Tata-owned Air India plans to borrow Rs 18,000 crore from State Bank of India (SBI) and Bank of Baroda (BoB) to refinance its existing debt over the short term, according to a report by the Economic Times (ET). This debt will be a continuation of the facility availed last year after the Tatas took over the airline and is being availed until a long term debt strategy is finalised, the ET report said.
Citing a person privy to the development, ET said, "Tatas decided to continue with the existing borrowing arrangement for another year, though they will eventually make a long-term debt strategy. The loans are at a higher rate than last time, mirroring the sharp rise in the interest rates in the last one year."
The interest rates will be higher because the repo rate has been raised by the Reserve Bank of India by 225 basis points since the airlines took loans from SBI and BoB in January 2022.
Earlier, Air India had taken loans worth Rs 10,000 crore from SBI and Rs 5,000 crore from BoB at an interest rate of 4.25 per cent. The new interest rate is expected to be 6.5 per cent.
Apart from restructuring the operations of Air India, Tata Group is also working on merging its various units, including AirAsia India and Vistara. Vistara is co-owned by the Tata Group and Singapore airlines.
"Completion of the merger formalities is an important milestone for the group's plans for Air India in the future because the nature and the amount of funds will be crystallised by then...Banks will hence be waiting for a pie of this top-rated corporate loan sometime later in 2023," another person aware of the matter told ET.
The airline, after months of closely-guarded, tough negotiations, is set to place an order for 190 Boeing 737 MAX narrow-body aircraft as well as some 20 Boeing 787s and 10 Boeing 777X planes on a day marking one year since Tata Group took control of the former state-run carrier, according to Reuters.