The Foreign Investment Promotional Board has capped Tata Sons equity exposure in the three-way joint venture proposed by Malaysian carrier for launching a Chennai headquartered budget airline at USD 9 million, a source from the aviation regulatory board told CNBC TV18.
On Wednesday Air Asia had sought an approval from FIPB for establishing a joint venture involving unlisted Indian firms Tata Sons and Telestra Tradeplace for setting up a budget carrier in India. AirAsia has proposed to hold 49 per cent stake in the JV (the maximum permissible under the foreign direct investment rules) while the Tata group would have 30 percent and the rest would be held by Telestra Tradeplace’s Arun Bhatia.
The source added that Tata Sons will not provide any Letter of Confidence or guarantee for the joint venture. FIPB has also capped total investment for the Air Asia joint venture at $30 million, of which $21 million will have to be invested within 45 days of Director General of Civil Aviation clearance, the source added.
The new joint venture will have six directors on board which will include Air Asia founder Tony Fernandes, co-founder Kamarudin Bin Meranun, two nominee from Tata Sons- S Venkatraman & Bharat Vasani and Arun Bhatia from Telestra. The sixth director will also be non-executive chairman of board.
"Confident of operating in India at low cost": AirAsia
AirAsia has planned to invest USD 30-60 million in the proposed Indian carrier, it said in a concall to analysts today. The airline which is largest discount carrier in Southeast Asia by fleet size said that the price will be the main differentiator for the new carrier.
Indian aviation sector has gone through turmoil in 2012 with grounding of Kingfisher airline, financial problems hitting Air India and other carriers. High fuel cost, huge borrowings, employee unrest and regulatory uncertainty have badly impacted the sector. However certain low-budget carriers like Indigo and Spicejet have managed to sustain and even gain more market share.
In a concall with analysts, AirAsia said that India is not a difficult or different than any other market. It is confident of operating the new carrier at low cost in the country, given the fact that it owns a huge fleet of 125 aircraft. The aviation company will fly A320s aircrafts in most tier two cities of India. The company has already got positive response from Indian airports.