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K. Giriprakash

Bangalore, Oct. 23 The UB Group is unlikely to bail out its company, Kingfisher Airlines, through infusion of funds from its other companies.

A top official with the UB Group told Business Line that the airline will have to generate its own funds for its operations as well as expansion. The official said each entity in the group has always followed this practice, which has been extremely beneficial for all its companies as well as its shareholders.

An analyst with a brokerage firm who did not wish to be named also said group companies such as United Spirits and United Breweries have their own funding requirements and are on an expansion mode, and hence diverting funds from some of these companies may not be in the interest of the shareholders of these companies.

United Spirits needs at least $140 million for its own funding requirements for the next 18-24 months and it also needs to pay back about £535 million it raised as debt to acquire Whyte & Mackay in mid-2007. However, the company does not have to start paying back the debt till mid-2010.

The head of research for Angel Broking, Mr Hitesh Agarwal, said that instead of sourcing funds from group companies, the promoters of the airline should raise funds through equity dilution or through debt. “The shareholders of other group companies may not be too keen on funding a company which has been bleeding for sometime,” Mr Agarwal said.

Kingfisher Airlines is already in talks with a few PE Funds to raise about $400 million through equity dilution. It may now become easier for the airline to raise funds after its recent alliance with Jet Airways.

IDFC SSKI Securities has in its report quoting the management of United Spirits Ltd (USL) said that there has been no inter group funding and hence the risk to the balance sheet of United Spirits (USL) was minimal. “We believe that the recent fall in USL’s stock price was mainly on the back of perceived operational concerns (volume growth, molasses prices, IPL losses) as indeed non-operational concerns (impact on USL’s balance sheet for funding Kingfisher Airlines),” the report said.

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