Deccan shares hit 52-wk high on merger buzz

Shares of Deccan Aviation, which owns budget carrier Deccan, hit an all-time intra-day high of Rs 212 on the Bombay Stock Exchange (BSE), extending Tuesday's 23 percent gain on market talk that the unlisted Kingfisher Airlines may be merged with it.

The Deccan scrip, however, closed the day at Rs 179.85, down 6.08 per cent in line with BSE's 30-share Sensitive Index, the Sensex, which fell 3.52 per cent on global cues. Deccan, however, informed the bourse that no such proposal has been considered by its board till date.

Ravi Nedungadi, group CFO, United Breweries told agencies that there were no such plans immediately. The UB Group, which started the full-service Kingfisher Airlines, owns 46 per cent in Deccan after the recently-concluded open offer.

"All the options are on the table," Nedungadi told a news channel. "But it is fair to say we have not significantly applied our mind on anything yet."

Traders and analysts said the group may be exploring the merger option to make Kingfisher eligible for flying abroad. Deccan will be eligible to offer services overseas by mid-2008 after it meets the criterion of five years of operation to do so. Industry experts also say that a merged entity will enable UB Group Chairman Vijay Mallya to bring in large investors to fund the foray abroad.

UB, which owns India's top beer maker United Spirits, recently hired Accenture's advisory services for the restructuring of its airline business.

Accenture, which also advised the government on the merger of Air India and Indian, the two state-run airlines, will suggest ways to make the airlines profitable, Nedungadi said.

Deccan posted a loss of Rs 253 crore in the quarter ended September 2007 but forecasts it will return to profits in 2008.

Deccan and Kingfisher control more than a fourth of the market and have ordered more than 170 Airbus aircraft. Kingfisher's orders include wide-body planes for long haul international routes.