Tony Fernandes trims AirAsia India exit price to $50 million amid Covid-19

Tatas in advanced talks to buy 49 per cent stake in Indian joint venture

The Tata group is in advanced talks to acquire AirAsia Group’s 49 per cent stake in their Indian joint venture airline, after the Malaysian company toned down its exit price to $50 million.

The sagging financial health of both AirAsia Group Berhad and AirAsia India, worsened by the Covid-19 pandemic, and falling airline valuations have brought down the expectations of the foreign partner, said a source close to the development.

“Besides, the threat of action by Indian investigating agencies against AirAsia India and AirAsia’s promoter Tony Fernandes is another reason why the foreign partner wants to exit India,” said the source.

At the same time, the Tata group wants to expedite the acquisition of AirAsia Group’s stake in the loss-making Indian airline before the deadline of Air India’s disinvestment expires at the end of August, the source said. 

“The Tatas may look at the option of roping in a financial partner for the Air India bid,” the source said, adding the final decision on Fernandes’ offer will be taken in August.

“The incoming financial partner has sent feelers that it does not want any uncertainty around AirAsia India, in which the Tatas hold a 51 per cent stake,” the source added.

An email sent to Tata Sons did not elicit any response.

The airline’s 30 planes remained grounded during the coronavirus lockdown, which pushed it deeper into a financial crisis.

AirAsia India reported a loss of Rs 330 crore in the March quarter on revenues of Rs 928 crore, compared with a loss of Rs 147 crore on revenues of Rs 631 crore a year ago. Its net worth is negative.

“AirAsia India needs an urgent fund infusion from the promoters, and AirAsia Group is not in a position to invest further. Hence, they have approached the Tatas with a lower valuation for the exit,” the source said. “Now, it will be up to the Tatas to take a call on this.”

The Tatas were not happy with the way the airline was run under the management appointed by Fernandes, which had led to multiple investigations, and wanted to end the partnership as soon as possible, a Tata insider said.

Early this month, AirAsia Group said it was seeking investors in specific segments of the group’s business after auditors expressed doubts over its going concern status. This was after the company announced its biggest quarterly loss of $188 million in the March quarter.

The announcement did not refer to India, but a media report last month had said Fernandes was exploring stake sales in airlines in India and Japan.  

AirAsia Group’s stock on the Kuala Lumpur Stock Exchange is down 62 per cent year to date, and the group needs urgent cash to revive its fortunes in its key markets in Southeast Asia.