India's newest airline Akasa Air, co-founded by late billionaire investor Rakesh Jhunjhunwala, is looking to raise $75-100 million by offering fresh shares to expand its business, a report has said.
The airline, founded in December 2021, wants the money to make pre-delivery payments for aircraft, the Economic Times quoted sources as saying. The Mumbai-based airline ordered 72 Boeing 737 Max, of which 19 have been delivered.
The move to raise funds will see the Jhunjhunwala family's 46 percent stake in the airline diluted. The family holds this stake through a trust and despite the potential dilution, it will remain the largest shareholder.
Also Read: First-year comparison shows Akasa Air clearly besting IndiGo
"The trust is unlikely to participate in this round of funding but even after the dilution will retain a substantial stake. The aviation sector is on a boom and the value of Akasa with strong financials and led by professionals will only rise," the report quoted a source as saying.
Potential investors
The airline, which commenced operations less than a year ago, has reached out to potential investors, including PE firms and high-net-worth individuals, for raising capital. Any infusion of capital will be based on a $650-million valuation.
US-based hedge fund PAR Capital Management is one of the names doing the rounds and may subscribe to the shares to add to its existing 6 percent stake in the low-cost airline.
Brokerage firm ICICI Securities said on June 12 the outlook for airlines remained strong due to healthy growth in traffic, declining jet fuel prices and ticking ticket values.
A source said the Jhunjhunwala family has the right of first refusal on any equity fundraising the airline plans.
A spokesperson for Akasa Air called this speculation and refused to comment. Utpal Seth, senior partner and CEO of Rare Enterprise, Jhunjhunwala's investment outfit, and PAR Capital didn't respond to queries, the report said.
Akasa's market share
Akasa Air has 19 aircraft in its fleet and commands a 4 percent market share. The company was looking to place a triple-digit aircraft order before the end of 2023, CEO Vinay Dube has said.
"Think of the airline as a startup and look at this as its next round of fundraising. The kind of ambitions the airline has, would money from the Jhunjhunwalas be enough to sustain them?" a source was quoted as saying in the report.
"The answer is no. Also remember the Jhunjhunwalas are financial investors and not promoters, as is the case with several airline ventures in India."
Akasa’s first commercial flight was on August 7, 2022 between Ahmedabad and Mumbai. Jhunjhunwala passed away a week later.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
