The Vijay Mallya-controlled UB Group is taking the debt-finance route to fund Kingfisher Airline’s expansion plans and the acquisition of Air Deccan’s 20 per cent additional equity through an open offer. The group has raised Rs 700 crore from a consortium of banks led by State Bank of India.
“We have received debts to the tune of Rs 700 crore. We have no plans to tap private equity funds for capital,” said a source close to the UB Group.
“The group may look at an initial public offer for Kingfisher Airlines at a later stage,” said the source. “With UB's acquisition of Air Deccan, valuations are expected to grow. The combined Kingfisher-Air Deccan can attract a better valuation within 12-24 months. The debt financing will help the airline to improve performance," said an analyst with the Centre for Asia Pacific Aviation. The stock market regulator is yet to clear the UB group’s open offer for Air Deccan.
The group, which owns 83 per cent in Kingfisher Airlines and 26 per cent in budget carrier Air Deccan, has invested Rs 400 crore in Kingfisher Airline. It has also raised another Rs 400 crore from ICICI Bank for the airline.
Kingfisher Airline needs funds after it placed orders for 15 planes-- five Airbus A350-800s, five A380s, and five A330-200s--in a deal valued at $3 billion.
Deliveries of the A330s are expected to start in the third quarter of 2007, while the A380s and the A350s will be inducted in 2010. Kingfisher Airline and Air Deccan have a commitment for a total of 176 Airbus aircraft valued at over $7 billion.