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Now, Vijay Mallya eyes SpiceJet
[February 22, 2006]

Now, Vijay Mallya eyes SpiceJet

(Times of India, The (KRT) Via Thomson Dialog NewsEdge) Feb. 22--NEW DELHI/MUMBAI, India -- It's raining mega deals from the Indian skies. Though the promoters are vehemently denying it, the airspace is abuzz with talks of liquor baron and Kingfisher Airlines chief Vijay Mallya -- having lost the race to buy Air Sahara -- now eyeing the no-frills rival, SpiceJet.

The purchase, market sources say, is part of Mallya's plans to grow his share of the domestic airline industry pie through the "inorganic route".

Sources say Mallya has already initiated talks with institutional lenders to raise a line of credit for buying an unnamed domestic airline company.

Mallya's plan of action, sources say, is to initially acquire the 40 percent stake held by Royal Holdings -- a Nevada-based company floated by non-resident Indian Kansagra family -- in SpiceJet.

Later, he plans to buy S K Modi family's stake which is under litigation, and slowly hike his holding to around 51 percent.

The liquor czar, however, denies any such move. Adds SpiceJet director Ajay Singh: "There's no plan to dilute any shareholding in SpiceJet and the Kansagra family is committed to this venture."

But sources in Mallya's Kingfisher Airlines confirm that talks are underway for acquiring a listed airline company.

"Talks are on, and progressing fast,"says a source close to Mallya.

Besides adding to his share of India's domestic aviation pie, the acquisition would help Mallya use Kingfisher Airlines to focus solely on the upper-end of the air travel market as a full-service carrier while SpiceJet targets the no-frills market.

Mallya is also planning to introduce first-class in Kingfisher Airlines to woo upper crust travellers who are willing to pay more for better services.

For the Kansagra family too, sources say, the deal holds good as the growing competition has considerably shrunk margins and returns.

"The NRIs -- who bought the erstwhile Modiluft at Rs 12 per share -- have seen their value scaling up to Rs 60 a share in just 24 months. And selling out when the market is still in a boom phase would help them gain maximum value for their holding,"says a source.

Besides, the Kansagra family, Istithmar -- a private equity fund of Emirates Airline -- had recently subscribed to the foreign convertible currency bonds issue of SpiceJet and also owns stake in the airline.

As and when the government allows foreign airlines to buy stake in India, this holding would allow Emirates to cruise into the market -- which would also help improve Kingfisher's valuation.

The only misfit, probably, is SpiceJet's Boeing aircraft fleet as opposed to Kingfisher's Airbus fleet. Sources say this is unlikely to derail the exercise as even Sahara -- which Mallya was trying to buy a few months back -- operates Boeing planes.

By Byas Anand & Baiju Kalesh

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