Premji Invest, Claypond in $125 mn talks for minority stake in Akasa Air

A consortium led by Premji Invest and Claypond Capital, the family offices of Wipro’s Azim Premji and Manipal Group’s Ranjan Pai, is in advanced talks to invest approximately $125 million in Akasa Air, one of India’s emerging airlines. This investment would secure a minority stake in the airline, reported The Economic Times citing sources.

Consultancy firm Alvarez & Marsal has been engaged to conduct due diligence on the potential deal, said sources.

The raised funds are expected to support Akasa Air’s expansion plans and cover pre-delivery payments for new aircraft. This investment will also result in a dilution of the shareholdings held by the Jhunjhunwala family and Akasa’s co-founder and chief executive Vinay Dube, who collectively own over 65 per cent of the airline.

Despite the dilution, the Jhunjhunwala family, which currently holds a 40 per cent stake, will remain the largest shareholder. “The diligence is underway while talks are moving steadily though it may still take some time to finalise and freeze the investment,” a source added.

Meanwhile, Vinay Dube declined to comment on the specifics of the potential investment but reaffirmed the company’s commitment to maintaining a strong capital position. “The amount of cash that we have is more than the initial investment that was made. We have committed to being well capitalised - we are today and will continue to be as we are building Akasa Air for the long run,” Dube was quoted as saying by The Economic Times.

A person briefed on the deal noted that Premji Invest and Claypond Capital are keen to invest in well-managed, consumer-facing startups with a large market potential and close to breaking even. The consortium is optimistic about Akasa Air’s prospects, particularly as the Indian aviation market increasingly becomes a two-player arena dominated by IndiGo and Air India, following the bankruptcy of Go First and the financial struggles of SpiceJet.

“Besides IndiGo and Air India, a well-funded airline can be a strong third player in the Indian market and give good returns,” the source stated. “The investors like the founders and the management team besides taking the bet on the sector with its potential.”

Launched in August 2021, Akasa Air rapidly expanded by adding 24 aircraft to its fleet, the fastest by any airline since India liberalised its aviation sector in the early 1990s. The airline initially placed an order for 76 Boeing 737 Max aircraft and followed up with another order for 150 planes in January.

However, the airline’s growth has been hampered by a slowdown in Boeing's aircraft production due to increased regulatory scrutiny after multiple safety incidents. Akasa reported a loss of Rs 744 crore in its first year of operations, with industry estimates predicting losses exceeding Rs 1,600 crore for FY24. Dube, however, emphasised that these are planned costs as the airline builds a robust foundation.

“Initial costs are part of our upfront investment in people, safety, training, and technology, and we still have the initial capital intact,” he said.

For Ranjan Pai, who holds a 30 per cent stake in Manipal Hospitals, this investment marks a significant foray outside the new-economy sector, where he has already invested $400-500 million. Pai’s portfolio includes stakes in companies such as Aakash Institute, Bluestone, PharmEasy, and Purplle.

Premji Invest, India’s largest family office managing over $10 billion in assets, continues to strengthen its portfolio with investments in AI-driven companies in both the US and India, as well as in firms like FirstCry, Lenskart, and Kreditbee.