Deccan Aviation may be forced to dilute 25%-30% equity

Deccan Aviation, which operates budget carrier Air Deccan, which is trying to raise $100 million (Rs 408.88 crore) or more in a fresh round of funding, may end up diluting more than 25-30 per cent of its equity.
Deccan is in talks with hedge funds and institutional investors like Reliance Anil Dhirubhai Group (ADAG) and Texas Pacific Group to rope in a strategic investor, who can strengthen its equity base and sustain the cash burn. Vijay Mallya, who runs Kingfisher Airlines, said that he was interested in acquiring a stake.
Investment bankers tracking the deal say that Deccan may be forced to dilute its equity by 30 per cent to raise $100 million (Rs 409 crore) or more. The company has outstanding shares of 10.02 crore as per its balance sheet.
Assuming a price of Rs 100 (the stock closed at 108.50 on the Bombay Stock Exchange), the company would need to issue 4.1 crore or 4.2 crore shares to raise the targeted $100 million. If it gets a higher valuation (say, Rs 110), the company could raise a higher amount, of say, Rs 462 crore
If the company issues 4.2 crore shares, the total outstanding capital will be close to 14.2 crore shares. Thus, Deccan would be forced to dilute equity by 29-30 per cent to raise $100 million or more, said an industry analyst tracking the deal.
07/05/07 Ranju Sarkar/Hindustan Times

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Categories: Air Deccan May 2007