The Indian government has officially shortlisted the Tata Group and SpiceJet MD Ajay Singh as the final bidders for Air India. The news comes over two months after the list was originally set to be released. The final bidders will have access to key details about Air India for due diligence in the coming weeks before placing their final bids for the airline.

Down to two

According to Zee Business, the government has officially shortlisted two bidders in the drawn out privatization process. The shortlisting starts the clock on the next step of the process: due diligence. The two parties will receive access to Air India's financials, liabilities, and other important data needed to assess the airline and make a final bid.

It has long been expected that the Tata Group and SpiceJet's MD Ajay Singh are the top-two bidders for the airline. Two other bidders either pulled their bids earlier or were not eligible under the rules of the sale.

The due diligence and bidding process will at least take another two to three months before completion. This means we are unlikely to see the final bidder of Air India emerge until at least late this summer or even the winter considering delays. The government hopes to wrap up the process by the second quarter of the fiscal year (July 1st -30th September).

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Who is more likely?

The Tata Group is one of India's most recognizable and valuable conglomerates. The group has holdings across the industrial sector, consultancy, and manufacturing. Notably, Tata also owns the majority shares of two other airlines, full-service Vistara (in partnership with Singapore Airlines) and low-cost AirAsia India.

Tata has largely been seen as the front-runner during the bidding process considering its vast resources. Buying the airline could mean the group has to shuffle its three brands and possibly consolidate. However, this won't be an issue unless it actually wins the bid.

Perhaps one of the surprise bidders has been SpiceJet's Ajay Singh. Bidding in a personal capacity, Mr. Singh has partnered with a Middle Eastern sovereign wealth fund to place his bid for the national carrier, according to Times of India. The government previously eased the rules to allow foreign firms to buy up to 100% of Air India.

However, the bid does come at a surprising time considering SpiceJet's growing financial trouble with lessors and vendors. It would also be interesting to see how Air India will integrate with SpiceJet if Mr. Singh were to win the bid.

Not cheap

While the two bidders are going head to head to buy Air India, the airline does not come cheap. Air India's total debt is currently sitting at roughly ₹90,000 crores ($12.4bn), with another huge ₹10,000 crore ($1.37bn) loss expected for the last year.

While this figure does not include the government write-offs and other reductions (bringing the figure closure to $4 billion), any bidder will have to take on billions in debt to start with.

Under the terms of the sale, the winning bidder will have to pay 15% of the airline's enterprise value in cash and take the rest on as debt. While both sides are likely ready for this reality, it is a reminder of how much work (and money) is needed to fix the beleaguered airline.

What do you think about the future of Air India? Who is likely to win the bid for the carrier? Let us know in the comments!