Mumbai: Vijay Mallya’s disclosure to the media late last week that Kingfisher Airlines is close to roping in an Indian private investor appears to have sent business circles buzzing. Among the names doing the rounds are those of Mallya’s newfound ally Subrata Roy Sahara and — hold your breath — Reliance Industries chairman Mukesh Ambani.
“A potential investor seems to be Sahara Group chairman Subrata Roy,” said a source with connections in both camps. The Sahara Group last month bought a 42.5% stake in Mallya’s Formula 1 team Force India. Sahara bought this stake with an equity commitment of $100 million towards development of the team.
A similar equity infusion from the Sahara Group is now being discussed for Kingfisher Airlines, according to well-placed sources. Officials of the two groups were expected to discuss the issue at a full-day meeting on Sunday, though a Sahara spokesperson said it was purely a Sahara Force One board meeting. “Sahara has no interest in the airline,” the spokesperson said.
Mallya, chairman of Kingfisher, denied any talks with Sahara for an investment in the beleaguered carrier though in an interview with Financial Times on Friday he had said Kingfisher was close to sealing deals worth $370 million. A consortium of 14 banks led by the State Bank of India is likely to chip in with Rs600 crore working capital and a private investor with Rs1,250 crore.
But Kingfisher’s market capitalisation was less than what the private investor would bring in at Rs 1,197 crore on Friday on a paid-up equity base of 49.77 crore shares. That could mean a massive dilution of the equity base.
Kingfisher Airlines’ total debt is at an overwhelming Rs6,500 crore, accounting for nearly half of the promoter UB Group’s total debt of Rs14,000 crore. With such huge debt on its books, most Indian banks are unwilling to lend to it, said a source, forcing it to seek other investors and sell some of the group’s popular liquor brands and assets under subsidiary United Spirits to raise funds.
21/11/11 Amritha Pillay & Shailaja Sharma/Daliy News & Analysis
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