Akasa Air plans to raise up to $400 mn

However, this could lead to a dilution of the stake held by the family of late billionaire investor Rakesh Jhunjhunwala, they said.

“The fundraising will be done in multiple tranches, with an increasing valuation of up to $1 billion from around $650 million now. The Jhunjhunwala family is unlikely to buy any additional shares in the planned fresh equity issuances, which may dilute their holding," one of the two people said on condition of anonymity.

The banker appointed for the process may also look for a suitable buyer for a secondary stake sale by the Jhunjhunwala family, which owns 45.97% of Akasa Air.

UBS Group AG, according to the people aware of the development, has been hired to manage the fundraising plan. A spokesperson for UBS declined to comment.

The fundraising plan, to be carried out over the next 12-18 months, may involve fresh equity issuances of $75-100 million each, the first person said.

Akasa, launched in August 2022, is entangled in a crisis after the exodus of 43 pilots and a subsequent dispute in the Bombay high court. According to the airline, the pilot resignations caused it to cancel over 630 flights in August, an estimated 18% of the 3,500 flights it operates monthly.

The fresh capital raised could be utilized to expand Akasa Air’s fleet, offer better compensation packages to pilots, and improve in-flight services to compete with larger rivals in India’s booming aviation industry.

An Akasa Air spokesperson said the airline has “strong finances and a solid growth plan". “We are confident about our future and continue to invest prudently," the spokesperson said, without commenting on the company’s fundraising plan and the Jhunjhunwala family’s stake dilution.

“The airline has generated cash from its first day of operations, as a result of which the initial investment by our investors (including the investment made by Mr Jhunjhunwala) continues to remain secure in our bank account. As a young airline, we are proud that we are adding to the company reserves even in the first year of our operations," the spokesperson said.

Akasa Air’s co-founder and chief executive, Vinay Dube, holds a 16.13% stake in the airline, with Madhav Bhatkuly owning 9.41%, Sanjay Dube and Niraj Dube each holding 7.59%, PAR Capital Ventures Llc with a 6.37% stake, Kartik Verma at 1.93%, Ninan Chacho at 1.07%, and other stakeholders owning 3.94%.

The Jhunjhunwala family has a right of first refusal on any equity fundraising that Akasa plans. If existing shareholders, including the Jhunjhunwala family, fail to participate in an equity issuance, their ownership will be diluted.

“The Jhunjhunwala family may retain a small stake in Akasa even after the primary issuance," said the first person.

Responding to a query from Mint, a spokesperson for the Jhunjhunwala family said, “The family continues to have the utmost faith in the professional management of Akasa and will continue to remain invested for the long term."

Akasa Air has ordered this year for a total of 72 “737 MAX" aircraft that are to be delivered over the course of five years.

The airline currently has a 19-aircraft fleet and a 4% market share as of August 2023.

IndiGo (Interglobe Aviation Ltd) commands the largest market share at 63%, while the Tata group’s total market share in the civil aviation space is 27%.

Indian airlines carried 12.4 million passengers in August, a 23% jump from a year earlier, according to data compiled by the Directorate General of Civil Aviation (DGCA). In the eight months to August, Indian airlines carried 100.62 million passengers across domestic routes, a 30% increase from the year earlier.

The airline has been one of the fastest-growing airlines in India, with an initial fleet induction plan of adding one brand-new aircraft every 15 days.

Further, the delivery of its 20th aircraft on 1 August makes Akasa Air the first airline in Asia to add the 737-8-200 variant of the Boeing 737 MAX aircraft to its rapidly expanding fleet. Akasa Air’s order book comprises 76 jets, which include 23 737-8s and 53 737-8-200 airplanes. In addition, the airline remains fully committed to placing a three-digit aircraft order by the end of 2023.

The airline is now looking at an international foray by December.

Akasa Air has over 3,000 employees now and expects to reach an employee strength of over 3,500 by March to support its expansion plans.