KUALA LUMPUR (Dec 29): Budget airline AirAsia Group Bhd has decided to sell 32.67% of the 49% stake it holds in AirAsia (India) Ltd to Tata Group for US$37.66 million (approximately RM152.58 million).
AirAsia Group holds the 49% stake in AirAsia India via its 100%-owned AirAsia Investment Ltd (AAIL), while Tata holds the majority 51% stake through Tata Sons Private Ltd (TSL).
As part of the transaction, there will be a call option in respect of the remaining 16.33% stake, exercisable by Tata at any time after the transaction is completed.
There is also a put option exercisable by AAIL in two tranches, with the first tranche being exercisable from March 1, 2022 until May 30, 2022, and the second tranche being exercisable from Oct 1, 2022 to Dec 31, 2022.
The total consideration in respect of the options granted for the remaining 16.33% stake shall be US$18.83 million (approximately RM76.29 million), according to AirAsia's filing with Bursa Malaysia today.
AirAsia said AAIL executed a share purchase agreement today with TSL for the share disposal, which also stipulates the conditions for the options granted.
AirAsia said the disposal will reduce cash burn in the short term and allow the company to concentrate on recovery of its key ASEAN markets in Malaysia, Thailand, Indonesia and the Philippines in the long run.
"Since the start of the Covid-19 pandemic, the aviation industry has been one of the hardest hit industries. Airlines around the world have cancelled flights and grounded planes and AirAsia India is no exception. Due to this, the directors expect further capital requirements for AirAsia India.
"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," it explained.
It added that the cash received from the share disposal will be used as the group's working capital in the first quarter of 2021.
"The transaction is expected to be completed by the end of March 2021," AirAsia said.
In a separate press statement, AirAsia President (Airlines) Bo Lingam said besides AirAsia's core market in ASEAN, the cash gained from the transaction will also be utilised for its future expansion into Cambodia, Myanmar and Vietnam.
"AirAsia Group has been reviewing its forward business strategy regularly, including its investment in AirAsia India. This transaction will ensure strict cost containment for AirAsia Group in the short term, and strengthen our presence in ASEAN while continuing our market dominance for travel from ASEAN to India and North Asia," he said.
Even with the share disposal, Bo assured that international services to India from Malaysia and Thailand will resume in the future after travel restrictions are lifted and borders with India are reopened.
Prior to the pandemic, AirAsia operated over 100 weekly flights from Malaysia and Thailand to nine destinations in India.
AirAsia gave its strongest indication that it was considering exiting its India business in mid-November, after the company said it was reviewing its investment in the joint venture (JV) airline there.
The group said in a statement at the time that its operations in India, like those of its now-shuttered Japan business, had been draining cash and adding to the group's financial stress.
AirAsia shut its operations in Japan, the smallest of its foreign offshoots, in October.
Group chief executive officer Tan Sri Tony Fernandes told Reuters in September that the group intended to consolidate and strengthen its ASEAN foothold, which could mean one day exiting both Japan and India.
Earlier this month, he said the group was still in talks with Tata on the future of the JV.
Shares of AirAsia closed unchanged today at 90.5 sen with a market capitalisation of RM3.02 billion.