Mallya to pick up 26% Deccan Aviation stake

Vijay Mallya today moved decisively towards controlling the largest share of the domestic aviation market.

His UB Holdings, the parent company of Kingfisher Airlines, is acquiring 26 per cent of Bangalore-based Deccan Aviation's equity for close to Rs 550 crore, valuing it at Rs 2,200 crore.

The markets, anticipating this, boosted the stock of Deccan Aviation, which runs India's first low-cost carrier Air Deccan, by 11 per cent to Rs 146 at the close of trade on Bombay Stock Exchange. The offer of Rs 155 a share represents the 26-week average.

Air Deccan has an 18 per cent share of the market and Kingfisher Airlines close to 11 per cent. Market leader Jet Airways has a 25 per cent share.

A few weeks ago, Deccan Aviation Managing Director GR Gopinath, responding to Mallya's interest in buying the carrier, had said he was from Mars and the UB Group chairman from Venus, meaning a match between the two could not happen.

Deccan Aviation is making a preferential allotment of a little over 35 million shares to UB, after which UB will be required by law to make an open offer for another 20 per cent at the same price. If the offer is fully subscribed, UB will have to pay another Rs 425 crore to take its total holding to 46 per cent.

Gopinath will be the executive chairman and Mallya the vice-chairman. Deccan Aviation's chief financial officer Ramki Sundaram will take over as officiating CEO while COO Warwick Brady is leaving the airline.

Gopinath reiterated that Air Deccan will be run as a separate entity and stick to its low-cost, no-frills model.

Deccan Aviation can use the Rs 550 crore for expansion. UB today made a payment of Rs 150 crore; the rest will be paid by the end of June.