Tata Sons raises its stake in AirAsia India to 49%, Arun Bhatia exits

Image: Romeo Ranoco / Reuters

AirAsia India launched operations in June 2014

Tata Sons Limited said on Monday that it will increase its stake in AirAsia India to 49 percent from 41.06 percent, buying 7.94 stake in the airline from Arun Bhatia’s Telestra Tradeplace Pvt Ltd. The financial details of the transaction weren't disclosed.

“The agreement was entered into on March 14, 2016, and the transaction is proposed to be completed in April, 2016, subject to completion of the relevant corporate approvals and processes,” read a statement from Tata Sons Limited.

Separately, two directors of the airline S Ramadorai, who is also the chairman, and R Venkataramanan in their individual capacity are acquiring 0.5 percent and 1.5 percent stake from Bhatia’s Telestra Tradeplace.

On completion of these transactions, Bhatia, who in the past has publicly aired his unhappiness in the way the airline has been run and operated, will completely exit from AirAsia India.

The 2 percent stake held by Ramadorai and Venkataramanan along with Tata Sons’ 49 shareholding ensures that the airline is majority owned by its Indian partners. The remaining 49 percent stake in the airline will continue to be owned by AirAsia Investment Ltd, a subsidiary of AirAsia Berhad of Malaysia which is owned aviation entrepreneur Tony Fernandes. In India, as per foreign direct investment norms in the civil aviation sector, foreign airlines can only hold up to 49 percent stake in an Indian airline.  

AirAsia India, which launched operations in June 2014, was set up as a tripartite joint venture between Tata Sons (who owned 30 percent then), Telestra Tradeplace (21 percent), and AirAsia Berhad of Malaysia (49 percent). Over the last 18 months, Tata Sons has been increasing its stake in the airline by buying shares from Telestra Tradeplace.

With these developments Tata Sons consolidates its position in the Indian aviation industry, having a majority control of Vistara (Tata Sons owns 51 percent stake in full service airline Vistara, while the remaining 49 percent stake is owned by flag carrier Singapore Airlines) and a 49 per cent stake in AirAsia India.

In the past, Ratan Tata, the former chairman of Tata Sons, had said that there was no conflict of interest for the company, for having stakes in two separate airline entities.  “There is an enormous potential for airlines in India at both ends of the spectrum -- at the budget end with AirAsia India, while the Tata-Singapore Airlines JV serves the full-service market. We will probably be competing with each other but as enlightened competitors,” Tata had said in July 2014, before boarding an AirAsia India flight from Bengaluru to Goa along with Tony Fernandes.