Tata Sons Ltd is considering various options on the future of its airline venture AirAsia India against the backdrop of its Malaysian partner planning to exit it, Bloomberg said in a news report quoting two people in the know.
This comes at a time when the Tatas are facing the uphill task of gathering funds to buy out the 18.4% stake that Shapoorji Pallonji Group owns in the Tata group holding firm, the report said.
The Tata group, which has the first right of refusal for the 49% stake held by Tony Fernandes-owned AirAsia Bhd in the Indian airline, is weighing at least three alternatives, said the people cited above.
These are the Mumbai-based conglomerate purchasing AirAsia Bhd’s entire stake in the Indian venture or ushering in a strong new investor such as a private equity firm or a sovereign wealth fund to purchase AirAsia Bhd’s stake, they said.
The Bloomberg report further said there is also the option of bringing in a strategic player that would acquire the entire stake of Tata group and AirAsia Bhd in the loss-making Indian airline, the people cited above said on condition of anonymity.
“Other options like a merger of the businesses of AirAsia and Vistara (a 51:49 joint venture between Tata Sons and Singapore Airlines) have also been considered. However, this may be tricky because Vistara is well-capitalized and merging AirAsia India’s business during a downturn may suddenly weaken the merged entity’s financials, and cause more funding requirements, increase fixed costs and so on. This may not be desirable to Singapore Airlines,” one of the two people quoted in the Bloomberg news report said.
The second person said Tata group is reluctant to deploy funds to buy out AirAsia Bhd’s stake as it is facing the mammoth task of arranging capital to buy out Shapoorji Pallonji Group in Tata Sons, estimated at about ₹1.6 trillion, the news report said.
The Bloomberg report said that while the Tata’s decline a comment, Air Asia Bhd did not respond to emailed queries.