InvestorQ : Why is the Air Asia parent selling its stake in the Indian Joint Venture to the Tata Group?
diksha shah made post

Why is the Air Asia parent selling its stake in the Indian Joint Venture to the Tata Group?

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Rutuja Nigam answered.
7 months ago
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That is correct. Air Asia of Malaysia, which is the parent company, plans to sell 32.67% stake in the Indian joint venture to Tata Sons. The stake is expected to be sold for a consideration of $37.7 million. This will mark a substantial reduction in the stake of the Malaysian promoters and a sharp increase in the holdings of Tata Sons in the JV.

Tatas already own 49% in Air Asia India so this will effectively take their total stake in the joint venture closer to 82%. This broadly will gel with the Tatas bid for Air India as it gives them a much bigger share of the skies. If you add up Air India, Vistaara and Air Asia, the Tatas will command close to a quarter of the Indian skies, next to Indigo.

Air Asia Malaysia wants to focus more on its core Southeast Asian markets, where it had originally started its business and run a profitable low-cost model for a long time. It realized that, although the Indian market was large and lucrative on paper, it had its own set of challenges to contend with. The pandemic only worsened the situation for Air Asia.

This move from Air Asia was expected after it had earlier decided to fully exit Japan. Air Asia’s India operations had been draining cash and they decided that they could not afford to burn cash any longer. The sale to Tata Sons will be done by March 2021. Air Asia Malaysia will waive brand license fee payable by Air Asia India to Air Asia Malaysia as part of the deal.

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