Tata Sons to buy 83.67% stake in AirAsia India

Mumbai: Tata Sons will shortly buy an 83.67% stake in AirAsia India, its joint venture with the eponymous Malaysian low fare carrier, said two people close to the development.

An announcement on the same is likely to be made as early as this evening.

Tata Sons currently owns 51% in AirAsia India while AirAsia Berhad owns the rest. The reason for the prompt purchase, apart from the Malaysian airline’s intent to exit its India business, is that Tata Sons wants to keep an entity ready to bid for Air India, said one of the people cited above. It’s other joint venture partner Singapore Airlines in Vistara is yet to be convinced to be on board for the investment.

The salt-to-software conglomerate has been in advanced talks for months for buying a controlling stake in AirAsia India. Recently, Tata from a no-compete clause, leaving it free to bid for an airline in the budget space. The Air India bid also includes Air India Express, its regional international low-fare arm.

The Tata group on December 14 submitted its expression of interest to invest in the state-run carrier Air India. It has been trying to woo Singapore Airlines to invest but the airline hasn’t given in yet, which means Tata may be to submit the final binding bit through its other airline entity: AirAsia India. To be sure, AirAsia India will itself be rebranded once the Malaysian airline’s stake has been reduced to slightly less than 17%.

AirAsia Berhad last month gave the clearest indication yet about exiting the India business, when its president Bo Lingam said the businesses in Japan and India had been “draining cash, causing the group much financial stress.”

In June, a Credit Suisse report cited AirAsia global chief executive Tony Fernandes on a plan to exit from India. In August, ET reported that the auditors of Tata Sons had raised doubts about the capability of the airline to continue as a going concern, months after AirAsia Bhd’s own external auditors EY had raised similar concerns.

On December 8, ET reported AirAsia India was in talks with the Malaysian parent to return seven planes leased from the latter.

Tata Sons chairman Chandrasekaran has stated that the airline businesses have to be consolidated and there cannot be multiple carriers, according to people with knowledge of the matter.

Source link