AirAsia Group Berhad on Tuesday executed a share purchase agreement with Tata Sons Private Ltd to sell 32.67% equity stake held by AirAsia Investment Ltd (AAIL) in AirAsia (India) Ltd (AAI) for $37,660,000. With this the holding of Tatas in AirAsia India has increased from 51% to 83.67%.
Tatas did not offer any comment on this development.
Air Asia India was initially formed in 2013 as a joint venture between Tata Sons, AirAsia Investment Ltd and Telestra Tradeplace of Arun Bhatia having equity stake of 41.06%; 49; 9.94% respectively. And the Tatas gradually increased stake to 51%.
“As part of the transaction there will be a Call Option in respect of AAIL’s remaining 16.33% stake in AAI, exercised by Tata Sons at any time the transaction is completed,” AirAsia Group Berhad said in a filing with the Malaysian Stock Exchange.
“In addition there will also be a Put Option exercised by AAIL in two tranches with the first tranche being exercised from March 1, 2022 until May 30, 2022 and the second tranche being exercisable from October 1, 2022 and December 31, 2022,” the filing said.
The total consideration in respect of the options granted for AAIL’s remaining stake shall be $18,830,000.
“The disposal price was arrived at after an arms length negotiation between AAIL and Tata Sons based on a willing buyer, willing seller basis taking into account the assets and future prospects of the ongoing business,” the statement said.
AirAsia Group Berhad said it will utilise the cash received as purchase consideration as working capital in the Q1 of 2021.
The transaction is expected to be completed by the end of March 2021.
Since the value of the transaction will not breach the 25% ratio, AirAsia Group the Malaysian company would not require any approval of its shareholders for the transaction.
It said, “Since the start of 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 AAI is no exception. Due to this, the directors expect further capital requirements for AAI. As India is a non-core market for AirAsia, the company will regularly re-assess its business strategies and dispose of non-core investments to augment its liquidity,” it said.
“This transaction will reduce the cash burn of the company in the short term and allow AirAsia to concentrate on recover of its key ASEAN markets in Malaysia, Thailand, Indonesia and Philippines in the long run,” it added.