By Mauro Orru and P.R. Venkat

The Indian government has agreed to sell its entire stake in ailing flagship carrier Air India Ltd. to private-sector conglomerate Tata Sons Pvt. at a valuation of 180 billion rupees ($2.41 billion) including debt, ending a yearslong effort to privatize the money-losing airline.

The government backed a bid by Talace Pvt., a subsidiary of the Tata Group conglomerate, with the transaction expected to be completed by the end of the year, a statement from the Ministry of Finance said Friday.

The deal agreed with Tata doesn't include assets such as land and buildings valued at INR147.18 billion, which will be transferred to a government-controlled asset holding company.

Acquiring Air India is something of a homecoming for Tata, which was founded by J.R.D. Tata under the name Tata Airlines in 1932. After World War II, Tata Airlines changed its name to Air India and became a public limited company in 1946.

"The Tata Group winning the bid for Air India is great news !... welcome back, Air India," Tata Emeritus Chairman Ratan Naval Tata tweeted.

Prime Minister Narendra Modi's government had put the debt-laden Air India on the block in 2018, but it attracted few bidders. It sweetened the offer in 2020 to lower the amount of debt the new owner would have to take on.

Air India is the country's biggest airline, operating in 56 Indian cities and 42 international destinations. It had a fleet of 146 aircraft as of Nov. 1, 2019, comprising 78 Airbus and 68 Boeing aircraft.

The flagship carrier, like many other state-owned airlines, has been hurt by increasing competition. The company has been posting losses for several years and has survived on a government bailout.

The divestment of Air India is part of the government's effort to mobilize funds to meet its development goals. Aside from Air India, the government is also selling state-run oil refiner Bharat Petroleum Corp. and diluting its stake in Life Insurance Corp.

Tata Sons is one of India's oldest private-sector conglomerates with interests ranging from manufacture of salt to automobiles and steel. It owns U.K.-based Jaguar and Land Rover.

Write to Mauro Orru at mauro.orru@wsj.com and P.R. Venkat at venkat.pr@wsj.com

(END) Dow Jones Newswires

10-08-21 0917ET