Kingfisher Airlines to raise Rs 5,000 cr

Kingfisher Airlines, owned by Vijay Mallya's liquor-to-airlines UB Group, said on Tuesday it would raise $1 billion (close to Rs 5,000 crore) through various instruments.

The company's board approved the airline's plan to raise the amount through issuance of equity shares or preference shares or through global depository receipts.

Of the designated amount, the company will immediately seek to raise up to $250 million (Rs 1,100 crore) through GDR issue and another Rs 500 crore (Rs 5 billion) through domestic offering.

"The funding is expected to be completed within the next three to four months," a company statement said.

Kingfisher Airlines had earlier said it might raise around Rs 450 crore (Rs 4.5 billion) through GDR and might look at a rights issue for the domestic float.

Kingfisher Airlines also said it would seek shareholders' approval to increase its equity share capital to Rs 1,650 crore (Rs 16.5 billion)  from Rs 900 crore (Rs 9 billion) and authorised preference share capital to Rs 2,600 crore (Rs 26 billion) from Rs 100 crore (Rs 1 billion).

However, the company was silent on how it would increase its preference share capital. The board also gave approval for converting Rs 650 crore (Rs 6.5 billion) provided as loans into preference share capital.

For the past 18 months, Kingfisher Airlines has been trying various equity options to shore up its base, but is yet to achieve any success.

It has  amassed debt close to Rs 7,500 crore (Rs 75 billion) and has sought Reserve Bank of India's approval for restructuring it.

"The financials of Kingfisher Airlines are expected to be strengthened by these initiatives," the company claimed.

Not only Kingfisher Airlines, but other carriers like Jet Airways and Air India have accrued a combined debt of Rs 50,000 crore (Rs 500 billion), because of a dip in traffic during the recession and higher aviation turbine fuel prices.

With the economy's revival, the financials of these companies have improved, but many are yet to be out of the woods and seek various ways to reduce debt.

The domestic airlines industry is looking at a debt restructuring plan from the government to defer payment for some period.

Analysts believe further equity infusion is necessary, as the net worth of Kingfisher Airlines has eroded due to losses.

Kingfisher Airlines has a 20 per cent market share and equity capital of Rs 265.91 crore (Rs 2.65 billion).

The airline had narrowed its loss by 21 per cent to Rs 187.34 crore (Rs 1.87 billion) during the April-June quarter of this financial year, owing to increase in loads and yields and several cost reduction initiatives.

Total revenue rose 28 per cent to Rs 1,640.57 crore (Rs 16.4 billion) during this period.