L ive Mint :Mihir Dalal Mail Me | P.R. Sanjai :: Tue, Sep 24 2013. 03 05 PM IST
Discussions to get funds for a restart
are likely to conclude within 90 days,
says Mallya
Bangalore: Kingfisher Airlines Ltd is in talks with a “foreign” investor to get funds for a re-start and may conclude the discussions within 90 days, the airline’s embattled chairman Vijay Mallya said on Tuesday.
Mallya declined to elaborate further on the talks.
“All I can say is that it is a foreigner. I’m not at liberty to give further information because of strict confidentiality clauses. Given all that has been speculated, this investor is very, very sensitive to identities being revealed,” Mallya told reporters after the airline’s annual general meeting (AGM) on Tuesday.
A person close to the development, who spoke on condition of anonymity, said a Saudi Arabia-based investor with “strong Maharashtra links” is conducting a due diligence of Kingfisher.
As per the plan, Mallya and the investor will assume part of the debt of the grounded airline and invest nearly Rs.1,000 crore after settling part of the dues of lenders and vendors, this person said.
“The idea is to opt for a limited re-start with five Airbus planes and three ATR planes. A joint revival plan will be submitted to aviation regulator DGCA (Directorate General of Civil Aviation) and lenders shortly,” the person said.
Higher fuel costs largely on account of increasing taxes, a failed acquisition of a low-cost carrier (Air Deccan) and poor management of operations led to thousands of crore of losses at Kingfisher. The airline’s operating licence was suspended in October by DGCA following a strike by its employees. Its permit expired on 31 December 2012, but it can be renewed within two years.
Mallya blamed the media for potential investors walking away from putting money into the airline and said at the AGM that Kingfisher’s employees caused the airline’s licence to be suspended.
“Let’s try to get Kingfisher Airlines restarted and not have a situation where yet one more investor has been driven away because of statements made by somebody, actions taken by somebody, or speculation in the media,” he said.
Despite the increasing losses in India’s airline industry, investor interest has been strong after the government allowed overseas carriers to invest in their counterparts here in September 2012. Indian airlines, excluding Kingfisher, are expected to lose a combined $400-450 million in the second quarter of the current fiscal, according to a mid-August report by consulting firm Centre for Asia Pacific Aviation (Capa). The airlines lost an estimated $1.95 billion last fiscal.
Still, this year, Etihad Airways agreed to buy a 24% stake in Jet Airways (India) Ltd. The Tata Group signed a deal to run a discount carrier with Malaysia’s AirAsia, and then last week also announced plans to launch a full-service airline with Singapore Airlines.
Mallya said on Tuesday that Kingfisher has submitted three revival plans to DGCA but hasn’t yet received a response from the regulator.
He also said the UB Group’s holding company, United Breweries (Holdings) Ltd, or UBHL, has agreed to pay Kingfisher employees a month’s salary and has approached the Karnataka high court for approval. Kingfisher hasn’t paid employee salaries since August 2012.
The permission is required because Kingfisher Airlines’ creditors have filed at least five winding-up petitions in the court to recover dues. UBHL has given corporate guarantees of nearly Rs.9,000 crore for Kingfisher’s debt.
“The Kingfisher board has requested the UBHL board for funding. The UBHL board has considered the matter in the light of the prospective investor and has agreed to provide some funding to Kingfisher Airlines. UBHL itself cannot use its own funds or its assets because of a restraining order from the Karnataka high court. We have applied to court for permission to use part of these funds and now it’s in the hands of the honourable judge,” Mallya said.
Several Kingfisher employees present at the AGM on Tuesday said that receiving just one month’s salary wasn’t enough and expressed scepticism about Mallya’s ability to restart the airline.
“He’s paying us a salary for one month out of 14 months… he’s doing a great job,” one of the employees said, declining to be named.
“He’s been saying for months now that he’ll get investors and restart the airline. But who’ll want to invest in Kingfisher? At the AGM, he also said that we were to blame for (Kingfisher) losing the licence.”
Slipping control
Kingfisher is grounded, and Diageo Plc has management control at United Spirits Ltd. Now, Mallya is in danger of losing control of another of his companies.
Zuari Fertilisers and Chemicals Ltd and Deepak Fertilisers and Petrochemicals Corp. Ltd are in contention to be the largest shareholders in the UB Group’s Mangalore Chemicals and Fertilisers Ltd(MCFL) after a sale of pledged MCFL shares by Kingfisher’s lenders significantly reduced Mallya’s stake.
Mallya said on Tuesday that the UB Group intended to remain the controlling shareholder in MCFL and had offered to buy the shares back.
“I have told Mr (Saroj) Poddar, as well as Shaileshbhai of Deepak Fertilizers, that I intend to keep MCFL within the UB Group fold and that we’re not sellers and if either of them wishes to sell their shares we would be happy to buy them,” he said, declining to say how he would fund any purchases. Mallya added that he had received assurances from both Zuari Fertilisers and Deepak Fertilisers that they would not attempt a hostile takeover of MCFL.Despite repeated attempts, Mint couldn’t reach both Zuari Fertilizers and Deepak Fertilizers for comment.
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