VCCircle

The newly merged company of Kingfisher Airlines and Deccan Aviation will raise about $250 million in equity to fund its expansion plans, the executives of both the airlines told media. A K Ravi Nedungadi, CFO of the UB group which owns Kingfisher Airlines, said that the group has started receiving expressions of interest from private equity partners and merchant bankers.
The new entity has plans to almost double its fleet from 80 to 158 aircraft over the next five to seven years, while is hoping to generate savings of anywhere between Rs 300 crore and Rs 400 crore a year as a result of synergies of the combination. The combined loss of the company last year was about Rs 1,000 crore. But the name of the game has been to gain marketshare rather than to make money.
The merged company, which will have a marketshare of 28.8 per cent, will look at gaining 0.5 per cent market share from its competitors every month, G R Gopinath, who will be the vice-chairman of the merged company, said.
Business Standard adds: Apparently the merger move will help Vijay Mallya help rope in investors to fund the group's international foray and also provide the much needed capital to sustain its operations for the next one or two years. The paper quotes a private equity executive as saying: "Mallya will get different types of investors. Large hedge funds or West Asian institutions, who were hitherto not comfortable with the competitive intensity here. That's reduced now."
The paper quotes some specialist airline investors such as Indigo Partners and private equity firms like Capital International, Texas Pacific Group, Temasek and Istithmar (it has invested in budget carrier Spicejet). The thinking is that post merger the losses would get wiped out over the next two years. Vijay Mallya should not find it difficult to raise capital in the emerging aviation scenario.