Kingfisher Airlines Ltd, which was forced to halt its airlines operations a year ago due to debt and defaults on loans besides lack of funds to pay its employees, is still in talks to revive the business.

The firm is in talks with an unnamed foreign investor for a potential stake sale which could materialise as early as by the end of the year, chairman Vijay Mallya said on Tuesday. He was speaking to reporters after the company’s annual general meeting on Tuesday. He did not elaborate if he is negotiating with a foreign carrier or a financial investor.

The company’s share price shot up 9.8 per cent hit the upper circuit for the day at Rs 5.14 on the BSE in a flat Mumbai market on Tuesday. Currently the firm has a market cap of Rs 415 crore.

United Breweries (Holdings) Ltd, the single largest shareholder of the airlines, also saw its scrip rising almost 10 per cent to close at Rs 27 a share on the BSE.

This is not the first time Mallya has publicly said that the group is in talks to bring in an investor. However, he has unable to sew a deal to rescue the full-service carrier which had to stop operations around a year ago.

Its departure had coincided with sharp uptick in air fares in the country. While partly linked to high aviation fuel prices, the fare increases was also said to be a result of limited competition in the domestic routes.

The public listed firm had last generated revenues in the quarter ended September 30, 2012. For the full year ended March 31 2013 it had revenues of Rs 501 crore with a net loss of Rs 4,301 crore against revenues of Rs 5,493 crore and a net loss of Rs 2,328 crore in the previous year.

The total promoter holding, bulk of it through another listed firm United Breweries (Holdings) was pegged at mere 32 per cent as of June 30, 2013. Any significant equity dilution by entry of a new partner will potentially make Vijay Mallya a junior partner in the venture. The debt-laden group recently sold a chunk of its stake in one of its flagship firms United Spirits to Diageo.

Last year, the government opened the aviation sector by allowing foreign carriers to pick up to 49 per cent stake in Indian firms to operate domestic airlines. Already, Jet Airways is in the final leg of getting approval to sell a large minority stake to Abu Dhabi-based Etihad.

In another deal, Malaysian budget carrier AirAsia has formed a joint venture with Tata Sons and another Indian businessman to form a new low-cost domestic carrier. Most recently, Tata Sons also said it has decided to tie up with Singapore Airlines to launch a new full service airline in the country. SpiceJet is also in talks to rope in a new strategic partner.

(Edited by Joby Puthuparampil Johnson)

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