Tata Sons, Singapore Airlines pump in ?900 crore into Vistara

Mumbai: India’s Tata Sons Ltd and Singapore Airlines Ltd have infused a combined ?900 crore in Vistara, their joint venture airline in India, bolstering efforts by the carrier to improve its financial health and take delivery of new planes from Airbus SE and Boeing Co.

Of the total, Tata Sons pumped in ?459 crore of fresh equity by subscribing to two rights issues—one in December, the other in March.

Singapore Airlines added ?441 crore, according to documents filed by Tata SIA Airlines Ltd with the corporate affairs ministry and reviewed by Mint.

Tata Sons and Singapore Airlines own stakes of 51% and 49%, respectively, in Tata SIA Airlines, which runs the full-service airline, Vistara.

Following a board meeting on 6 March, Vistara informed the corporate affairs ministry on 18 March that the company had approved an issue of shares worth ?500 crore on a rights basis.

As per the rights issue documents, Tata Sons will purchase 255 million equity shares of Tata SIA Airlines at ?10 each, while Singapore Airlines will buy 245 million shares.

In December, Vistara raised ?400 crore through a separate rights issue by allotting 204 million shares to Tata Sons and 196 million shares to Singapore Airlines at ?10 apiece.

The equity infusion was to finance at least a threefold expansion in Vistara’s fleet by 2023 and to move “faster towards a break-even by enhancing its economies of scale”, said a top official at Vistara.

“The proceeds of the rights issue will be mostly used to fund the purchase and lease of 56 aircraft. The money will also help us in lowering losses and attaining break-even faster,” said the official.

“About 9-12 existing aircraft could be replaced by new ones, but if that happens, we may order six more, apart from the 56 already on order. The order includes both A320neo aircraft and Boeing 787s,” added the official.

Vistara’s order placed last July includes 13 A320neo planes and 6 787-789 Dreamliners from Boeing. At the time, the airline also announced plans to lease 37 new A320neo family aircraft.

The wide-body 787-789s will be tapped by Vistara to launch medium-haul and long-haul international flights. The A320neo aircraft are considered more fuel-efficient than the airline’s existing A320s.

In total, Vistara has raised at least ?2,900 crore through fresh equity infusion in the past six months.

Last October, the airline rasied about ?2,000 crore through a rights issue by allotting shares to both Tata Sons and Singapore Airlines, according to previous regulatory filings.

Vistara, which has a fleet of 22 planes, posted a net loss of ?431.30 in fiscal 2018, compared to a ?518.45 crore loss in the previous year. Like other carriers in India, the airline has been hammered by high operating costs and intense competition.

The value of net reserves and surplus at Vistara depleted to a negative of ?1,556.44 crore in fiscal 2018 from a negative of ?1,125.34 crore during fiscal 2017, according to the documents.

The airline’s total current and non-current liabilities increased to ?812 crore at the end of March 2018, compared to ?753 crore at the end of March 2017.

Net cash flows stood at a negative of ?393 crore for fiscal 2018.

Vistara is preparing to start international flights that would require a bigger fleet. The carrier received government approval in March to run overseas flights.

Vistara started operations on 9 January 2015 and operates around 120 daily flights to 22 destinations across India.

In the March meeting, Vistara’s board also revised the limits for issuance of standby letter of credit (SBLC) to about $195 million ( ?1,350 crore) for 2019-20.

“Pursuant to the company executing the lease agreement(s) for the lease of aircraft/engines with lessors and original equipment manufacturers… the company shall arrange to provide an SBLC from reputed bank(s) with minimum credit rating in favour of the lessor for an amount not exceeding $195 million during the FY 019-20,” according to a copy of the minutes of the meeting.

The board also raised the remuneration for Vistara chief executive officer Leslie Thng for 2018-19 to up to Singapore $1,200,000 (around ?6.13 crore), including performance bonus, perquisites and stock options, according to the note.

Vistara’s board also approved the remuneration of Thng for the rest of his term to up to S$1,400,000 (around ?7.15 crore) per annum.

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