Air Sahara may face funds strain

MUMBAI: With the failure of the Jet-Sahara deal, the future of Sahara as an airline has raised concerns.

At a late night press conference, its president Alok Sharma, said: “The Sahara group will revive the airline.’’ Capital infusion of about $150m is expected to be made to revive the Lucknow-based carrier by the group.

Brave words, but barely enough to survive in the cut-throat dogfight over Indian skies. The cancellation of the deal could not have come at a worse time for the airline industry. Plunging share prices, widening losses and increasing scepticism among investors have made fund raising extremely tough for airline companies.

Local firms compete with each other to buy or lease planes and launch new routes, but they are also encountering tight-fisted investors who are wary of investing in a high-risk business. How will Sahara manage to raise money, hire pilots and survive on its own is the million dollar question.

Some analysts and industry experts believe that this will force Mr Roy to, perhaps, consider parting with some of his other assets such as Aamby Valley, which was reportedly on the block some months ago. Or he could get another strategic investor such as Vijay Mallya of Kingfisher.

But Mr Mallya has already said that he is willing to consider a deal but only at a price. Now that he holds all the aces, the figure is sure to be much lower and perhaps unpalatable to Sahara. Jet continued to remain silent on the reasons for the walk-out.

The conditions precedent to the merger have not been fulfilled with the home ministry’s approval for Naresh Goyal yet to be obtained, Jet officials claimed.

Jet filed an arbitration petition before the Bombay HC, seeking direction to stop Air Sahara and its seven directors from withdrawing Rs 500 crore transferred by it as part of the acquisition deal reached on January 19.

Investors, meanwhile, have reacted positively to the Jet announcement. Jet shares rose 5.1% to Rs 706 on Wednesday. After the strong headwinds created by the Sahara fiasco, Mr Goyal can perhaps permit himself a wry smile as he looks at the stock prices.