Private equity chases airlines

Funds to invest over $275-$300 mn despite losses.

Private equity funds will invest over $275-300 million to take up minority equity stakes in the country's leading private carriers like Kingfisher Airlines, SpiceJet and Go Air. The move comes at a time when airline companies are losing over Rs 6 crore a day.

Kingfisher, for instance, is talking to two private equity fund houses in Europe. "We are in talks with two European private equity fund houses for diluting 20-25 per cent stake for $100-125 million. The deal should be concluded in a month and this will be used to pay off our debts," a Kingfisher Airlines executive said.

Budget carrier SpiceJet is exploring the opportunity of divesting 5-10 per cent in the airline to raise over $50 million, which will be used in funding the company's expansion plans.

The Wadia group-promoted budget carrier GoAir is also planning to offload a minority stake to investment houses to fund aircraft acquisitions.

"We are in talks with different players. We are also exploring various routes. But nothing has been finalised yet," Jeh Wadia, managing director, GoAir, said. This budget airline's value is pegged at $250 million, according to sources.

Chennai-based Paramount Airways is in talks with five domestic and global private equity funds for further dilution of 10 per cent equity.

Earlier, Kotak Mahindra Bank's private equity fund India Growth Fund had picked up a 10 per cent stake in this airline for $15 million. Bennett, Coleman & Company has also picked up a less than 2 per cent stake in Paramount Airways for $3 million.

Air Deccan has offloaded 1.96 per cent of its equity to UK-based Investec Bank for nearly $6 million. Following the aborted attempt to merge with Jet Airways, Air Sahara was also looking for private equity placement. However, it was unsuccessful due to its losses.

According to industry estimates, domestic airlines are expected to post a cumulative loss of Rs 2,500 crore during 2006-07 and this situation is likely to worsen with half a dozen airlines planning to commence operations in the near future.