In a significant development in India’s aviation sector, a consortium comprising Azim Premji’s family office, Premji Invest, and Ranjan Pai’s family office, Claypond Capital, is set to acquire a minority stake in Akasa Air. The investment, part of a larger $130-140 million fundraising round, marks a key milestone in the airline’s journey as it aims for growth and expansion.
Details of the Investment
According to reports from The Economic Times, Akasa Air has already signed a term sheet with the Premji Invest-Ranjan Pai consortium earlier this month. The investment, valued at over $100 million from the consortium alone, is expected to play a pivotal role in bolstering Akasa’s financial foundation. The consortium is now seeking necessary regulatory approvals from the Competition Commission of India (CCI) to finalize the deal.
Valuation Insights
Akasa Air, valued at $86 million in 2021 according to Tracxn, has seen a significant rise in its valuation. While the investment talks were initially based on a valuation of over $350 million, the deal is reportedly being finalized at a slight discount, reflecting current market dynamics.
Jhunjhunwala Estate to Double Down on Investment
The late Rakesh Jhunjhunwala, who was instrumental in Akasa Air’s inception, continues to influence its trajectory through his estate. Reports suggest that the Jhunjhunwala estate is likely to increase its holdings, doubling down on its commitment to the airline. The Jhunjhunwala family currently holds a 38% stake through various trusts, making them the largest single shareholder.
Shareholder Dilution
As part of this fundraising round, the shareholdings of the Jhunjhunwala family and Akasa Air’s founders, including CEO Vinay Dube and his brothers Sanjay and Niraj Dube, will be diluted. Collectively, they hold a 67% stake in the airline, which will decrease post-investment. However, the Jhunjhunwala family’s position as the largest shareholder remains secure.
Akasa Air plans to channel the newly raised capital into expansion efforts, including increasing its fleet size and strengthening its operations across India. With the aviation industry rebounding post-pandemic, this infusion will position Akasa to capture a larger share of the market.
Aircraft Pre-Delivery Payments
A significant portion of the funds is expected to go towards pre-delivery payments for aircraft. This investment aligns with the airline’s vision to expand its fleet and enhance its capacity to meet growing demand.
Beyond fleet expansion, the funds will help Akasa improve operational efficiency and customer experience, further solidifying its position as a formidable player in India’s low-cost carrier market.
India’s aviation sector is witnessing intensified competition among low-cost carriers like Indigo, SpiceJet, and Go First. In this environment, Akasa Air has carved a niche with its customer-first approach and focus on sustainability.
The aviation industry has shown robust recovery following the pandemic-induced slowdown, with passenger numbers steadily increasing. Akasa’s fundraising and expansion come at an opportune time, enabling it to ride the wave of industry recovery.
The involvement of prominent investors like Azim Premji and Ranjan Pai underscores the confidence in Akasa Air’s business model and growth prospects. These family offices bring not just capital but also strategic insights that could steer Akasa towards long-term success.
The airline’s ability to scale operations effectively will determine its future success. By leveraging the fresh capital, Akasa can expand its network, improve service offerings, and strengthen its foothold in the domestic market.
With shareholder dilution resulting from the latest funding round, it will be crucial for Akasa to balance the interests of its existing and new stakeholders. Maintaining the confidence of the Jhunjhunwala family and the Premji-Pai consortium will be key to sustaining its growth momentum.
The deal’s completion hinges on approvals from the Competition Commission of India (CCI). Timely clearances will be essential to ensure the airline can implement its expansion plans without delays.
The acquisition of a minority stake in Akasa Air by the family offices of Azim Premji and Ranjan Pai marks a new chapter for the airline. This strategic partnership not only provides the financial backing needed for expansion but also adds a layer of credibility to the airline’s growth ambitions. With robust plans to enhance operations and scale its fleet, Akasa Air is poised to strengthen its position in the competitive Indian aviation sector.
