Ownership hurdle: Tata Group's airport plans may not take off

Tata Sons’ plans to make another big splash in the aviation space have been hit due to ownership hurdles.

According to a CNBC-TV18 report, Tata Group was planning to bid for a 100 percent stake in the Chennai airport. However, due to a cross ownership clause in the request for quotation, Tatas may not be allowed to participate in the bidding process.

According to the request for qualification, the special purpose vehicle, which is planning to bid for the Chennai airport, should not include any equity ownership of a scheduled airline, cargo airline, or associates in excess of 10%. This condition shall be deemed to form part of the Joint Bidding Agreement. And since Tata Sons, the holding company ofTata Realty and Infrastructure ( TRIL) , has recently entered into a 51% joint venture with Singapore Airlines, TRIL as a subsidiary of Tata Sons will become as associate of the airline and thus will not be able to bid for the airport, the CNBC-TV18 report said.

[caption id=“attachment_1076735” align=“alignleft” width=“380”]  The government had allowed privatization of six airports in August this year.[/caption]

The government had allowed privatization of six airports in August this year.

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Tata Group’s interest in this clearly comes at an appropriate time, considering that the Tatas have announced two airline joint ventures (JVs) this year - one with Air Asia and one with Singapore Airlines recently.

Experts told _CNBC-TV18 t_hat the airport foray will not only help them expand their base further but help them gain market share in the aviation space too.

Tata Realty and Infrastructure (TRIL) in their recent representation to the government had sought for change in this clause, by changing the term ‘associate’ with ‘subsidiary’ of the airline, so as to ensure TRIL’s participation in the bidding process, _CNBC-TV18 r_eported. However, if the Tata Group is not allowed to bid for the airport project, it will impact the group’s plans to expand in the aviation space significantly.

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TRIL has also sought details on tariff regulations from the government for the next five years. They have sought clarity on the amount they will have to pay to Airport Authority of India. In the past, other airport companies like GVK and GMR had also raised similar concerns.