The much debted and troubled Kingfisher Airlines Ltd has once again turned to business associates, most of them being allies of Vijay Mallya for capital infusion and has also received a whopping Rs.763 crores from some of them, reportedly.
Earlier this year also, the company received Rs 709 crores from them through optionally convertible debentures (OCDs). These business associates are deemed as persons acting in concert (PAC) with the promoter. However, on Monday, the airline’s lenders led by State Bank of India (SBI) stated that they will release fresh funds or restructure loans only after the UB group showed up with at least Rs 800 crores in capital. The lenders also want the airline to come up with a competent business plan to compete in the market.
Kingfisher will also be asking the associates, or co-investors for further fund requirements. The tapping will be done by Kingfisher’s parent company, UB group. However, these co-investors are betting on upsides due to foreign direct investment (FDI) being allowed in the aviation sector.
59% stake in the company is owned by the promoters, which may get diluted due to infusion of more funds. Kingfisher has already tried to raise equity through numerous ways in the past one year. This includes it exploring a $250 million GDR which failed take off due to Eurozone crisis and other disturbances in the Arab world.
The Kingfisher Airlines is facing an all time low and huge debt crisis due to rising fuel prices, as blamed by UB Group chairperson Vijay Mallya, and also planning to sell property and to exist from the low cost aviation as a fund raising measure.
The lender consortium have also converted a part of their loans to equity in March this year translating to 23% stake for the banks in the company. Apparently, Kingfisher approached banks with a proposal for converting the high cost domestic debt into foreign currency loans. The airline also wants additional funds for working capital but the lenders have sought more surety capital from the airline management.
Kingfisher has called for a media briefing on Tuesday even as the lender consortium would also meet to discuss further the possibility of fresh loans.
Shares of Kingfisher Airlines rose upto Rs 21 today on Bombay Stock Exchange.
Report by Indrani Chowdury