Investors Bet Big on Akasa Air with $125 MN Injection

Akasa Air Lands $125mn Investment

According to The Economic Times, a two-party consortium is preparing to invest around USD125 million in Akasa Air. The consortium values the low-cost carrier, which commenced revenue operations two years ago, at about USD350 million, a fourfold increase from its initial valuation.

According to the newspaper's sources, a private equity firm called Premji Invest, based in Bangalore, and a venture capital firm called Claypond Capital, owned by Manipal Group, are currently in discussions to acquire a "significant" minority stake. Premji Invest is the family investment office of Azim Hashim Premji, the former chairman of the Indian multinational Wipro Limited. Manipal Group is associated with Ranjan Pai, a businessman who operates tertiary institutions and hospitals. Reportedly, the two parties have hired the consultancy firm Alvarez & Marsal to conduct due diligence.

"The diligence is ongoing, and discussions are progressing steadily. However, it may still take some time to finalize and secure the investment," the source stated.

Akasa Air operates flights to 27 airports in India, the UAE, Qatar, Saudi Arabia, and Kuwait. The airline currently has a fleet of twenty-three B737-8s and one B737-8-200, with ninety-nine B737-10s and 103 B737-8-200s on order. Vinay Dube, an Indian aviation entrepreneur, co-founded Akasa, and the Jhunjhunwala family are the primary investors, owning around 67% of the carrier. If the Premji/Claypond consortium invests, the stakes of both parties will dilute, with the Jhunjhunwalas remaining the largest shareholder with approximately 40% ownership.

Akasa currently holds a domestic market share of 4.7%, placing it fourth behind IndiGo Airlines (62%), Air India (14.3%), and Vistara (4.7%) but ahead of Air-India Express (4.5%) and SpiceJet (3.1%). The consortium is interested in investing in well-managed start-ups that are close to breaking even and have a large market. They believe that changes and consolidation in the Indian aviation market create an opportunity for a well-funded, strong third player. The investors are attracted to the founders and the management team, and they see great potential in the sector.

Akasa Air has been experiencing financial losses since its inception, including a loss of INR 7.44 billion rupees (USD 88.7 million) in its first 12 months of operations. It is projected that the airline will report losses of INR 16 billion (USD 214.7 million) for the 12 months ending on March 31, 2024. The CEO, Dube, attributes these losses to start-up costs and the expenses associated with establishing a strong market presence. He anticipates that it will take another two years for the airline to become profitable. The raised funds will be used to support further expansion and make aircraft pre-delivery payments.