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KUALA LUMPUR (December 29): Budget airline AirAsia Group Bhd has decided to sell 32.67% of its 49% stake in AirAsia (India) Ltd to Tata Group for $ 37.66 million (approximately 152, 58 million RM).
AirAsia Group owns the 49% stake in AirAsia India through 100% owned AirAsia Investment Ltd (AAIL), while Tata owns the 51% majority stake through Tata Sons Private Ltd (TSL).
As part of the transaction, there will be a call option with respect to the remaining 16.33% stake, which Tata may exercise at any time after the transaction is completed.
There is also a put option exercisable by AAIL in two tranches, the first tranche being exercisable from March 1, 2022 to May 30, 2022, and the second tranche from October 1, 2022 to December 31, 2022.
The total consideration in respect of the options granted for the remaining 16.33% interest will be US $ 18.83 million (approximately RM 76.29 million), according to AirAsia’s filing with Bursa Malaysia today.
AirAsia said AAIL today signed a share purchase agreement with TSL for the sale of shares, which also stipulates the conditions for the options granted.
AirAsia said the phase-out will reduce short-term cash burn and allow the company to focus on recovering its key ASEAN markets in Malaysia, Thailand, Indonesia and the Philippines in the long term.
“Since the start of the Covid-19 pandemic, the aviation industry has been one of the hardest hit. Airlines around the world have canceled flights and ground planes and AirAsia India is no exception. Due to this This, the directors expect more capital requirements for AirAsia India.
“As India is a secondary market for AirAsia (being a non-ASEAN country), the company will continue to periodically reassess its business strategies and will have complementary investments to increase its liquidity,” he explained.
He added that the cash received from the sale of shares will be used as the group’s working capital in the first quarter of 2021.
“The transaction is expected to be completed by the end of March 2021,” AirAsia said.
In a separate press release, AirAsia (airlines) Chairman Bo Lingam said that in addition to AirAsia’s main market in ASEAN, the cash obtained from the transaction will also be used for its future expansion in Cambodia, Myanmar and Vietnam.
“AirAsia Group has been reviewing its forward-looking business strategy regularly, including its investment in AirAsia India. This transaction will ensure strict cost containment for AirAsia Group in the short term and strengthen our presence in ASEAN as we continue our market dominance to travel from ASEAN to India and North Asia, “he said.
Even with the share sale, Bo assured that international services to India from Malaysia and Thailand will resume in the future after travel restrictions are lifted and borders with India are reopened.
Before the pandemic, AirAsia operated more than 100 weekly flights from Malaysia and Thailand to nine destinations in India.
AirAsia gave its strongest indication that it was considering exiting its business in India in mid-November, after the company said it was reviewing its investment in the joint venture (JV) airline there.
The group said in a statement at the time that its operations in India, like those of its now-closed business in Japan, had depleted cash and added to the group’s financial stress.
AirAsia closed its operations in Japan, the smallest of its foreign subsidiaries, in October.
The group’s chief executive, Tan Sri Tony Fernandes, told Reuters in September that the group intended to consolidate and strengthen its presence in ASEAN, which could one day mean exiting Japan and India.
Earlier this month, he said the group was still in talks with Tata about the future of the joint venture.
AirAsia shares closed unchanged today at 90.5 sen with a market capitalization of RM3.02 billion.
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