STILL IN RED, AIRASIA’S IPO DREAM LOOKS PREMATURE
Firm also looking for partner for its services business
Tony Fernandes, group chairman of AirAsia, on Wednesday said the company is looking for a public listing and will seek shareholder approval to appoint bankers for the process. The company is also seeking a partner for its services business.
“Analysts giving zero value to AirAsia India. Not far from 20 planes and a potential IPO,” Fernandes tweeted. “AirAsia will be seeking approval at the next AirAsia India board to pick a banker to start prelim process. Very valuable asset with huge growth potential,” he tweeted.
Fernandes also stated, “AirAsia in the process of appointing a banker to find a partner for our profitable and successful shared services centre.”
Public listing guidelines mandate that to become eligible for an initial public offering (IPO), a company should register average pre-tax profit of ~150 million for at least three financial years.
AirAsia India, however, is still in the red. Its net loss was ~1.4 billion for 2016-17, about 23 per cent less than the ~1.82 billion of 2015-16. Revenue rose nearly 45 per cent to ~9.52 billion.
The joint venture of Malaysia’s AirAsia Berhad and India’s Tata Sons started operations in June 2014. By end-March 2017, accumulated loss was ~4.85 billion
Sources said the airline aims to consolidate its operations and clock profit before going public. “IPO is immediately not on mind. What does a market look for when it invests in a company? It looks at the past, which was not very smooth. It looks at the future, which we don’t know. Currently, the company is trying to steady the ship,” said a person aware of the development.
According to Singaporebased transport research firm Crucial Perspective, AirAsia India could be worth about ~26 billion. “With a cost structure even lower than the dominant domestic low cost carrier IndiGo, AirAsia India is well positioned to grow its market share and profitability longer term,” said Corrnie Png, chief executive.
On the other hand, Tata Sons, has majority stake in Vistara, which has 17 aircraft.
In October, Tata Sons Chairman N Chandrsekaran had said it made little sense to run two airlines on a small scale. “Obviously, you can’t run two airlines with each having 15-20 aircraft. Definitely, that's not the way forward,” he had said.
Questions sent to a Tata Sons spokesperson regarding the group’s plan about AirAsia India were forwarded to an AirAsia India spokeswoman, who did not respond.
AirAsia India Chief Executive Amar Abrol had said the airline was looking to be profitable by FY19. “We have an eye on profitability and will be there sooner than later, perhaps by 2019,” he’d said. According to him, it has charted a three-step process in achieving the target — clock a positive gross profit margin at the first level, become cashflow positive and profitable at the Ebit level.