Reliance, a white knight for Kingfisher?

K. Giriprakash Updated - March 12, 2018 at 12:28 PM.

Reliance might either make a financial investment in the airline or pick up equity through a preferential offer.

The beleaguered Kingfisher Airlines is close to finding a white knight.

That might just be Reliance Industries, according to a person close to the airline who did not want to be named.

Reliance Industries is also understood to have engaged a merchant banker to carry out due diligence of the airline.

This development should be seen in the context of the airline's promoter Mr Vijay Mallya's statement at a press conference today that a potential investor is in talks with them.

When contacted, the UB Group President, Mr Ravi Nedungadi, confirmed the talks based on the statement of Mr Mallya but refused to disclose whether the potential investor was an airline or any other company.

Mr Mallya is also understood to have indicated that he has enough friends who are ready to invest in the airline.

Reliance Industries refused to comment on record whether it was considering investment in the airline.

Mr Mallya has also said that he is ready for a stake dilution in the airline though he did not give any indications of how much of stake he is willing to part with.

Reliance might either make a financial investment in the airline or pick up equity through a preferential offer which could be followed up by an open offer to public shareholders.

If Reliance makes a financial investment in the airline, it might want the UB Group companies' shares pledged with itself as collateral. This financial investment could at a later stage be converted to equity.

Tricky situation

The second option will be preferential offer leading to Reliance gaining control of the airline. “It will be a tricky situation for the UB Group which its promoter needs to negotiate with care,” Mr Sujay Mishra of AZ Research Partners, marketing research and consultancy company, said.

As far as FDI in the airline industry is concerned, sources said that as and when it happens, it will come with several riders which could limit the choices as well as investment levels.

Published on November 15, 2011 16:41