Thursday, July 3, 2008

Vijay Mallya eyeing a stake in SpiceJet

After acquiring a stake in Air Deccan last year, UB Group chairman Vijay Mallya is all set to expand his wings further in the domestic aviation space. According to sources, now Mallya is eyeing a stake in low-cost carrier (LCC) SpiceJet.

Last year when Kingfisher Airlines took a 26% stake in Air Deccan, Mallya had evinced interest in picking up a stake in SpiceJet but things did not move forward. "I am interested in SpiceJet but I am not a predator," he had said then. Kingfisher is now learnt to be eyeing a part of either the 12.9% stake held by SpiceJet's promoter, UK-based NRI Bhupendra Kansagra or the 13.4% stake held by Dubai-based investment firm Istithmar PJSC. Kansagra was under a lock-in period, which barred him from selling any part of his stake in SpiceJet. The lock-in period ended a few months ago.

Kingfisher's executive vice president Hitesh Patel said he would not comment on the issue, but added: "I can see additional consolidation in the industry in next 12 to 18 months. All these airlines won't be hanging around that long. If as predicted, crude hits $178 to a barrel in September, it will kill some players.... The access to funds of Kingfisher is strong and the backing of UB Group is a strong plus."

SpiceJet's executive chairman Siddhanta Sharma maintained that the airline is not talking to anyone for selling stake. The airline, which on Monday declared a loss of Rs 133 crore, is planning to raise $100 million through debt and equity. A stakeholder in airline had earlier indicated that it is in talks with Istithmar and Tatas (who hold a 6% stake in the carrier for garnering more funds.

With crude showing no sign of cooling off, most of the airlines are bleeding and are desperately on the look-out for funds. Incidentally, Kingfisher is among the few players which has access to funds as most of the others are finding it difficult to get investors to put money in this business, which has now become loss-making.

In his flight for SpiceJet, Mallya could again lock horns with Anil Ambani, who was also eyeing a stake in Air Deccan last year. This time too, the Anil Dhirubhai Ambani Group is reported to be keen on making an entry in aviation and is looking to buy a stake in Spicejet.

According to industry sources, the current turbulence in the aviation sector is severely affecting the bottomlines of every player - combines like Air India-Indian Airlines; Jet-JetLite and Kingfisher-Deccan as well as Wadia Group-backed GoAir, SpiceJet and IndiGo. "The scope for consolidation is highest in GoAir which is in talks to sell stake and SpiceJet," said an industry insider.

The Kingfisher-Deccan combine at present has an all-Airbus fleet while SpiceJet is all-Boeing. So if the deal goes through, Mallya can join the league of big players like Jet and AI that run a big Airbus and Boeing fleet.

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