Which stocks might benefit from the Air India andTata Group deal?

In a historic event for the Tata Group, Prime Minister Narendra Modi met the chairperson of Tata Group N Chandrasekaran on 27th January to officially hand over Air India to the Tata Group. This marks the homecoming of Air India back to the Tata Group, which has agreed to pay over Rs 18,000 crores to buy the debt-ridden Air India.

Air India was first established by JRD Tata, the first chairman of the Tata Group, in 1932. Called Tata Airlines back then, the Tata Group was forced to hand over the airlines to the Indian government in 1953 after the government passed the Air Corporations Act and nationalized the aviation sector. Afterward, Tata Airlines was named Air India.

However, due to bad management, the profits of the airline declined, with Air India accumulating a total debt of Rs 61,562 crores as of August 31st, 2021. From this, around 75% of the debt, i.e. Rs 46,262 crores, will be transferred to AIAHL (a special purpose vehicle) within the handing over process.

Tata Group has inked a deal with an SBI led consortium of lenders to provide loans for the smooth functioning of the airlines. Banks such as Bank of Baroda, Union Bank of India, and Punjab National Bank are part of the consortium. The Tata Group has already planned the first action to provide enhanced meals on four Air India flights operating from Mumbai. It is expected that the Tata Group will make comprehensive changes in the management and operations of the airline.

This move can positively influence the stocks of Tata Group companies such as TCS, Tata Steel, Voltas, etc. As these stocks have the highest percentage of investments among Mutual Funds, investors can benefit from MFs having Tata Group stocks as holdings.