Tata's Merger Streak - A Sign of Industry Dominance or Risky Expansion?

Since 2020, The Tata's are in pursuit to consolidate their businesses sharing similar synergies with an intent to reduce the number of subsidiaries from approximately 110 to under 10 major verticals. Starting from the Tata consumer products which was a result of the merger of Tata Chemicals and Tata Global Beverages to the current Vistara and Air India merger in the aviation sector.

This is in line with the Tata Sons Chairman and MD N Chandrasekaran’s Philosophy of Simplification, Synergy and Scale which will help the conglomerate to focus on products and services which are of similar nature under the allied vertical by providing integrated solutions to its customers. This is done in order to bring cost efficiencies, simplify groups holding structure, and improve its overall performance. The ongoing Vistara and Air India merger is the hot trending topic in the aviation sector globally as it will create one of the world’s largest airline groups which will add value to the group’s proficiency to compete on a global scale.

Vistara known for its quality and service was established in 2013 as a joint venture between Singapore Airlines (SIA) and Tata Sons. The Shareholding structure being 49% and 51% respectively. Vistara will now be merged with Tata’s Air India on 12th November, marking the end of the its decade long journey. The merger aims to combine Vistara’s service superiority with Air India’s scale and reach, creating operational effectiveness, lowering route duplication, and augmenting the combined fleet.

Competition commissions of both the countries CCI(India) and CCCS(Singapore) approved the merger subject to certain conditions marking the beginning of the consolidation phase.  As per the details provided by the company, post the consolidation Tata Sons will have a stake of 73.8%. SIA will be investing RS.2059 crores as the Indian government recently approved foreign direct investment in the merged entity along with regulatory clearances and approvals by NCLT and DGCA. SIA will be holding 25.1% stake and SBICAP Trustee Co. will have 1.52%.

What Happens Next?

September 3rd will be the last date for bookings on the airlines website after which Air India will take over the bookings and all other allied services previously offered by Vistara. The memberships, loyalty programs, and points will be transferred to Air India. The merged entity will extend both full service and low- cost services across domestic and international routes and will majorly focus on delivering great customer experience, enhancing safety, reliability and on- time performance. With this consolidation, Air India shall be India’s prominent domestic and international carrier with a pooled fleet of 218 aircraft, making it India’s largest international carrier and second largest domestic carrier.  

This unification may well mark the former chairman Sir Ratan Tata’s three-decade- long-standing aspiration of making Air India a world class airline a reality. Vistara CEO, Vinod Kannan expressed that the merger will be offering passengers more choice with a larger fleet and a wider network while elevating the overall travel experience. Many analysts are of the view that the amalgamation will lead to the creation of shareholder value, increase productivity and increase consumer satisfaction by offering a huge range of choices.

Picture Credits

Picture 1 - Moneycontrol.

Picture 2 - Business Standard.