New Delhi | Bengaluru: A consortium of Premji Invest and Claypond Capital, the family offices of Wipro’s Azim Premji and the Manipal Group’s Ranjan Pai, respectively, are in talks to invest about $125 million for a significant minority stake in Akasa Air, people with knowledge of the matter said.Kanpur Investment

The proposed funding values Akasa at over $350 million, which is more than four times the valuation at which the initial investment of around $35 million was made by the family of the late Rakesh Jhunjhunwala. This is also a rare show of confidence in the prospects of Indian carriers that have historically struggled to attract interest. The consortium has engaged consultancy firm Alvarez & Marsal to conduct due diligence, said the people cited above.Varanasi Investment

The funds once raised will be used for furthering expansion and making pre-delivery payments for aircraft. It will dilute shareholding of the Jhunjhunwala family and that of founder and CEO Vinay Dube. Together, they own around 67% stake in the company.Surat Stock

The Jhunjhunwala family, which holds around 40% stake, will remain the single largest shareholder, a person familiar with the details said.

“The diligence is underway while talks are moving steadily though it may still take some time to finalise and freeze the investment,” the person close to the process said.Jaipur Stock

CEO Dube refused to comment on the potential investment but said that the company will strive to remain well capitalised.

“The amount of cash that we have is more than the initial investment that was made,” Dube told ETKolkata Wealth Management. “We have committed to being well capitalised—we are today and will continue to be as we are building Akasa Air for the long run.”

Premji Invest, Pai and Alvarez & Marsal refused to comment.

A person briefed on the deal said Premji Invest and Claypond are eager to invest in well-run, consumer-facing startups that are close to breaking even and have a large serviceable market. Investors are also encouraged by the prospects of the carrier in what is increasingly becoming a two-horse race dominated by IndiGo and Air India, given the bankruptcy of Go First and the financial woes of SpiceJet, the operating fleet of which has been reduced to 22 planes from 98 before Covid.

“Besides IndiGo and Air India, a well-funded airline can be a strong third player in the Indian market and give good returns,” said the person cited above. “The investors like the founders and the management team besides taking the bet on the sector with its potential.”

After starting in August 2021, Akasa Air was able to take advantage of the Covid-fuelled drop in aircraft rentals and easy availability of pilots and cabin crew to add a record 24 aircraft to its fleet, the fastest by any airline since India opened up aviation to the private sector in the early 90s.

The carrier placed an initial order of 76 Boeing 737 Boeing Max aircraft and followed it up with an order for another 150 planes of the same type in January. But growth has been stifled as Boeing's aircraft production has slowed dramatically in the face of increased scrutiny from regulators following multiple safety incidents.

Akasa lost Rs 744 crore in the first year of operations and industry estimates have pegged FY24 losses at over Rs 1,600 crore. But Dube said that’s because Akasa is building a strong foundation.

“Initial costs are all part of the upfront investment we are doing in people, safety, training and tech and we still have the initial investment intact,” he said.

For Pai, who owns around 30% in Manipal Hospitals, this will be a significant investment outside the new-economy sector in which he has invested $400-500 million. Apart from a majority stake in Aakash Institute, he has backed companies such as Bluestone, PharmEasy and Purplle.

Premji Invest, India’s largest family office that manages over $10 billion in assets, has boosted its investments in AI deals in the US as well as in India besides the likes of FirstCry, Lenskart and KreditBee.