As Vistara gets fresh fund infusion of Rs 200 cr, CEO gets tenure extension

This is the first round of fund from promoters under a new Tata Sons Chairman N Chandrasekharan

Full-service airline Vistara received a thumbs up from their promoters as it got an infusion of Rs 200 crore while Chief Executive Officer Phee Teik Yeoh got a further extension to his tenure. This fresh fund infusion is the last tranche of the second stage funding of Rs 600 crore into the airline. 

Vistara is a joint venture of the salt-to-steel conglomerate of Tata Sons and Singapore Airlines (SIA). While Tata Sons holds a 51 per cent stake, the rest is held by SIA.

This is the first round of fund infusion by Tata Sons in its aviation business after the group saw N Chandrasekharan becoming chairman earlier this year. The decision to invest Rs 200 crore was taken in a board meeting in March. Other than Vistara, Tata Sons owns a majority stake of 51 per cent in AirAsia India.

With this, total investment by the promoters stands at Rs 1,200 crore. The promoters had originally committed Rs 600 crore funding while setting up the airline in 2013. After that, in a board meeting of Tata Sons in June last year, Yeoh in his presentation to the Tata Sons board mentioned that the revised financial forecast required an incremental equity infusion of Rs 600 crore underlining the airline’s plans of becoming profitable by FY21. 

Of this Rs 600 crore, the promoters invested Rs 400 crore last year in two tranches. Business Standard had reported about the funding.

“Fresh round of funding after a change of leadership in Tata Sons signals that fund will not be a problem for both the Tata airlines," said a person close to the developments. A Vistara spokesperson declined to comment on the issue.

Aviation consultancy firm Centre for Asia-Pacific Aviation (CAPA) in its yearly forecast for Indian aviation market had said that both AirAsia India and Vistara will require significant fund infusion in FY18. 

“AirAsia India and Vistara are likely to require significant recapitalisation in FY18 to provide for much larger war chests in the face of strong competition. Following its recent funding exercise in November 2016, AirAsia India may need another tranche of capital by Q3 of 2018 and Vistara may need significant funding once it has taken a decision on the acceleration of its fleet expansion,” CAPA said.

Besides the fresh round of funding, the promoters also expressed their confidence in CEO Phee Teik Yeoh’s management with his tenure being extended by three years till April 2020. Yeoh will be paid a remuneration of Rs 3.70 crore.  Yeoh was brought in from Singapore Airlines in 2013 when the airline was being set up. 

In an interview early this year, Yeoh mentioned that he was taking several measures to reduce the cost of running the business. “We have swiftly tightened our operations and renegotiated a lot of third party contracts to bring down the unit costs,” said Yeoh.

Vistara in FY17 registered a loss of Rs 400.90 crore while earning a revenue of Rs 714 crore.