Mallya looking to divest 25% in Kingfisher

Nov 18, 2008 Mergers and Acquisitions

With hardly any company or sector being spared the aftershocks of the economic slowdown, Vijay Mallya’s Kingfisher Airlines appears to be the latest in the line, believed to be keen on a stake sale even as it flies deeper into ‘red’ territory with huge losses.

There is a proposal in the offing which seeks to allow foreign carriers to invest just less than 26% in their domestic counterparts, and Mallya seems to be eyeing British Airways, Singapore Airlines and Virgin Atlantic. However, with the stock markets turning an unkind eye, the market cap of the airline is currently around Rs.700 crore, and divesting 25% is only going to bring in close to Rs.175 crore, hardly enough to satiate Mallya. Ironically, this market cap could be quite close to the value of his IPL team, Royal Challengers.

These are worrying times ahead for Kingfisher, which is sitting on accumulated losses of ~ Rs.2,500 crore and has deferred proposed delivery of new aircraft. The oil companies and the Airports Authority of India are also not making it any easier, by demanding their pound of flesh, though Mallya will probably make staggered payments.

The newly formed alliance with Naresh Goyal’s Jet Airways is another sign of the turmoil the aviation industry is going through and it will be interesting to see how these one time rivals manage to tap into their combined synergies and get out of this mess, which ironically enough, is partly of their own making !