A two-party consortium is preparing to pump around USD125 million into Akasa Air (QP, Mumbai International), according to The Economic Times. It values the low-cost carrier, which commenced revenue operations two years ago, at about USD350 million, or a four-fold increase on its initial valuation.
The newspaper cites sources close to the matter saying that Bangalore-based private equity firm Premji Invest and Manipal Group-owned venture capital firm Claypond Capital are in talks to take a “significant” minority stake. Premji Invest serves as the family investment office of Azim Hashim Premji, former chairman of Indian multinational Wipro Limited. Manipal Group is linked to Ranjan Pai, a businessman who runs tertiary institutions and hospitals. The duo have reportedly retained consultancy firm Alvarez & Marsal to conduct due diligence.
“The diligence is underway while talks are moving steadily, though it may still take some time to finalise and freeze the investment,” the source said.
According to ch-aviation PRO airlines data, Akasa Air flies to 27 airports across India, the UAE, Qatar, Saudi Arabia, and Kuwait, using a fleet of twenty-three B737-8s and one B737-8-200. It also has ninety-nine B737-10s and 103 B737-8-200s on order. Indian aviation entrepreneur Vinay Dube co-founded Akasa along with foundation investors the Jhunjhunwala family, who together own around 67% of the carrier. The stakes of both parties will dilute if the Premji/Claypond consortium proceeds with the investment, although the Jhunjhunwalas would remain the largest shareholder with a circa 40% stake.
“We have committed to being well capitalised,” Dube told the newspaper. “We are today and will continue to be as we are building Akasa Air for the long run.”
Akasa’s current domestic market share is 4.7%, ranking it fourth behind IndiGo Airlines (62%), Air India (14.3%), and Vistara (4.7%), but ahead of Air-India Express (4.5%), and SpiceJet (3.1%). The consortium is reportedly keen to invest in professionally run start-ups “that are close to breaking even and have a large serviceable market.” It also believes that shifts and consolidation in the Indian aviation market are making room for a well-funded, strong third player. “The investors like the founders and the management team, besides taking a bet on the sector with its potential,” the source said.
Since its start, Akasa Air has lost money, including INR7.44 billion rupees (USD88.7 million) in its first 12 months of operations. The airline is tipped to report losses of INR16 billion (USD190.7 million) for the 12 months to March 31, 2024. Dube attributes this to start-up costs and the expenses of establishing a strong market presence and says it will take another two years to achieve profitability. The raised funds will help pay for further expansion and aircraft pre-delivery payments.