Azim Premji and Ranjan Pai Lead $125 Million Flight into Akasa Air Investment

A consortium led by Premji Invest and Claypond Capital, the family offices of Wipro’s Azim Premji and Manipal Group’s Ranjan Pai, is in advanced discussions to invest approximately $125 million for a significant minority stake in Akasa Air, according to sources familiar with the matter. This investment would value Akasa Air at over $350 million, marking a substantial increase from its initial valuation of around $35 million, when the late Rakesh Jhunjhunwala‘s family first invested. This move signifies a rare show of confidence in the Indian aviation sector, which has historically struggled to attract substantial investment.

The funds raised through this investment are expected to support Akasa Air’s expansion plans and pre-delivery payments for aircraft, which will result in the dilution of the Jhunjhunwala family’s and CEO Vinay Dube’s shareholdings. Currently, the Jhunjhunwala family and Dube hold around 67% of the company, with the Jhunjhunwala family maintaining a 40% stake, making them the largest single shareholder even after the dilution.

Due diligence for this investment is being handled by a consultancy firm, and while the process is ongoing, finalizing the deal may take some time. Although CEO Vinay Dube did not comment directly on the investment, he emphasized the company’s commitment to remaining well-capitalized, ensuring that Akasa Air continues to build for the long term.

The potential investors, Premji Invest and Claypond Capital, are reportedly interested in well-managed, consumer-facing startups with significant market potential. Akasa Air’s prospects are bolstered by the current state of the Indian aviation industry, which is largely dominated by IndiGo and Air India, especially after the bankruptcy of Go First and financial struggles at SpiceJet. Investors believe that a well-funded airline like Akasa Air could emerge as a strong third player in the market, offering substantial returns.

An exclusive combination of Premji Invest and Claypond Capital, family offices of Wipro’s Azim Premji and Manipal Group’s Ranjan Pai is in talks to invest roughly $125m in Akasa Air a vital minority investment talks. This investment would give Akasa Air a post-money valuation of well over $ 350 million, a far cry from when the family of the late Rakesh Jhunjhunwala invested for about $ 35 million. This single action can therefore be seen as a very positive signal for the Indian aviation market which has hitherto had very little get a hold of investors.

The money from this investment is supposed to go to Akasa Air’s expansion and aircraft pre-delivery payments whereby the shareholding by the Jhunjhunwala family and the airline’s CEO Vinay Dube will be diluted. Currently the Jhunjhunwala family and Dube own roughly 67% of the company although the Jhunjhunwala family will retain 40% after the new share issue and will hence be the largest single shareholder.

Selection of an appropriate investment is still underway with the due diligence process being handled by a consultancy firm and hence the closing of the deal may still be a while away. While CEO, Vinay Dube did not make a direct reference to the investment, he made it clear that Akasa Air would continue to hold sufficient cash to build for the future.

Premji Invest and Claypond Capital are the potential investors who are said to target only companies with high growth potential, and those in the consumer space that are run efficiently. The current structure of the Indian market is in the favor of Akasa Air as the current key player is IndiGo and Air India with Go First going bust and SpiceJet coming from a financial crisis. Prominent investors are of the view that Akasa Air which is highly-funded could create new dynamism and resulted in high returns. Entering the market in August 2021, Akasa Air rapidly grew its fleet as the pandemic lowered the cost of renting aircraft and hiring pilots and cabin crew. When the aircraft was first launched the airline placed an order for seventy six Boeing 737 Max, then placed an order for one hundred and fifty more in January. But it has been restricted because Boeing has slowed down production in recent years, a result of close regulatory monitoring of the company following a series of safety failures.

For the fiscal ended 2022, Akasa Air presented losses of Rs 744 crore; however, the FY24 predicted industry losses are over Rs 1,600 crore. To these losses, CEO Dube blames the incremental investments required to set the right platform especially in safety, training and technology though he affirms that the initial outlay remains inviolate.

For Ranjan Pai, who has a 30 per cent stake in Manipal Hospitals that accounts for $400-500 million, the new economy sector investment is one of the major new ventures. Its major clients are Bluestone, Pharmeasy, Purplle and it also has a 74% stake in Aakash institute. Premji Invest, family office managing India’s largest portfolio over $10bn, remains active across sectors; latest deals involve investments in AI companies in US and India as well as FirstCry, Lenskart, KreditBee.