Kingfisher shares up on news of stake sale to Etihad

Shares of Kingfisher Airlines rose around five per cent in the Mumbai market today following a newspaper report that Abu Dhabi state carrier Etihad Airways has agreed to buy 48 per cent stake in the grounded airline.

Kingfisher shares were up 4.96 per cent at Rs15.67 in morning trade on BSE after the Mumbai Mirror reported that the Gulf carrier is close to buying a 48 per cent stake in debt-ridden Kingfisher Airlines for a little over Rs3,000 crore.

The Mirror quoting two unnamed sources at the two airlines said a formal announcement of the deal could come around 18 December, the birthday of Kingfisher's flamboyant chairman, liquor baron Vijay Mallya, the newspaper said.

Kingfisher's planes have been grounded since the beginning of October.

Abu Dhabi-based Etihad will initially buy a 30 per cent holding in December and a further 18 per cent by next August, the paper said.

Both Kingfisher and Etihad, however, refused to confirm the development.

Battling stiff competition and high operating costs, Indian carriers have been in talks to sell minority stakes to foreign investors since the government permitted this earlier this year. Etihad was earlier reported to be eyeing a stake in Jet Airways, India's largest airline by passengers carried.

Kingfisher, which Mallya launched with much fanfare in 2005, was once India's second-largest airline by domestic market share. However, it has never made a profit since its inception. For most of this year, the carrier has struggled to pay its staff; and according to estimates, it is saddled with a debt burden of over Rs17,000 crore.