The author has posted comments on this articleTNN | Dec 12, 2012, 01.55AM IST
MUMBAI: Ailing Kingfisher Airlines returned to active discussions for selling a 49% stake to Abu Dhabi carrier Etihad even as investors on Tuesday lapped up shares of the debt-laden company, co-owned by UB Group chairman Vijay Mallya, and a clutch of domestic banks.
The grounded Kingfisher has been in protracted discussions with Etihad for more than a year, but talks revived in recent weeks, said people briefed on the matter. Kingfisher CEO Sanjay Agarwal and Mallya were leading talks with Etihad, which has reached a crucial stage, they added. “This deal has been in the making for a while and Etihad has stood by us, despite being wooed by others. This is a deal which gives them operational control and a large stake at an attractive valuation,” said a source who didn’t want to be named as talks were private. He declined to confirm media reports that a preliminary deal could be in place as early as next week.
Kingfisher Airlines, responding to queries from the stock exchanges, said it was in talks with three potential investors, including Etihad. These are in negotiation stages and no agreement has been reached, the company added. Kingfisher shares were locked at the upper circuit on Tuesday, after rising 5% to touch Rs 15.67 in early morning trade on BSE.
Mumbai Mirror, a Times Group publication, on Tuesday reported that Etihad was nearing a deal with Kingfisher to buy 48% stake in the latter, and transaction might get announced on December 18, which is Mallya’s birthday. Another report earlier this week said Etihad had returned to discussions with Kingfisher after its brief talks with Jet Airways didn’t move ahead.
Jet Airways chairman Naresh Goyal, who fought a bitter battle with challenger Mallya for market share, had stepped into discussions with Etihad after foreign carriers were allowed to buy a 49% stake in domestic airlines. Etihad CEO James Hogan told international media in recent weeks that his company was talking to three Indian carriers for a possible investment, but didn’t name any. Etihad acquired a stake in Virgin Australia, Germany’s Air Berlin and a 40% stake in Air Seychelles in the past one year.
“Foreign carriers know that Kingfisher will regain the market share once it starts flying and shoring up market capitalization will be no big deal then. Even lenders will be more than happy to reschedule debts,” said investment advisor S P Tulsian, who argued that the troubled airline presented the best bet for any foreign acquirer. Kingfisher carries a debt of Rs 8,000 crore and another Rs 3,000 crore supplier credit compared to Jet’s debt of roughly Rs 14,000 crore and supplier credit pegged at around Rs 4,000 crore, Tulsian added.
Meanwhile, Kingfisher Airlines lenders said they would insist that any new stakeholder should come in by fresh issue of shares into the company rather than sale of shares by promoters. The airline lenders are scheduled to meet on December 17 in Mumbai. “If the airline has to be operational it will need immediate capital for paying off dues to airports, staff and other service providers. This has to come in by issue of new shares so that funds go into the airline,” said a lender. “We may agree to another repayment schedule if new shareholder comes up with a viable plan,” he added.