Bravia Capital, a Hong-Kong based investment firm eyes to invest in airline companies in India. This is despite a negative sentiment pervading the aviation market. Bravia Capital has made investments in air transport and logistic companies in emerging countries according to Indian airline companies. Managing Director of Bravia Capital, Hal Hayward said, “I think all the airlines are talking to strategic partners and to funds like us about raising capital,”. He also added, “I am here. We’ve been watching the Indian market for quite some time. We have been talking to the airlines and we have a pretty consistent interest in the market. We are looking for opportunity and feel that there would be an investment definitely,”.
There are some speculations in the market about Bravia might invest in Kalanithi Maran-promoted budget airline SpiceJet. Hayward, when asked if there is a deal brewing between Bravia and Spicejet for $200 million said, “I will never comment on any specifics”. Spicejet is looking at the possibility of booking more aircraft orders either with Boeing or Airbus, thus it needs funding for purchasing aircraft. According to Hayward, “SpiceJet of course would raise funds as it is adding new aircraft. I’m sure it would be looking for money. And it needs equity in order to fund those aircraft. The banks might provide 80% of the funds but the remaining 20% have to be raised elsewhere. The question then is from where it is going to get it,”.
During the CAPA summit, SpiceJet CEO Neil Mills was asked about the term sheets for fund-raising and he said, “I have not seen the term sheets that I want to see. Over the next couple of months if the right one comes across then we will talk about it.” He also said that the private equity funds are becoming favourable towards investing in Indian airline companies as the government change of regulation to allow foreign airlines to pick equity has provided them an exit option. “The environment has changed. The private equity interest has actually grown because over the next couple of years they see an exit path for them with a foreign carrier coming in. PE interest has gone up because the ability of the other (read foreign carrier) to invest is now there,” Mills said. Bravia’s senior management has invested $5 billion in aviation, transportation, shipping and logistics industries in the past two decades. Its most recent acquisition was in Turkey where it acquired a Turkish freight carrier, this is according to company information. Hayward stated, “But risk perception, which involves legal risks, regulatory risks and rupee risks along with legal issues in the Indian market puts an ‘India premium’ to all investments. Major part of that risk is regulatory. And this India premium makes availability of funds that much more expensive for Indian companies. “I think it’s very difficult to raise equity for an airline. It is cost prohibitive to make an investment. Anybody who wants investment in Indian airline companies will come at a price and that price will be very high,” he said. But recent change in regulatory environment is a huge plus for investment in the sector. “There are some favourable things that have happened. There is a favourable regulatory environment and I understand that the price war of the past no longer exists. Also, there is favourable business trust,” Hayward said.