Kingfisher Airlines Ltd, in stake sale talks with Abu Dhabi's Etihad Airways and other investors, has capped foreign portfolio investment in the company at 3 percent, carving space for a foreign investor to buy as much as 46 percent of the embattled carrier.
India allows foreign investment of up to 49 percent in local carriers. Overseas institutional investors currently hold 2.46 percent of Kingfisher, according to stock exchange data.
Cash- and debt-strapped Kingfisher, which was once India's No. 2 airline by domestic market share but has grounded its fleet since the start of October, said earlier this week it was in talks with Etihad Airways and other investors about taking a stake. The decision to limit FII investment was taken "with a view to keeping the company's capital structure in readiness for transactions that may be identified in the future for the benefit of all stakeholders of the company," Kingfisher said in a statement on Thursday.
Kingfisher, controlled by liquor tycoon Vijay Mallya, has been trying for more than a year to find an investor, without success. It is saddled with $2.5 billion in debt, according to one estimate.
A fresh cash infusion into the struggling carrier could come from a financial or strategic, Indian or non-resident investor, Kingfisher said on Thursday.
Shares of the company have rallied recently and were up 5 percent - their daily limit - for the third consecutive day on Thursday. The shares, which were trading at 17.15 rupees in early trade, have recovered sharply from their all-time low of 7.05 rupees hit in August.
Kingfisher caps FII holding at 3%
Mumbai, (PTI): Debt-laden Kingfisher Airlines, which is in talks with various investors for equity infusion, has capped the FII investment limit at 3 per cent, a move to help facilitate foreign direct investment into the carrier.
The Vijay Mallya-led carrier, which is currently grounded, today said it has imposed FII cap, with a "view to keep the company's capital structure in readiness for transactions that may be identified in the future for benefit of all stakeholders".
In a BSE filing, Kingfisher said with immediate effect no FII, qualified foreign investor or other non-strategic foreign investment (excluding investment by NRI) shall be "permitted beyond its current level of three per cent or such other percentage that may be decided from time to time under intimation to the stock exchanges".
A resolution in this regard was passed at its board meeting held on December 12.
At the end of the September quarter, overseas investors held 2.46 per cent stake in Kingfisher. Foreign Direct Investment (FDI) in domestic carriers is currently capped at 49 per cent.
Extending its rally for the eighth consecutive day, shares of the company jumped 5 per cent to touch an upper circuit limit of Rs 17.27 on the BSE.
According to the filing, the Board of Directors of the company has been deliberating various alternatives to improve the financial position in the best interest of all stakeholders.
"In this connection, it has been advised that a fresh infusion of capital by a financial or strategic, Indian or non-resident investor is a possible alternative," it said.
Regarding the FII limit, Kingfisher said appropriate steps are being undertaken to intimate the RBI and to seek consequent measures and any other approvals that may be considered necessary to give full effect to this decision.
On Tuesday, Kingfisher had said it was in "discussions with various investors, including Etihad Airways, for equity investments".
The carrier's statement came in response to reports that it was to ink a deal for offloading 48 per cent stake. "However, no agreement has been reached either with Etihad or any other airline and the matters are merely at negotiation stages," Kingfisher had said.
Coupled with tax arrears and vendor dues, the airline has over Rs 10,000 crore in accumulated losses, besides Rs 7,000 crore it owes to 17 banks, which the company has not serviced since January.