Days before the Air India bid, Tatas give AirAsia a ‘national’ tag
Tata Grouphikes its stake in AirAsia India, buys additional 32.67% stake for $37.66 million (₹276 crore).
- Tata Group now holds 83.67% stake in the venture, with an option to acquire the rest 16.33% stake for $18.83 million.
- This move comes as the race for Air India’s divestment heats up, with its second phase beginning on January 5. Tata Sons has filed an expression of interest to rescue the cash-strapped national carrier.
- The government will announce the names of qualified bidders in the second phase of the divestment process.
Tata group earlier owned 51% of the stake in the joint venture. This move gains significance as the race for Air India heats up, and Tatas have shown preliminary interest in bidding for the national carrier. Tata Sons filed an Expression of Interest to rescue cash strapped Indian flag carrier Air India last week.
The second phase of the strategic disinvestment of Air India will start on January 5, with the announcement of the names of the qualified bidders.In the stage II, shortlisted interested bidders will be provided with a request for proposal (RFP) and thereafter there will be a transparent bidding process, said a presentation by the ministry.
AdvertisementEarlier this year, Rashtriya Swayamsevak Sangh ( RSS) had raised their opposition against the sale of Air India to foreign airlines and conveyed their concerns to the government. RSS had said that the national carrier must be only sold to an Indian entity. Other Swadeshi lobbies, including Swadeshi Jagran Manch (SJM), had raised their resistance as well.
Meanwhile, earlier this month, BJP MP Subramanian Swamy had urged the government to disqualify Tata Sons from the Air India disinvestment process till a final decision on his plea against Tata Sons and AirAsia India is taken by the court. Subramanian in 2013 had filed a petition in the Delhi high court challenging the illegal grant of license to
AirAsia moves to reduce its cash burn
“This transaction is in line with our initiatives towards reducing cash utilisation for the Group and will allow us to use cash to grow market share in our core markets in Asean, particularly in Malaysia, Thailand, Indonesia and the Philippines as well as for our future expansion into Cambodia, Myanmar and Vietnam.,” said President (Airlines) of AirAsia Group, Bo Lingam.
“India will remain an important market for AirAsia. TSL has been an excellent partner and we look forward to continue working closely together in other areas of growth,” he added. The group in a Malysian stock exchange filing said the cash received as purchase consideration will be utilised as working capital in Q1 for the parent company.
The company also hinted towards further liquidation of its assets saying “as India is a non-core market for AirAsia (being a non-ASEAN country), the company will continue to regularly reassess its business strategies and dispose of non-core investments to augment its liquidity.”
AirAsia’s bumpy ride
AdvertisementThe Malaysian partner has been battling financial headwinds for quite some time now. AirAsia also gave a clear indication on exiting the India business earlier in November, when its president Bo Lingam said the businesses in India have been “draining cash” and causing much financial stress to the parent company.
“Our businesses in Japan and India have been draining cash, causing the Group much financial stress. Cost containment and reducing cash burns remain key priorities evident by the recent closure of AirAsia Japan and an ongoing review of our investment in AirAsia India,” President (Airlines) of AirAsia Group, Bo Lingam said in the statement in November.
The parent company AirAsia also ceased its Japan operations in October, citing “highly challenging operating conditions in Japan which have been aggravated by the COVID-19 pandemic.”
AdvertisementThe company has been unprofitable since its launch in 2014. In FY20 results, Tata Sons said that the pandemic completely eroded the AirAsia India net worth, and its auditor raised the red flag about the JV’s ability to continue. The Tata Group also invested nearly ₹490 crore in AirAsia India in FY20, while the JV posted a loss of ₹317 crore in the same period.
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