Kingfisher Airlines' stake-buy talks report denied by Reliance Industries

MUMBAI: A spokesman for Reliance Industries denied on Wednesday a media report that the energy major was in talks to buy a stake in cash-strapped Kingfisher Airlines.

It was reported that Reliance might make a financial investment or pick up a stake through a preferential offer by the carrier, which could be followed up by an open offer to public shareholders.

In an interview to ET, Chairman of Kingfisher Airlines, Vijay Mallya said, "I have an investor who is interested but it all depends on how the regulatory framework takes shape and what the situation is like. I am not going to say anything more on the issue."

Ravi Nedungadi, chief financial officer of UB Group, the airline's parent, had said on Tuesday it had been approached by strategic investors.

Investors have grown increasingly worried over the future of Kingfisher Airlines in a fast-growing but loss-making industry.

Kingfisher, named after its parent firm's best-selling beer, cancelled scores of flights last week as it abruptly shut some routes.

To ease its fuel bill, Kingfisher had asked authorities to directly import fuel. Taxes make jet fuel in India 60-70 percent more expensive than the global average.

Kingfisher, which has been asked by creditors to raise $160 million in equity, aims to launch a rights issue for up to Rs 2000 crore ($397 million) shortly after its end-March financial year-end at the latest. It is also considering a global depositary receipt issue, Nedungadi said.

Both plans have been stalled by weak markets, while an earlier plan to bring in private equity was not successful.

Nedungadi said Kingfisher has asked banks for Rs 700-800 crore additional working capital, as well as Rs 150 crore of term loans to fund fleet reconfiguration as it ends its budget offering.

The airline's founders have made Rs 800 crore "soft" loans to the carrier, which will eventually be converted to equity, he said.

R K Gupta, managing director of Taurus Mutual Fund, said he was avoiding the airline sector. "I think a rights issue is very unlikely in the near term," he said.

Kingfisher, which has never made a profit since its 2005 launch, saw its fuel bill jump 70 percent in the September quarter. Passenger revenue rose 9 percent, revenue per available seat kilometre (ASK) fell 16 percent, and cost per ASK rose 8 percent. Its net loss more than doubled to Rs 469 crore.

"While all airlines have taken a deep hit this quarter because of high fuel prices, Kingfisher is in such a bad shape that they need to look for funds to stay afloat," said Neeraj Dewan, director at New Delhi-based Quantum Securities.

At 10:25 AM, shares in Kingfisher Airlines were trading at Rs 22.35, up 2.29%.