AirAsia considers IPO for selling stake in Indian unit

Group chief executive Tony Fernandes says company is also seeking a partner for its services business

Malaysia-based AirAsia is considering an initial public offering for its Indian unit and seeking a partner for its services business in the country. Channel 9 via AP

Malaysia-based AirAsia is considering an initial public offering for its Indian unit and seeking a partner for its services business, the carrier’s group chief executive Tony Fernandes said on Wednesday.

This is the latest in a series of asset monetisations being undertaken by the budget airline group, which this week received shareholder approval for a reorganisation to make AirAsia Group the listed holding company for assets across Asia.

AirAsia has already completed a back door  listing of Indonesia AirAsia and finalised a 119.3 million Singapore dollars (Dh328m) joint venture for its ground-handling business with Singapore's Sats. Its Philippine unit is looking to raise up to US$250m via share float in mid-2018.

AirAsia will seek approval at the next AirAsia India board meeting to pick a banker to start a preliminary process for an IPO, Mr Fernandes posted on Twitter on Wednesday.

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While analysts are “giving zero value to AirAsia India”, the unit is a “very valuable asset with huge growth potential”, he said in separate tweets, adding the subsidiary “was not far from 20 planes and a potential IPO”.

According to Indian regulations, airlines need to have a fleet of at least 20 aircraft to fly on international routes.

AirAsia India, a joint venture with India's Tata Sons conglomerate, had 14 planes at the end of 2017. Its revenue last year was expected to double to 12 billion Indian rupees ($188.44m) and climb to 18bn rupees in 2018.

The fast-growing Indian venture reported a net loss of 164m rupees in the quarter ended September, according to AirAsia’s latest accounts.

“AirAsia India is still incurring start-up losses and in negative equity so it is challenging to ascribe much value to the business at this point,” said Corrine Png, the chief executive of transport research firm Crucial Perspective.

However, she said if the Indian venture grew its fleet to 20 and turned profitable, AirAsia's 49-per cent stake could be worth $200m based on listed Indian airline rivals.

Mr Fernandes said AirAsia was also in the process of appointing a banker to find a partner for its shared services centre business, AirAsia Global Shared Services, which provides accounting services and data management for its airlines.

But Ms Png said the value of that business would be insignificant, at around 1m Malaysian ringgit ($249,563).

AirAsia said it did not have any additional information to share about the plans announced by Mr Fernandes.

The company’s strategy involves selling more stakes in non-flying businesses to help fund special dividends, Mr Fernandes said in October.