BackAir Works India to raise another funding round
The Mumbai-based company looks to raise about `150 crore
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Mumbai: Air Works India (Engineering) Pvt. Ltd, which provides aircraft maintenance services, is looking at raising another round of funding of about ₹ 150 crore, according to three people close to the development.
“There is going to be a part primary (direct stake sale by the company) and part secondary (stake offloading by existing investors) stake sale," said one of the three people.
The Mumbai-based company could also consider raising capital from both new and existing investors, said another person. All the three people asked not to be identified.
The firm has asked JM Financial Institutional Securities Ltd, an investment bank, to advice it, according to Ravi S. Menon, executive director at Air Works.
“The existing shareholders may look at bringing some funds via a rights issue or other instruments," Menon said. “We are yet to finalize the mode of funding."
Air Works is an independent provider of aviation maintenance, repair and overhaul (MRO) services in India, and aircraft paint and refinishing in the UK. Established in 1951, Air Works provides aviation services qualified to maintain 50 types of planes for over 100 customers across 15 maintenance locations in India, the company said.
Last year, Air Works acquired Aero Technique Espace, a French aircraft painting company, for an undisclosed amount, to strengthen its market position as a provider of painting services to the European commercial and military aircraft market.
In 2012, Air Works made a strategic investment in Dubai-based private aviation specialist, Empire Aviation Group FZCO, to increase its footprint in the Middle East.
The fund-raising plans come at a time when aircraft maintenance is being considered a part of the sub-sector of airports in transport sector infrastructure for the purpose of raising money overseas, according to new rules set by the Reserve Bank of India.
The nascent local industry that has an annual turnover of about $800 million (around ₹ 4,930 crore today) in the country, will get a boost from this, according to the aviation ministry.
The global market is estimated to be worth $50 billion. The industry in India has the potential to achieve an annual growth rate of 10% for the next 10 years.
“Expanding fleet size of incumbent carriers and with the entry of more players in the Indian aviation market, MRO industry is set to grow at a faster rate than before," the aviation ministry said on 13 January. “Policy change at this juncture to classify MRO as transport infrastructure is quite timely, feel the industry representatives."
Private equity firms New Enterprise Associates and GTI Capital Group own around 51.51% stake in Air Works; engineering firm Punj Lloyd Ltd holds 19.58%. The Menon family, Vivek Gour and employee stock options together own 28.91% of the equity.
The aircraft maintenance segment hasn’t seen too many private equity transactions in the past few years. In 2007, Subhkam Ventures invested an undisclosed amount in Trusted Aerospace and Engineering Pvt. Ltd. In 2009, GE Capital Equity, the investment arm of GE, picked up a 30% stake in Kerns Aero Products Pvt. Ltd for $2 million.
The overall exuberance in the segment has gone down as airline firms are facing difficulties, experts say.
“PE (private equity) funds need conviction about the sustainability and scalability of a business," said Sanjeev Krishnan, executive director of PricewaterhouseCoopers, an audit and consulting firm. “There are concerns about exits as well. Who will be the buyer for such businesses?"
The increasing privatization of airports could further stress such firms with high charges and associated expenses, Krishnan added.
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