Tata Sons may raise stake to over 76% in AirAsia India by 2020-21 end

Tata Sons is planning to gradually raise its stake in AirAsia India to more than 76 per cent by the end of 2020-21, people aware of the development have said.

Tatas increasing stake in the airline will give an exit route to Malaysia's flagship budget carrier AirAsia Berhad, which holds 49 per cent stake in the company. The AirAsia Group recently said it was reviewing its investment in the joint venture, as operations of the company — like those of its now-shuttered Japan business — have been draining cash and adding to the group’s financial stress.

“For the time being, AirAsia Berhad will continue to hold a minority stake but it is all but certain that it will be converted into a Tata airline,” a person aware of the process said.

Tata Sons and AirAsia India declined to comment. If the Tatas successfully acquire Air India, the conglomerate is likely to integrate AirAsia with Air India’s low-cost subsidiary, Air India Express.

At present, AirAsia India is functioning on funding from Tata Sons, which has invested close to Rs 650 crore through optionally convertible debentures. This will pave the way for Tata Sons to convert the debt into equity at a later stage. This will also reduce the stake of AirAsia Berhad.

“The company will hold a rights issue before December 31. As AirAsia Berhad will not participate in the rights issue, Tata Sons will convert an equivalent portion of its outstanding OCD into equity,” the person said.

Internally, the Tata Group has initiated discussions on rebranding the airline. 

Two names that have been contemplated are Tata Airline or Tata Express. “Though no name has been finalised, it has been decided that the airline will display a Tata brand name. The airline will start capitalising more on the Tata brand name, which it has been unable to till now due to the presence of the AirAsia Group,” the person said. The airline’s brand licensing agreement with AirAsia Malaysia ends on March 31, 2021.

The airline’s initiative to break dependence from its Malaysian partner had started a year ago. AirAsia India’s commercial unit now has a full-fledged office in Gurugram and has established a crew training unit in Bengaluru.

The airline will have its own website from February, which is being built by US-based travel technology company Navitaire. Tata Consultancy Services is working on a crew scheduling software, which till now was handled from Kuala Lumpur.