Kingfisher saviour in Diageo?

Victoria
By Victoria September 26, 2012 14:08

Kingfisher saviour in Diageo?

Drinks company Diageo announced yesterday that it is in talks (again) about buying a stake in India’s United Spirits. Confirming our story here from the beginning of August. Diageo is trying to buy a 15% stake from Vijay Mallya and a further 10% from other shareholders of United Spirits. A sale would secure the short-term future of Kingfisher but will in the process be a further blow to the personal fortune of Mallya.

While this is all going on however the lessors who did not get their aircraft out of Kingfisher in time are finally resigning themselves to the fact that they must pay the Airports Authority of India (AAI) in order to reposes their assets. Kingfisher owes about Rs 290 crore to the state-run AAI and the latter told the airline it would not allow any lessor to repossess aircraft from it. The lessors in the end will not make a dent in the debt to AAI, we know this as Kingfisher paid the AAI between Rs 1 crore and 2 crore so that a lessor could take their aircraft back. Now the lessors are paying the AAI directly with three aircraft so far repossessed by lessors by paying Rs 1 crore per plane. AAI says the interest on its dues works out to Rs 5 crore a month alone, so these payments are symbolic only.

Vijay Mallya is a nice guy (we know) but it looks like it is time to cut and run for the aviation business as tipping United Spirits share money into the airline will be like pouring money down a drain. Mallya has made much of FDI and the effect it will have on Kingfisher but the fact remains that the airline would need to dilute bank loans of Rs 8,000 crore and all other liabilities before a foreign airline hands over a cent.

In other interesting news: For those of you out there looking to benchmark your management and/or investment against an aviation company doing very well indeed, you would do well to keep an eye on announcements coming out of PEMCO at this time and in the near future. As I mentioned the word PEMCO I am sure a great many of you switched off, this is folly. Look more closely at what is going on and you will see some impressive stats, the management have done an impressive job during 2011/12. The same goes for Orix Aviation – another tip from the start of the year that passed a great many of you by, look again is the mantra.

Victoria
By Victoria September 26, 2012 14:08
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