AirAsia India's valuation halves in past one year amid mounting losses

AirAsia Group's 49% stake in JV valued at Rs 550 cr amid sale talks

The valuation of AirAsia Group Berhad’s 49 per cent stake in AirAsia India has crashed by half in the last one year to Rs 550 crore because of the mounting losses of the Indian venture and Covid-19-related disruptions.

The valuation report has been prepared by one of the ‘Big Four’ audit companies for an international fund, which is keen to buy the stake.

According to a source close to the development, the Tata group, which owns 51 per cent in the airline, is open to the idea of a foreign fund as its equity partner and will not object to the investment. The Tatas enjoy the right of first refusal on AirAsia Group’s shares and are ready to acquire the holding if the fund fails to buy it. 

“Now we have to see whether Tony Fernandes (owner of AirAsia Group) agrees to this valuation or not. The ball is in his court,” the source said.

The sharp fall in the airline’s valuation over the last one year, the source said, was in line with the drop in the valuations of other airlines across the world. For instance, SpiceJet’s market valuation was Rs 2,988 crore as of Thursday, as compared to about Rs 7,900 crore a year ago — a fall of 62 per cent. Similarly, the valuation of InterGlobe Aviation, operator of IndiGo airlines, was Rs 38,100 crore, as against Rs 55,618 last year — down 31.6 per cent. Since April 1, SpiceJet has lost 35 per cent of its value, and Indigo 7.5 per cent.   

While AirAsia India has a fleet size of 30 aircraft, rival no-frills airline SpiceJet has 117 aircraft. “At a time when airlines are filing for bankruptcy around the world, this valuation offered to AirAsia Group looks reasonable,” the source said.

An email sent to Tata Group did not elicit any response.

The fall in AirAsia India’s valuation is also due to the fact that the airline reported a loss of Rs 330 crore in the March quarter on revenues of Rs 928 crore. In comparison, it posted a loss of Rs 147 crore on revenues of Rs 631 crore a year ago.

The Tatas are not happy with the way the airline was run under the management appointed by Fernandes – which led to multiple investigations — and want to end the partnership as soon as possible, said a Tata insider. “The Tatas are currently eyeing Air India, which is far bigger airline in terms of number of aircraft and comes with its own no-frills airline, Air India Express,” the source said. The government has put Air India on the disinvestment list with August 31 as the last date for submitting expressions of interest.