Tata Sons may bid for rest of the 49% stake in AirAsia India

• Tata Sons owns 51% of the stake in the six-year-old joint venture, and AirAsia owns 49%.
• Reports suggest that Tata Sons may buy the remaining stake from the Malaysian parent company.
• Air Asia announced its biggest quarterly loss in August and said it plans to raise $600 million through debt and equity as the pandemic affected its revenue
• In FY20, the JV posted a loss of ₹317 crore in the first quarter.

Tata Sons is reportedly gearing up to acquire the rest of the 49% stake of the joint venture between Tata Sons and Malaysia’s AirAsia, as the latter struggles to continue operations in India, according to a TOI report.

In the six-year-old joint venture, Tata Sons owns 51% of the stake, and the remaining 49% is held by AirAsia. Tata’s will have the first right of refusal for the minority stake owned by AirAsia.

“AirAsia, because of its financial difficulties, is not keen on infusing capital into the India JV. It wants the JV to take on debt to run the operations. Tata Sons is forced to consider buying out AirAsia,” a source told TOI.

This came after Air Asia announced its biggest quarterly loss in August and said it plans to raise $600 million through debt and equity as the pandemic affected its revenue— the company also added that it is evaluating some of its operations outside Malaysia.

AirAsia ceased Japan operations and has hinted towards Indian operations

The parent company AirAsia also ceased its Japan operations, citing “highly challenging operating conditions in Japan which have been aggravated by the COVID-19 pandemic.”

AirAsia India has been hinting at a shutdown in Indian operations for a while now. In June, AirAsia’s founder and CEO Tony Fernandes said India is a peripheral market and that the company could exit one day.

The 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.

Yesterday, the Union Aviation Minister Hardeep Singh Puri’s comment made headlines on social media, where he claimed: “AirAsia’s shop is anyway shutting down." The aviation minister added that “their parent company has problems."

The Tata Group also owns a 51% stake in Vistara Airlines in Partnership with Singapore Airlines. And, the Tata SIA JV in its FY20 results, reported a net loss of ₹1,814 crore. Tatas are also reportedly looking to bid for the government-owned cash strapped Air India.

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