Tata Sons is reportedly in talks to buy out its Malaysian partner AirAsia Berhad’s stake in their joint venture airline. According to a Business Standard report, the group may partner with financial investors to acquire a 49% stake in Air Asia India, currently held by AirAsia Berhad.
The sale is likely to happen at a steep discount because aviation as a sector has taken a major beating in the COVID-19 pandemic.
AirAsia India is a joint venture between the Tata group and AirAsia Berhad, where the Tatas own 51% stake.
This news comes at a time when the Tata group has emerged as the sole bidder for India’s nationalised carrier Air India. The group also operates Vistara Airlines in India in a JV with Singapore Airlines. Buying out AirAsia’s Berhad’s stake could be seen as the company consolidating its airlines business in the country.
The BS report quotes sources in Tata as saying that AirAsia group CEO Tony Fernandes was demanding a huge valuation for AirAsia India, but with AirAsia Berhad now having financial trouble, the tables have reportedly turned.
Earlier this week, AirAsia Group had said that it was looking for investors for certain segments of the group, following which there were media reports that Tony Fernandes was mulling a stake sale in the India and Japan ventures.
In fact, in June, while speaking at a Credit Suisse webinar, Tony Fernandes reportedly hinted at exiting the Indian market saying, “we would never say that we would never exit India.”
On Wednesday, auditor Ernst & Young said that there is a significant doubt over AirAsia Group ability to continue as a going concern as the group’s liabilities exceeded its current assets by 1$430 million at the end of 2019.
Following this, the shares of the Malaysia-based airline group slumped nearly 18% following which trading was halted until 2:30 pm.
As per the BS report, AirAsia Berhad registered a loss of $188 million in the March quarter, while AirAsia India saw a loss of Rs 330 crore.