Kingfisher Airlines shares rise 2% on LIC stake buy talks

Shares of the Vijay Mallya-led Kingfisher Airlines on Monday rose by two per cent on the back of news that the government has asked Life Insurance Corporation (LIC) to consider buying 10 per cent stake in the airline.

At the Bombay Stock Exchange (BSE), the company's stock rose by 2.49 per cent to Rs 24.65 in the noon trade. It had earlier touched an intra-day high of Rs 25.

The markets were buoyed by the news of a likely 10 per cent stake buyout by LIC, as this will infuse the much-needed capital in the airline whose lenders had also asked the carrier to put in more money for continued support.

On November 14, the company's lenders had asked the airline to come up with more funds for them to consider restructuring of the company's loans.

PERSPECTIVE: Kingfisher and what ails India's aviation sector

"We have asked them to come up with some fresh funds. The thing that is being discussed is selling some of the assets. If they do it, it is good," State Bank of India Managing Director Hemant Contractor told reporters on the sidelines of a World Economic Forum (WEF) meet in Mumbai.

"We (banks) have to be satisfied about viability of Kingfisher. There is no point in restructuring (debt), if the company's operations are not going to be viable," Contractor added.

IN DEPTH: Kingfisher's quest to resolve its troubles

The SBI leads the consortium of 13 banks which has lent to the airline. SBI is also the biggest lender to Kingfisher with loans of Rs 1,500 crore. Private lender ICICI Bank has also given loans of up to Rs 400 crore to the company.

The development comes even as the carrier continues to curtail 50 flights daily since November 8 as it has been hit by technical and labour issues.

The concerns on airline's viability has been in the news since it started curtailing flights with its stock falling over 19 per cent in the early trade of November 11 to a new low of Rs 17.55. It later managed to crawl up but was still ruling with a 12.44 per cent loss at Rs 19 in noon trade.

Currently, the airline owes huge amounts to oil companies, the Airports Authority of India and private airport operators GVK and GMR groups. The airline has not posted any profit since its launch five years ago and reported a net loss of Rs 1,027 crore last fiscal and Rs 263 crore in the last quarter.