AIM-listed and India-focused private equity firm Elephant Capital has added a new company to its portfolio by acquiring 4.8 per cent stake in Air Works for £2.45 million ($3.9 million or Rs 17.79 crore) in what is the first tranche of a two-tier transaction. For Elephant Capital, this is the first addition to its portfolio this year. The PE firm has already pumped in more money in hospitality firm EIH Ltd (which runs the Oberoi Hotels) in a recent rights issue.

The deal values Air Works at around $81.25 million or Rs 370 crore in its third round of funding. Elephant Capital’s co-investment vehicle will be investing £0.44 million (Rs 3.2 crore).

Air Works is an independent provider of aviation maintenance, repair and overhaul (MRO) services in India, and provides aircraft paint and refinishing services in the UK. Incepted in 1951 by the Menon family, Air Works provides a full suite of services to business and commercial aircraft in India, the UK, the Middle East and South-East Asia.

Air Works is also backed by a syndicate of private equity investors such as GTI and New Enterprise Associates (NEA), besides Delhi-based infrastructure firm Punj Lloyd. The GTI Group had invested into the aviation services provider in 2007, along with Punj Lloyd. A few months ago, both NEA and GTI put in fresh money in Air Works.

Its capability has now grown to approvals for maintaining over 100 business aircraft in India across 14 locations. Working through its Air Livery subsidiary, Air Works has turned out to be one of Europe’s largest providers of aircraft paint services to marquee clients.

Commenting on the transaction, Gaurav Burman, managing partner of Elephant Capital LLP said, “The MRO market in India is experiencing rapid growth due to the increasing demand for new aircraft, driven by the demand from both commercial aviation and business aviation sectors. Air Works is the leading operator in this space, with a first mover advantage in the domestic market and we believe, is well-placed to capitalise on this growth going forward.”

Air Works had recently established a dedicated facility for Honeywell International, the world’s largest maker of airplane controls. It also acquired the UK-based aircraft refinishing company Air Livery UK Plc for an estimated amount of Rs 112.5 crore, making it one of the world’s largest providers of aircraft paint services. Airworks’ facility at Hosur is expected to be the first dedicated aircraft paint facility in Asia.

The MRO space has seen some private equity action in the past. In 2009, GE Equity, the subsidiary of General Electric, acquired 30 per cent stake in Kerns Aero Products for $2 million. In 2007, Subhkam Ventures invested an undisclosed amount in Trusted Aerospace and Engineering Pvt Ltd.

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