Kingfisher eyeing SpiceJet stake?

No way, says Kingfisher, SpiceJet

BY A CORRESPONDENT
February 24, 2006

After an aborted attempt to take over Air Sahara, Kingfisher Airlines chairman Vijay Mallya is reportedly looking at acquiring low-cost rival SpiceJet. India's No.1 English daily Times of India reported that Mallya may buy out the Kansagra family's stake in SpiceJet. Both Kingfisher and SpiceJet have denied any such move.

Mallya has already initiated talks with lenders to raise money for acquiring an unnamed domestic airline company, the report said. Investment bankers are believed to have been given the mandate to look for an airline that has a "good potential" and they are believed to have closed in on SpiceJet.

Even though the industry is abuzz with these rumours, promoters of both companies have vehemently denied it.

According to Times, Mallya is planning to acquire around 40 per cent stake held by Royal Holdings, a Nevada-based company floated by non-resident Indian Kansagra family, in SpiceJet. Besides Kansagra family, Istithmar -- a private equity fund of Emirates Airline -- also owns stake in SpiceJet.

Kansagra family, who bought the erstwhile Modiluft at Rs 12 per share has seen its value rising to Rs 60 a share in just 24 months. And selling out when the market is still in a boom phase is a wise decision, Times reported.

If the acquisition goes through, Mallya may position Kingfisher Airlines as a full-service carrier, while SpiceJet will remain as a low cost carrier.

However, the takeover would not be a cakewalk for Mallya as SpiceJet has operates Boeing aircraft and Kingfisher Airbus planes, making the integration of the two a difficult process. More than integrating, owning different models will push up operational and maintenance costs.

The liquor czar, however, denies any such move. Adds SpiceJet director Ajay Singh: "There's no plan to dilute any shareholding in SpiceJet and the Kansagra family is committed to this venture."