MAS to sell MRO unit in India to its partner, GMR

PETALING JAYA: Malaysian Airline System Bhd's (MAS) unit, Malaysia Aerospace Engineering Sdn Bhd (MAE), is pulling out from its airframe maintenance, repair and overhaul (MRO) joint venture in India less than three years after it started operations.
The Economic Times of India reported that MAE is selling its 50% stake to its joint venture partner, GMR Group. The report did not say how much the deal was worth.
"The Board of Approvals, under the Union Ministry of Commerce, has given its conditional nod to a GMR Group proposal to buy out the 50% stake owned by its partner MAE in an aircraft MRO unit," it reported on Tuesday.
MAE signed an agreement with GMR Hyderabad International Airport Ltd (GHIAL) to set up the 50:50 joint-venture company, known as MAS-GMR Aerospace Engineering Company Ltd (MGAECL) in 2009.
The MRO unit is located at an Special Economic Zone (SEZ) near the Hyderabad International Airport which has been earmarked specifically for aerospace-MRO activities.
"After deliberations, the board has decided to approve the proposal subject to each entity independently fulfilling the following conditions," the board of approvals said as per the minutes of its recent meeting.
As part of conditions to be fulfilled, GMR Group would have to ensure seamless continuity of SEZ activities, with unaltered responsibilities and obligations for the altered co-developer entity.
Earlier, GMR had informed the board of approvals that the decision to acquire the stake was taken after its Malaysian partner expressed inability to infuse more funds into the loss making MRO facility.It is not known how much MAS has poured into the JV thus far.
The board of approvals has instructed both GMR and MAE to comply with all the departments like revenue, company affairs and SEBI which regulate issues like capital gains, equity change, transfer as well as taxability with regard to change of equity.
"The assessing officer under the Income Tax Act, 1961, shall have the right to assess the taxability of the amount arising out of the transfer of equity. Applicants shall comply with relevant state government laws, including those relating to lease of land, as applicable," the Board of Approvals said.
MGAECL started its commercial operations in November, 2011 with, reportedly, an initial investment of more than US$50 million.
During the last three years, the company incurred cumulative losses of Rs 240.30 crore as on March 31, 2014. Mostly, promoters have been funding its operations.
After the acquisition of equity from MAE, GHIAL will wholly own MGAEL and change its name to GMR Aerospace Engineering Company Ltd.
MAS, which is into its fourth year of losses and in the midst of preparing a "radical" restructuring plan to drag itself out of the doldrums, did not respond to queries sent by SunBiz as at press time.