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Business News/ Companies / News/  Tata Sons to buy 33% more in AirAsia India
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Tata Sons to buy 33% more in AirAsia India

Tatas can buy out the rest of the stake in JV after closure of deal

In November, AirAsia said it was reviewing its Japan and India operations as they had been draining cash, causing the group much financial stress.Premium
In November, AirAsia said it was reviewing its Japan and India operations as they had been draining cash, causing the group much financial stress.

Tata Sons has agreed to buy an additional 32.67% stake in AirAsia India Ltd from its joint venture partner for $37.66 million, increasing its stake in the budget airline to 83.67%, Malaysia’s AirAsia Bhd said on Tuesday.

Tata Sons, which owns a 51% stake in the Indian joint venture, has also the option to buy out AirAsia Bhd’s remaining 16.33% stake after the closure of the deal.

“There will also be a put option exercisable by AAIL (AirAsia India) in two tranches, with the first tranche being exercisable from 1 March 2022 until 30 May 2022, and the second tranche being exercisable from 1 October 2022 to 31 December 2022," AirAsia said in a regulatory filing.

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Tata Sons can exercise the option to pick the remaining stake in AirAsia India for $18.83 million, the Malaysian airline said in the statement. The share purchase pact may, however, be terminated if Tata Sons doesn’t close the deal to buy the 32.67% stake in AirAsia India before 31 March.

AirAsia Bhd had in June approached the Tata group to sell its stake, as mandated by the terms of the joint venture under which Tata Sons has the first right to buy out the shares.

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Mint had in November reported that the Tata group would raise its stake in AirAsia India to beyond 51%.

A Tata group spokesperson declined to comment.

AirAsia is under tremendous pressure to reduce cash burn after reporting a record loss in the June quarter as the pandemic battered airlines around the world.

The carrier had stopped funding its money-losing Indian operations and also hinted at exiting the market, leaving AirAsia India completely reliant on the Tata group for survival.

In November, AirAsia said it was reviewing its Japan and India operations as they had been draining cash, causing the group much financial stress.

The airline has since then stopped operations in Japan.

“This (Tata Sons) transaction will reduce cash burn of the company in the short term and allow AirAsia to concentrate on the recovery of its key Asean markets in Malaysia, Thailand, Indonesia and the Philippines in the long run," AirAsia said.

The Tata group has also put in an expression of interest (EoI) to acquire national carrier Air India Ltd.

The bid by the country’s largest conglomerate, if successful, will mark the return of Air India, founded by industrialist J.R.D. Tata as a mail carrier in 1932, to the Tata fold. The government took control of Air India in 1953 after Tata proposed the government take 49% of the airline.

The expressions of interest are currently being evaluated by the finance ministry’s department of investment and public asset management, and the names of those allowed to make financial bids will be announced on 5 January.

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ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 30 Dec 2020, 06:21 AM IST
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