tatas may be calling it just an investment, but analysts see it as a significant development, given the fact that aviation has been close to the group’s heart.
The late J.R.D. Tata was among the first Indians to get a commercial pilot’s licence in 1929. A year later, there was a proposal to start an airmail service to connect Bombay (as it was known then), Ahmedabad and Karachi.
Two years on, Tata Aviation Service, the forerunner to Tata Airlines and Air-India, took to the skies. JRD nurtured the airline through to 1953, but there was disappointment when Jawaharlal Nehru nationalised it. In the nineties, the group wanted to float a domestic airline in alliance with Singapore Airlines, but that proposal was dropped as the then aviation policy barred foreign airline equity in the business.
A couple of years later, the Tatas again submitted a plan that was clear of foreign partners, but it was altered with a part of the equity being held by foreign investors like the insurance company American International Group and the Singapore Investment Corporation.
The proposal was cleared by the industry ministry but the civil aviation ministry opposed it and a frustrated Tata group withdrew the Rs 1,475-crore plan in 1998.
In late 2000, the Tatas formed a consortium with Singapore Airlines to acquire a 40 per cent stake in Air-India, but this move also came unstuck as the then Vajpayee government dropped the plan to privatise the airline.