Deccan Aviation, which operates budget carrier Air Deccan, may close a fresh round of fund-raising by the month-end, which could see the airline placing equity worth $65-100 million (Rs 273-430 crore) with hedge funds and private equity investors like Texas Pacific Group.
A Deccan spokesperson, while confirming that the airline may tie up the funds by the month-end, couldn’t provide more details. Deccan CEO GR Gopinath could not be reached for comments. The airline had mandated investment bankers Edelweiss Capital to raise $65-80 million (Rs 273-344 crore) of fresh capital.
“Deccan is trying to rope in a strategic investor. They are expanding fast and adding new routes. You also need to beef up capital in a competitive market,” said an investment banker, who didn’t want to be identified. Deccan is keen on raising its equity base from Rs 563 crore to Rs 1,000 crore.
The funds will also be used to buy planes—Deccan is taking delivery of 12 planes in calendar year 2008 (5 Airbus A320, 7 turboprops) and part of the new funds would go in bankrolling these acquisitions.
This would be the third round of funding for Deccan. The airline had raised $100 million (Rs 430 crore) in October from two European lenders by pledging the right to buy 60 Airbus planes it ordered. It has received $60 million, and will receive another $40 million in two instalments in November 2007 and February 2008.
In June 2006, Deccan raised Rs 363 crore ($83 million) through an IPO. Prior to that, the budget carrier had placed equity worth $40 million (Rs 180 crore) with ICICI Ventures and private equity firm Capital International, which specialises in investing in aviation stocks.
Shares of Deccan Aviation rose 4.5 percent to Rs 108.7 on the Bombay Stock Exchange on Wednesday. The stock has declined 20 per cent this year. The airline had sold shares for Rs 148 Industry experts feel the latest equity sale could be at a lower at a lower price than the IPO.
Indian carriers are raising a new capital to buy new planes or increase their net worth so that they can absorb more losses — experts had estimated that airlines would together lose $500 million (Rs 2,200 crore) in the financial year 2006-07. Hindustan Times was the first to report that on September 12, 2006.
Jet Airways, the country’s biggest airline, plans to sell as much as $400 million of stock in the next few months to buy new planes as it prepares to take deliveries of 30 wide-bodied aircraft from Airbus and Boeing that will fly on international routes. Others like Kingfisher Airlines and GoAir are also trying to raise capital.