Ahead of Air India' strategic disinvestment, Tata increases stake in AirAsia India
Mumbai/IBNS: Tata Sons is all set to buy AirAsia Berhad's majority stake in AirAsia India as all eyes are set on the second phase of Air India deal, which reportedly the Tatas are most likely to win.
The Malaysian budget airline will sell 32.67% of its stake in Indian operations for $37.7 million, after which Tata Sons will hold 83.67% and AirAsia Berhad's share will shrink to 16.33%.
"AirAsia Group Berhad ("AirAsia Group" or the "Group") today announced the disposal of 32.67% of its equity shares in AirAsia (India) Limited (AAI) held by the Group’s wholly-owned subsidiary, AirAsia Investment Limited (AAIL). This brings its shareholding in AAI to 16.33%," AirAsia said in a statement on its website.
The Tata Group will also have the option to buy AirAsia's remaining stake at $18.83 million, said reports.
Also read: Tata Sons likely to bag Air India deal as govt decides to divest 100 pc stake in the struggling national carrier
According to reports, Tatas may use AirAsia as the vehicle for Air India investment, and the Malaysian partner's approval.
Air India's sale will also include Air India Express, a 100 per cent subsidiary of Air India which competes with AirAsia in India.
A report in Mint said a separate website for AirAsia India is already under process while TCS is creating a crew-scheduling software.
Explaining the rationale behind its move, President (Airlines) of AirAsia Group, Bo Lingam said, “This transaction is in line with our initiatives towards reducing cash utilisation for the Group and will allow us to use cash to grow market share in our core markets in Asean, particularly in Malaysia, Thailand, Indonesia and the Philippines as well as for our future expansion into Cambodia, Myanmar and Vietnam."
Earlier, AirAsia had exited Japan citing the same reasons, reports said.
The company said the transaction would help in strict cost containment and confine its strengthen its presence in ASEAN while continuing its market dominance for travel from ASEAN to India and North Asia.
“India will remain an important market for AirAsia. TSL has been an excellent partner and we look forward to continuing working closely together in other areas of growth,” he said.
According to the Mint report cited above, AirAsia said continuing its operations in India would mean investing more money in the Indian operations, which had suffered losses like other airlines due to the Covid-19 restrictions.
In the September quarter AirAsia India's revenue fell by 69%. The Tata Group also invested nearly Rs 490 crore in AirAsia India in FY20, while the JV posted a loss of Rs 317 crore in the same period, reported media.
The company has been making losses since it started operations in 2014. In FY20 results, Tata Sons informed that the Covid-19 induced lockdown completely eroded the AirAsia India net worth, and its auditors doubted the JV’s ability to continue.
The second phase of Air India's strategic disinvestment will begin on January 5, with the announcement of shortlisted interested bidders.
A request for proposal (RFP) will be made to them followed by a transparent bidding process, said a presentation by the ministry, reports said .