Air Works on sale, promoters eye Rs 1,800 crore valuation
Air Works, an aviation maintenance and overhaul services provider, is on the block, and its promoters expect valuation of up to 1,800 crore.
“Investment bank Jefferies has been appointed to look for buyers. Initial talks with local and global players in the segment have begun,” a person with direct knowledge of the deal said.
Investors such as New Enterprise Associates (NEA), GTI Capital, Elephant Capital, and Punj Lloyd that together own 71% stake in Air Works “expect total value of Rs 1,500-1,800 crore”, said another person involved in the talks.
An investment banker with knowledge of the deal said the company was initially considering an initial public offering. “However, the management and the shareholders have now decided to look for a strategic investor,” the person said.
Going by the valuation they are eyeing, GTI Capital and NEA would make 6-6.5 times returns on their initial investments totalling $27 million made in 2010 while Elephant Capital, which invested in the company in 2011 at a valuation of Rs 400 crore, would make about four times of its investment.
Founded in 1951 by P S Menon and late B G Menon, Air Works provides aviation maintenance, repair and overhaul (MRO) services in India, and aircraft paint and refinishing services in Europe through its subsidiaries. The Menon family owns 28% stake in the company.
In a detailed reply to an emailed query, a spokesperson for Airworks said, "There is no move to bring in a strategic investor by the promoters/investors of Airworks. This news is extremely speculative in nature with no basis."
Spokesperson for GTI Capital in an emailed response to ET queries said, “I regret, we cannot comment on this matter.”
When contacted over phone, Bala Deshpande, senior managing director of NEA India, too, declined comment.
Experts expect global players to show interest in Air Works. “There will be a lot of strategic interest from global investors as the industry has a strong growth potential,” a banker said.
Air Works reported provisional revenues of Rs 601.5 crore in 2014-15, down from Rs 664.1 crore, and its net profit slipped to Rs 17.8 crore from Rs 20.1 crore, according to India Ratings & Research. The company, however, reported an improvement in its EBITDA margin at 16.9% in FY15 against 14.1% in the previous fiscal FY14. Air Works’ earnings before interest, tax, depreciation and amortisation stood at Rs 101.9 crore last fiscal against Rs 93.5 crore in FY14, the rating release says.
The company currently maintains 42 aircraft types in India and has a presence at 12 airports across India and at five airports in the UK through its subsidiary Air Livery. Together, the group has about 150 customers including airlines, autonomous bodies, corporates, individuals, and governments.
Since 2010, Air Works has been aggressively growing through inorganic route. It acquired 85% stake in Air Livery, which is the largest aircraft refinishing company in the Europe. In 2013, it acquired Aero Technique Espace, a French aircraft painting company. Air Works also made strategic investment Dubai-based Empire Aviation Group FZCO and it has a joint venture with Scandinavian Avionics that has expertise to maintain of over 250 aircraft types. In July this year, the company acquired a minority stake in Acumen Aviation Europe to enter into the into aircraft asset management business, building greater presence in Europe, Asia and the US.
Indian aviation industry is expected to grow at 10% a year for the next 10 years and become one of the top three aviation markets in 20 years. The global aviation industry is estimated at $50 billion, as per Indian civil aviation ministry statistics.