Vijay Mallya’s disclosure last week that Kingfisher is close to roping in an Indian private investor appears to have sent business circles buzzing.
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.
“Kingfisher Airlines can either look at partly selling itself to an international player, till FDI (foreign direct investment) from international airlines is permitted. Another alternative is to find a strong domestic investor,” said the source.
On sale of brands and assets, the source said, “Some brands of very high valuation like the premium whiskey Royal Challenge could be sold. There are also other premium whiskey brands in United Spirits’ portfolio like the Antiquity and Signature.”
Rumours about Bacardi India being a potential buyer for United Spirits’ premium whiskey brands are rife too. However, this could not be verified with Bacardi officials immediately.
Meanwhile, Ravi Nedungadi, CFO, UB Group stated, “We are very comfortable with the debt in United Spirits and thus will not look for a sale of any of the assets, which includes its brands, to retire debt at the group level.”
The official also declined to confirm the Rs 14,000 crore debt figure at the group level, saying “the debt needs to be seen a break-up at individual company level and not as a total liability for UB Group.”
Currently, while airlines are permitted to receive foreign direct investment of up to 49%, investment from foreign airlines is not allowed. The Cabinet, however, is expected to take up a proposal to let foreign airlines buy up to 24% equity in local carriers.
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