Tata Sons Pvt. Ltd, the holding company of the software-to-steel conglomerate, has signed a pact with Malaysian budget carrier AirAsia Group Bhd to increase its stake in their India joint venture.
Tony Fernandes-led AirAsia said in a stock-exchange filing Tuesday it has agreed to sell a 32.67% stake in the joint venture for $37.66 million (about Rs 276.7 crore at current exchange rates).
The Malaysia airline previously owned 49% of AirAsia (India) Ltd while Tata Sons controlled 51%.
AirAsia said it will also have an option to divest its remaining 16.33% in the Indian venture to Tata Sons for $18.83 million. It can sell the stake in two stages in 2022.
Similarly, Tata Sons will get an option to acquire AirAsia’s remaining stake at any time after the current transaction is completed. The deadline to close the deal is March 31, 2021.
AirAsia has also agreed to waive unpaid brand licence fees payable by the India joint venture due to the COVID-19 pandemic. This waiver will not have any material effect on the company’s earnings or net assets, it said.
The Malaysian airline, which shut its Japan operations two months ago, said the deal to exit the non-core Indian market would allow it to focus on its key markets of Malaysia, Thailand, Indonesia and the Philippines.
“Since the start of the COVID-19 pandemic, the aviation industry has been one of the hardest hit industries,” AirAsia said, adding that the company will regularly re-assess its business strategies and dispose of non-core investments.
AirAsia India was formed in February 2013 with the Tata group initially owning a 30% stake, the Malaysian carrier controlling 49% and Arun Bhatia-controlled Telestra Tradeplace holding the rest.
Tata Sons increased its stake to 41.06% in 2015 when Telestra opted not to subscribe to a rights issue of shares. It then raised its holding to 49% in 2016, before subsequently taking a majority stake.
AirAsia India competes with budget carriers IndiGo, SpiceJet and GoAir. AirAsia India had a 6.6% market share in terms of domestic passengers carried in India in November, according to data from the Directorate General of Civil Aviation. This compares with 53.9 per cent for IndiGo, 13.2 per cent for SpiceJet and 9.1 per cent for GoAir.
Full-service carriers Air India had a share of 10.3% while Vistara, a joint venture of Tata Sons and Singapore Airlines, had 6.3%, DGCA data show.