Tatas in talks to buy Airasia India stake at discount

Airasia Berhad’s auditor flags ‘going concern’ doubts

Tata Sons, the holding company of the Tata group, is in talks to buy out Airasia Berhad’s stake in their joint venture airline in India at a steep discount — taking into account the crash in valuations of airline stocks globally owing to the Covid-19 pandemic.

The Tata group is likely to tie up with other financial investors to acquire its Malaysian partner's 49 per cent stake in Airasia India, said banking sources.

The Tatas own 51 per cent in the airline and have the right of first refusal in acquiring shares of its partner. Tata Sons and Airasia did not respond to an email query on the matter.

“Just a few months ago, it was Tony Fernandes (group chief executive officer of Airasia) who had the upper hand in negotiations and was asking for a huge valuation for Airasia India. But now the tables have turned. Airasia Berhad itself is in financial trouble and the Tatas are patient (in acquisition),” said a Tata group insider.

On Monday, Airasia Berhad’s auditor, EY, flagged ‘going concern’ doubts, citing the airline’s financials. It said the airline's liabilities had exceeded its assets by $430 million before the start of the pandemic.

The airline’s cash flow, as is the case with other airlines, has been further hit by the grounding of planes amid the closure of airports globally to curb the spread of coronavirus.

Stock prices of global airlines have crashed by as much as 50 per cent.

“This slump and Airasia Berhad’s financial performance indicate the existence of material uncertainties that may cast significant doubt on Airasia Group’s and the firm’s ability to continue as a going concern,” EY warned, which led to a 17 per cent fall in Airasia Group Bhd’s share price on the KL stock exchange on Wednesday.

While the Malaysia-based airline group made a loss of $188 million in the March quarter, its Indian subsidiary, Airasia India, made a loss of ~330 crore for the same period on revenues of ~928 crore.

On Monday, Airasia Group said it was seeking investors in specific segments of the group’s business. The announcement did not refer to India, but a media report last month had said Fernandes was exploring stake sales in airlines in India and Japan. A Credit Suisse report had quoted Fernandes as saying India was a peripheral market for Airasia Group and may exit the country.

Sources said Airasia Bhd had held preliminary talks to sell its stake in the Indian airline to a Us-based private equity firm but talks had not moved forward.

While Airasia’s possible exit from India is necessitated by its own financial problems, Tata Group has been looking to consolidate its aviation business in India.