AirAsia India may soon go public: Tony Fernandes
New Delhi: AirAsia India may go public soon and will seek board approval to hire a banker to initiate the process, founder Tony Fernandes said on Twitter Wednesday morning.
“Not far from 20 planes and a potential IPO. AirAsia will be seeking approval at the next AirAsia India board to pick a banker to start prelim (preliminary) process. Very valuable asset with huge growth potential,” Fernandes said in a series of tweets.
AirAsia India, which started operations in June 2014, has a 4% domestic market share, with a fleet of 14 Airbus A320 aircraft, and competes with budget airlines like IndiGo and SpiceJet.
AirAsia India narrowed its loss to Rs16.4 crore in the September quarter from Rs62 crore in the same period a year earlier. SpiceJet reported a 79% increase in net profit to Rs105.3 crore in the September quarter from Rs58.9 crore a year earlier.
IndiGo’s parent InterGlobe Aviation Ltd’s net profit almost quadrupled to Rs551.55 crore in the September quarter from a year ago, helped by credits received from manufacturers for aircraft delivery delays and grounding, besides better revenue management.
AirAsia will be a 20-aircraft airline this year and hopes to fly abroad after that.
SpiceJet and IndiGo have fleets of about 57 and 150 planes, respectively, and have a market cap of about Rs8,000 crore and Rs47,000 crore, respectively.
“If AirAsia India manages to deliver net profit on a consistent basis, AirAsia India could potentially be valued at $408m (million) upon listing based on our preliminary estimates,” Crucial Perspective, a specialist in Asian transportation equities, said on its website, “This will boost the value of AirAsia Berhad, which owns a 49% stake in AirAsia India by US$200m.”
With a cost structure lower than market leader IndiGo, AirAsia India is well positioned to grow market share and profitability in the long term.
AirAsia India will have a greater chance of turning profitable once it has 20 aircraft in its fleet, allowing it to bring down unit costs.
The firm will require additional capital injection before an IPO and will face tough competition from airlines like IndiGo, SpiceJet, Vistara which are also expanding, Crucial Perspective noted.
“Although the Indian airline sector is expanding rapidly and has strong growth prospects given its low air travel penetration rate and rising per capita income, competition will be stiff. The other domestic airlines have aggressive fleet expansion plans, particularly IndiGo, which has a competitive cost structure and another 445 aircraft on order,” it added.