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Rothschild, TPG in talks with Kingfisher Airlines for PE funding

Raghuvir Badrinath  |  Bangalore 

Global blue-chip private equity investors Rothschild and TPG Group are reportedly in talks with UB Group-owned Kingfisher Airlines, which is in the market to raise $300 million.

This is the second time in the past couple of years that Kingfisher Airlines has engaged in discussions with marquee private equity investors to raise capital. Historically, the Bangalore-based UB Group has stayed away from private equity (PE) investors and has preferred to build its empire of spirits, beer and airlines on public equity along with a sizeable measure of leverage.

The move to open the window to PE investors comes after a series of measures taken by Kingfisher Airlines over the past six months. Last December, Airlines got a special one-time nod from the Reserve Bank of India to restructure its debt by converting a part of its Rs 7,000-crore debt into equity along with a moratorium on principal for two years, lowered interest rates and a ballooning repayment option over the next few years to settle its highly leveraged debt. The existing debt is around Rs 6,000 crore on an eroded networth.

Kingfisher Airlines, the second largest airline in terms of market-share in the highly competitive India’s civil aviation sector, post the debt restructure had hoped to raise $300 million through a GDR (Global Depository Receipt) route on the Luxembourg Stock Exchange. However, with the price of crude oil spiraling upwards and with meek interest from global investors, the company had to rework its plans.

Kingfisher Airlines is now understood to have directly opened talks with PE majors, according to two PE industry players who are close to UB Group. This is the second time that TPG Group is engaged with Kingfisher Airlines to explore the option of funding an airline in India. UB Group officials & fund managers could not be reached for comments.

If the move to raise PE by Kingfisher Airlines sails through, it will be the third major PE funding in the Indian civil aviation sector. While SpiceJet had raised PE funding from another global investor Wilbur Ross, Deccan Aviation, before being acquired by Kingfisher, had raised funding from a clutch of PE investors, including ICICI Venture.

Last financial year, Kingfisher Airlines had managed to cut its net loss by 38 per cent to Rs 1,027 crore on a topline of Rs 6360 crore, which grew by 25 per cent.

Riding on improved traffic in the domestic market and with efficient cost cutting measures across its 66 aircraft and 380 flights a day, the airline had managed to post a positive EBIDTA of Rs 140 crore for FY11, against a negative EBIDTA of Rs 690 crore during FY10.

First Published: Tue, June 14 2011. 01:09 IST