Indian aviation industry has never been this interesting for private equity players. Even as SpiceJet gears itself to receive the money in tranches from its deal with global private equity investor, WL Ross & Co, Kingfisher is reportedly in talks with global buyout giant TPG for an investment.TPG Capital, along with other potential investors is lining up to invest over $400 million for a substantial stake. While negotiations have been going on for five months, they seem to have been stuck over valuations. Though Kingfisher Airlines stock is down to Rs 55 after its reverse merger with Deccan Aviation, Mallya is said to be looking for a valuation of Rs 90-100 per share.
Texas Pacific Group (TPG) concluded its first deal in the aviation sector in 1993. TPG is known for its turnaround of the bankrupt US airline Continental Airlines. Since last year, its been actively scouting for an investment in the Indian aviation sector. TPG is also said to have evaluated Deccan Aviation and Kingfisher Airlines independently last year,before Kingfisher acquired Deccan. TPG also dropped its plans to invest $50 million in SpiceJet last year.
TPG recently saw its $1.35 billion investement in Washington Mutual dissapear, as it was acquired by JPMorgan for $1.95 billion. But on the other hand it just raised $30 billion for its various funds, out of which $4 billion are to be committed in Asia. Earlier this month it invested $120 million in Shriram Group’s consumer finance arm.
Jet To Dilute 10% Stake To International Funds
Naresh Goyal, chairman of Jet Airways, has reportedly said that he is going to dilute 10% stake in the airlines to international funds. This would be in addition to his plans to raise up to $800 million through a qualified institutional placement of equity shares and $400 million through a rights issue.
Jet, like others in the aviation industry suffered huge losses due to the surge in crude oil prices. The airline reported losses of Rs 800 crore last fiscal year, which are expected to go up this fiscal. Besides this, Jet is also raising $1billion debt to fund the purchase of of five A330 Airbus and three Boeing 777.
Among Indian airlines, SpiceJet has been able to raise private equity funding from various firms. Recently it raised $100 million from turnaround specialist Wilbur Ross and Goldman Sachs. It also raised money from Tata Goup and Dubai government’s investment arm Isthimar. Separately, Kotak Private Equity has invested $14 million in Paramount Airways.