Why would a non-banking finance company be interested in Kingfisher Airlines, a company that owes Rs 5,800 crore to various public sector banks?
True, banks had picked up stakes in airline companies when their loans went bad. But that was because they were forced to.
Mumbai-based LKP Finance has acquired optionally convertible debentures of the company for Rs 160 crore, a report in The Economic Times said. This will account for 8 percent of the company’s equity once the debentures get converted in a couple of weeks’ time.
That’s like buying an 8 percent share of trouble.
The investment has been made at a conversion price of Rs 21-23, a whopping 62 percent premium to the current market price. The shares of Kingfisher Airlines have been stuck in a grove for quiet sometime now.
The auditors of the company had earlier warned that to remain a going concern, the promoters have to pump in capital, which the management has been desperately seeking from all sources.
The stock is, however, unenthused. It is trading flat at Rs 13.6. The market clearly thinks it’s money down the drain — LKP is not the answer to Kingfisher’s problems, unless it is merely warehousing those shares for a possible download later on when FDI in aviation is opened up.
Which is why one wonders why LKP would want a slice of Kingfisher’s ever-growing problems.