The Hindu Business Line : UB Holdings will fund Air Deccan equity acquisition

NEW ALLIANCE: Mr Vijay Mallya, Chairman, Kingfisher Airlines, with Capt. G.R. Gopinath, MD, Air Deccan, at a press conference in Mumbai on Friday. — Paul Noronha

Mumbai June 1 After agreeing to pick up 26 per cent stake in Air Deccan, Kingfisher Airlines said UB Holdings Ltd will be funding the equity acquisition. With the company having listed assets worth Rs 4,000 crore apart from real estate assets, it feels that these assets would provide "enough headroom to raise the required money."

In addition, Mr Ravi Nedungadi, President and Chief Financial Officer, UB Group, said, "A number of financial institutions have shown interest in co-investing for the same."

Mr Vijay Mallya, Chairman, UB Group, told presspersons that the company had no intention at the moment to acquire complete 100 per cent stake in Air Deccan. With the completion of the investment process, the UB Group will become the largest single shareholder in Deccan Aviation Ltd, as the company also plans to make an open offer of 20 per cent to the shareholders of Deccan at a price of Rs 155 in compliance with SEBI regulations.

Both the companies said that the development does not mean an immediate price hike in the tickets of Air Deccan. However, Mr Mallya said that no tickets would be sold at a price that amounts to losses for the airline. He added there would be a reduction in operating cost through "synergies" that exist between both the airlines.

He also expects the combine to save Rs 300 crore in the first year of operation through the synergies between the two airlines.

The group would then also nominate three board of directors, of the total 12 directors. While out of the remaining, three will be nominated by the original promoters or institutional shareholders and the remaining six will be independent directors to be nominated jointly by the UB Group and the current promoter and institutional shareholders. Mr Ramki Sundaram, the current CFO would take over as the Chief Executive Officer of Air Deccan.

"Initially, when Mr Mallya publicly said that he was interested in Air Deccan, I did not take it too seriously as I thought he wanted to buy the whole airline which was not for sale. However, when all the available synergies between Kingfisher and Air Deccan were examined closely, it became clear that coming together would make enormous financial and operational sense," Captain G.R. Gopinath, Chairman, Air Deccan, said at the press conference here.

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