Takeover Tycoons Hard Times May Lend Wings To Raj Air

Takeover tycoon P Rajarathinam has decided to return Raj Air back to its original promoter Lalit Sheth. The airline is expected to be revived with the Sheths planning to pump in fresh funds into the project.

Sheths who sold the airline to Rajarathinam for a sum of Rs 10.5 crore in January, 1995 apparently failed to realise the entire amount. They were only given around Rs 1 crore as upfront money when it was sold to him.

Rajarathinam, in a communication to Sheth a couple of months ago, agreed to return the airline expressing his inability to pay back the amount. According to Sheth, his company has slapped a Rs 6 crore damage on Rajarathinam for defaulting on payment.

 

Sheth now wants to revive the airline by inducting five 31-seater Dornier 328s. We dont want to rake up old issues. We are more interested in reviving the airline, Sheth said.

He said that foreign financial institution KFW had sanctioned a loan of $34 million to buy the aircraft from Daimler Benz.

The aircraft manufacturer has agreed to freeze the prices at 1994 levels ($9.62 million for each aircraft). Sheth had paid $100,000 as token deposit to Benz which has been forfeited.

Raj Air had received a $36.5 million external commercial borrowing clearance from the finance ministry in June 1995 but it has lapsed now. Sheth said he would file an application with the ministry to renew the ECB.

Sheth said Punjab State Industrial Development Corporation and Gujarat Industrial Investment Corporation had agreed to pick up stake in the airline. Both the institutions had earlier agreed to pump in Rs 4.5 crore and Rs 1.5 crore respectively.

He said the airline will tap the market with an issue of around Rs 10 crore while he will infuse funds worth Rs 12 crore.

According to Sheth, low break-even seat factor of 51 per cent for Dorniers will help the airline to turn around soon.