Manila Bulletin
September 18, 2012
By Siddharth Philip and Vipin Nair
(Bloomberg)
India's decision to allow local airlines sell stakes of as much as 49 percent to overseas carriers may be of most benefit to operators least in need of investment.
SpiceJet Ltd., which has said it's in "no rush" for funds, may be the most appealing target for foreign investors because of the discount carrier's low debt and record of profitability, said Sharan Lillaney, an Angel Broking Ltd. analyst. Kingfisher Airlines Ltd. may struggle to win investment, even as billionaire Chairman Vijay Mallya seeks new financing, after posting at least five straight annual losses.
"The biggest beneficiary will be SpiceJet as it has lower debt and a decent brand image," Lillaney said. "Kingfisher needs to restructure its balance sheet and convert debt into equity before it can look at attracting any foreign investment."
The two carriers and Jet Airways (India) Ltd. rose Sept. 14 on speculation the rule change will help the industry win funds following years of losses caused by price wars, high fuel taxes and a weaker rupee. Prime Minister Manmohan Singh's government announced the end of the ban along with a similar easing for retailers as its moves to open up Asia's third-biggest economy. Kingfisher has said it is in talks on investment that depend up regulatory changes as it struggles under an 86 billion rupee ($1.5 billion) debt pile. The carrier has also cut two-third of services, grounded planes and halted international flights in a bid to end losses.
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