Shares in beleaguered Kingfisher Airlines slumped nearly 18% on Friday as concerns heightened about the cash-strapped carrier's ability to raise funds to continue operations.
The carrier, whose losses doubled in the September quarter due to high fuel costs, has cancelled scores of flights in recent weeks as it struggles to raise working capital.
"The fresh infusion of capital in Kingfisher is still uncertain. There is nothing concrete coming from the company, except that flights still continue to be cancelled, and the market is reacting to that uncertainty," said KK Mital, chief executive for portfolio management services at Globe Capital.
The Financial Times reported Kingfisher chairman Vijay Mallya said in an interview he was close to sealing a $370 million deal with an Indian private investor and a consortium of banks that would save the airline.
Mallya said on the social networking site Twitter that the report was "factually wrong", but he did not elaborate.
Investors, including banks who hold about 24% in the airline, have been worried over Kingfisher's financial stability after it sought further cushion to ease its debt burden of $1.4 billion.
On Thursday, the civil aviation minister ruled out a public bailout for Kingfisher or any other airline, urging private carriers to put their own house in order.
The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5 billion to $3 billion loss for Indian airlines for the year ending March 2012, with state-run Air India alone likely to account for more than half of it.
Mallya offered little to revive the Kingfisher's finances at a news conference earlier this week.
Officials at UB group, which controls Kingfisher, said the airline was talking to an Indian investor to raise funds, but declined to give more details.
Kingfisher, which has never reported a profit since becoming a listed company, cut its debt through a restructuring
earlier this year by issuing shares to 14 banks, including State Bank of India and ICICI Bank.
It recently recast its business model, doing away with its low-cost service Kingfisher Red.
Kingfisher shares, valued at $245 million, are down more than 60% in 2011. At 11:22am (0552 GMT), they were down 6.4% at 23.4 rupees, after falling to 20.55.
"There is talk that FDI may be allowed, and the company may look to sell stake, but all that will take time, and shares should remain under pressure till something concrete comes," Mital said.
India allows foreign investment of up to 49% in Indian carriers. However, foreign airlines are not allowed to invest directly or indirectly in domestic carriers, a rule the government has said is likely to be scrapped.
Kingfisher may shut more than a dozen small offices across India and ask some employees to search for jobs over time as it seeks to cut costs, the Mint newspaper reported on Friday citing sources.
A Kingfisher spokesman declined to comment, but denied plans to cut jobs.