AirAsia
AirAsia

Tata Sons to raise stake in AirAsia India to 83.67%

AirAsia India had started as a joint venture between AirAsia Berhad and Tata Sons, where the former owned 49% and the latter 51%

Tata Sons is raising its stake in AirAsia India (AAI) to 83.67%, by picking up 32.67% of AirAsia Berhad’s stake. AirAsia India had started as a joint venture between AirAsia Berhad and Tata Sons, where the former owned 49% and the latter 51%. This transaction leaves AirAsia Berhad with a minority stake of 16.33% in the Indian airline..

This move comes soon after AirAsia Berhad shut down its Japanese operations. In a filing with the Malaysian stock exchanges, AirAsia Berhad said that Tata Sons purchased the stake for $37.7 million. 

“Since the start of the COVID-19 pandemic, the aviation industry has been one of the hardest hit industries. Airlines around the world have cancelled flights and grounded planes and AAI is no exception. Due to this, the Directors expect further capital requirements for AAI. As India is a non-core market for AirAsia (being a non-ASEAN country), the Company will continue to regularly re-assess its business strategies and dispose of non-core investments to augment its liquidity,” AirAsia said in its filing. 

It added that the transaction will reduce the company’s cash burn, and allow AirAsia to focus on key ASEAN markets. The cash received as purchase consideration will be utilised as working capital in Q1 2021, it added. 

“The Directors having considered the rationale for the Transaction and after careful consideration, are of the opinion unanimously that the Transaction is in the best interest of AirAsia and its shareholders,” a statement by the Directors read. 

The filing said that as part of the transaction, there will be a call option for the remaining 16.33%, which is exercisable by Tata Sons at any time after the transaction is completed. 

“In addition, there will also be a Put Option exercisable by AAIL in two tranches, with the first tranche being exercisable from 1 March 2022 until 30 May 2022, and the second tranche being exercisable from 1 October 2022 to 31 December 2022,” the release states. 

The Tatas also have a stake in the Tata SIA Airlines Limited, which operates as Vistara. Vistara is a joint venture between the Tatas and Singapore Airlines.  Tata Sons has also submitted an expression of interest for Air India.

AirAsia Berhad reducing its stake comes a few months after President (Airlines) of the AirAsia Group Bo Lingam, saying that the Indian business was draining cash, causing the group financial stress. At the time, he said that the group was reviewing its investment in India. 

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