Shares of Vijay Mallya owned Kingfisher Airlines, the country’s second- largest private carrier by market share, surged 5.1 per cent to close at R62 on the Bombay Stock Exchange on Wednesday, a day after the company’s board approved fund-raising plans. The board of directors had on Tuesday approved an increase in the authorised equity share capital to R1,650 crore from R900 crore and an increase in authorised preference share capital to R2,600 crore from R100 crore.
The board also approved raising up to $250 million by way of global depositary receipts (GDRs) and a further R500 crore through a domestic offering subject to necessary regulatory approvals. The funding process is expected to be completed within the next 3-4 months.
"At the meeting of the Board of Directors of United Breweries (Holdings) Limited, the holding company of Kingfisher Airlines, it was resolved that a sum of approximately R650 crore provided as loans to Kingfisher Airlines be converted into preference share capital," a statement from the company issued late on Tuesday said.
Kingfisher, which operates around 380 flights a day, has mandated SBI Capital, a unit of State Bank of India, with the task of financial restructuring as it looks to stem losses and turn the airline profitable.
"The only positive thing is that the fund-raising will take care of Kingfisher’s cash flow crunch for the time being," said Ambareesh Baliga, vice-president of Karvy Stock Broking.
The debt burden of the airline as on March 31, 2010, stands at R6,000 crore and bulk of it consists of long-term loans. Aviation consulting firm Centre for Asia Pacific Aviation had said that Kingfisher’s biggest obstacle to a turnaround was its debt, with interest payments accounting for about a fifth of costs.