Kingfisher Air Should Raise $1 Billion of Capital, Lender Says

Kingfisher Airlines Ltd. (KAIR)’s largest lender said the cash-strapped Indian carrier should raise at least $1 billion of fresh capital, stepping up pressure on Chairman Vijay Mallya to deliver on promises of new investment.

“We are slightly disappointed at the pace at which the capital-raising plan is going,” State Bank of India Chairman Pratip Chaudhuri told reporters in Gurgaon, near New Delhi, yesterday. “The company has been assuring us that they have been working hard for it, but we would like to see some tangible evidence.”

Kingfisher, which halted flights about five weeks ago, needs to raise new funds this month, Chaudhuri said, without saying how much. He declined to give a timeframe for when the Bangalore-based company needs the full $1 billion. The airline separately reported a wider net loss of 7.54 billion rupees ($139 million) for the quarter ended September.

Liquor tycoon Mallya has spent about a year trying to sell a stake in Kingfisher as he seeks funds to ease an 86 billion- rupee debt pile. The carrier, whose market value has slumped to $190 million, is also working on a turnaround plan as it seeks to persuade regulators to re-activate its suspended license.

“Until they restructure, nobody will be interested in Kingfisher,” said Jasdeep Walia, an analyst at Kotak Securities Ltd. in Mumbai. “Everything the airline owns is locked away as collaterals for loans.”

Diageo Talks

The carrier’s founders have contributed 11.5 billion rupees to the company since April 1, Mallya told shareholders at the company’s annual meeting Sept. 26. Mallya is also in talks to sell a stake in liquor business United Spirits Ltd. (UNSP) to Diageo Plc as he seeks cash.

Kingfisher employees resumed work Oct. 25 after the airline agreed to pay four months’ of overdue wages by Dec. 24. A walkout sparked by unpaid salaries prompted the flight shutdown last month. The regulator subsequently suspended the carrier’s operating license and rejected its request for flight slots during the country’s winter.

The airline expects to resume operations “in the near future,” it said in its earnings press release. The company doesn’t comment on banking relationships, Prakash Mirpuri, a spokesman, said yesterday.

The carrier narrowed its operating loss to 2.2 billion rupees in the quarter through September from 4.3 billion rupees a year earlier. The airline booked 4 billion rupees of financing costs and 4.5 billion rupees of one-time charges from returning planes to lessors and restructuring, it said.

Kingfisher has 10 airworthy planes, down from 66 in the year ended March 31, 2011, according to Arun Mishra, the director general of civil aviation.

The airline has tumbled 39 percent this year in Mumbai trading. It rose 2 percent to 12.80 rupees yesterday. State Bank owns 3.5 percent of the carrier after converting debt to equity in the year ended March 2011.

Jet, SpiceJet

Jet Airways (India) Ltd. (JETIN), the nation’s biggest listed carrier, and budget airline SpiceJet Ltd. have both more than doubled in Mumbai trading this year, partly because of Kingfisher’s flight cuts paring competition. Jet’s domestic revenue jumped 35 percent in the quarter ended September.

Mallya’s UB Group will invest in Kingfisher to help revive operations, an Indian government official said Oct. 26, after a meeting between the regulator and the airline’s chief executive officer. The carrier must prove it has adequate funds to pay airports, fuel suppliers and other vendors before the license suspension can be lifted, said the official, who declined to be identified citing rules.

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Malavika Sharma in New Delhi at msharma52@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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