Tata Sons to buy out Arun Bhatia’s stake in AirAsia India

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Busiessman Arun Bhatia is set to exit AirAsia India, ending an acrimonious relationship in which he alleged that the low-fare airline he jointly owns with Tata Group and AirAsia Malaysia Bhd was controlled from overseas.

The airline, which started operations in June 2014, is a three-way joint venture, with Tatas, AirAsia Malaysia and Bhatia’s Telestra Tradeplace Pvt. Ltd holding 41.06%, 49% and 9.94% respectively.

Tata Group holding company Tata Sons Monday said that it will buy out Bhatia’s 7.94%, while two Tata Sons executives—AirAsia India chairman S. Ramadorai and director R. Venkataramanan—will buy out 0.5% and 1.5% stakes respectively from him in their personal capacity.

Once the deal is complete, the holding of Tata Sons in AirAsia India will go up from 41.06% to 49% and that of Malaysia’s AirAsia, which has invested in the airline through AirAsia Investment Ltd, will remain at 49%, while the share of Bhatia will fall to zero.

In an interview that appeared in The Economic Times on 11 December, Bhatia was quoted as saying that the airline was being controlled by its Malaysian parent, and that he would take up the matter legally.

The Tata Sons’ Monday statement said the agreement was signed on 14 March, and the transaction is proposed to be completed in April, subject to completion of relevant corporate approvals and processes.

Tata Sons’ decision to increase its stake comes 10 days after AirAsia India named Amar Abrol as its new chief executive officer (CEO) from April, taking over from Mittu Chandilya.

AirAsia India had also announced the appointment of Ankur Khanna as chief financial officer (CFO) and Kiran Jain as the head of commercial.

Indian rules allow foreign airlines to own up to 49% in local airlines, but stress that management control must be with the local partner.

In AirAsia’s case, this is complicated because Air Asia Bhd is the largest shareholder.

Chandilya led AirAsia India from 1 June 2013. Under his leadership, the airline has established a fleet of six aircraft, covering 12 routes and carrying over 1.8 million passengers, before stepping down.

However, Tony Fernandes, group CEO of AirAsia has dismissed allegations that his airline was exerting undue control over the Indian business.

The founder of AirAsia Group, whose father is of Goan origin, in mid-March said he applied to be an Overseas Citizen of India (OCI). Fernandes is seeking to sidestep criticism that the airline is controlled from abroad, which would be a breach of rules.

Indian laws allow a foreign company to own up to 49% in an airline, while a non-resident Indian (NRI) can hold 100%.

“I was searching for my father’s passport,” Fernandes had said.

Once he gets OCI status, nobody can hound him over foreign ownership, Fernandes said. “Maybe I should throw a party in Goa after I get the citizenship,” Fernandes joked.

He pointed out that Jet Airways (India) Ltd chairman Naresh Goyal, despite living in London, is able to step aside regulations. In February, Fernandes had raked a fresh controversy by asking whether all promoters of domestic airlines are living in India, hinting at Goyal.

Goyal, founder of India’s largest airline by passengers carried, is a London-based NRI.