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http://content.icicidirect.com/mailimages/ICICIdirect_KingfisherAirlines_EventUpdate.pdf
T o o m u c h u n c e r t a i n t y, r e c o m m e n d e x i t …
Last week, Kingfisher Airlines (KFA) once again called for massive flight
cancellations amid a liquidity crisis. As a result, its market share has come
down drastically to 11% from 19% last year. Also, according to the
company’s revised flight schedule submitted to DGCA, the company will
now operate 175 daily flights, down from 240 flights that they are
operating currently i.e. a 27% reduction in the capacity, which will further
lead to a fall in its market share, going forward. With this, supply cuts and
offering of seats at discounted rates, its revenues and market share are
going to be impacted severely in future, albeit with lower operational
losses. For the survival of the business, the promoter will either have to
infuse significant funds into the company or bring in strategic partners
with infrastructure for ATF import or some foreign carriers. The company
has guided that they would infuse the sufficient funds into the company
within two months. This can only help the company to tide over the
turbulent times over the medium term. Even if the company is able to
bring down its debt to | 6000 crore as per their guidance, the running of
the business will continue to remain a very tough job due to an
unfavourable operating environment where ATF prices are once again on
a rising trend. With lesser capacity, we believe, it would be a tough job for
the company to service its huge debt with lower earnings, going forward.
Hence, due to unfavourable risk reward ratio given the uncertainty on the
company’s future outlook, we recommend that investors EXIT the stock.
V a l u a t i o n s
At the CMP of | 25, the stock is trading at 1.6x and 2.0x its FY12E and
FY13E EV/sales, respectively. The company is running into a severe
liquidity crisis due to heavy operational losses and difficulty in getting
additional funds from banks. We believe a significant fund infusion by the
KFA promoter remains very crucial for running the business, going
forward. Hence, due to the deferral on the fund raising front and
unfavourable risk reward ratio given the uncertainty on the company’s
future outlook, we recommend that investors EXIT the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_KingfisherAirlines_EventUpdate.pdf
T o o m u c h u n c e r t a i n t y, r e c o m m e n d e x i t …
Last week, Kingfisher Airlines (KFA) once again called for massive flight
cancellations amid a liquidity crisis. As a result, its market share has come
down drastically to 11% from 19% last year. Also, according to the
company’s revised flight schedule submitted to DGCA, the company will
now operate 175 daily flights, down from 240 flights that they are
operating currently i.e. a 27% reduction in the capacity, which will further
lead to a fall in its market share, going forward. With this, supply cuts and
offering of seats at discounted rates, its revenues and market share are
going to be impacted severely in future, albeit with lower operational
losses. For the survival of the business, the promoter will either have to
infuse significant funds into the company or bring in strategic partners
with infrastructure for ATF import or some foreign carriers. The company
has guided that they would infuse the sufficient funds into the company
within two months. This can only help the company to tide over the
turbulent times over the medium term. Even if the company is able to
bring down its debt to | 6000 crore as per their guidance, the running of
the business will continue to remain a very tough job due to an
unfavourable operating environment where ATF prices are once again on
a rising trend. With lesser capacity, we believe, it would be a tough job for
the company to service its huge debt with lower earnings, going forward.
Hence, due to unfavourable risk reward ratio given the uncertainty on the
company’s future outlook, we recommend that investors EXIT the stock.
V a l u a t i o n s
At the CMP of | 25, the stock is trading at 1.6x and 2.0x its FY12E and
FY13E EV/sales, respectively. The company is running into a severe
liquidity crisis due to heavy operational losses and difficulty in getting
additional funds from banks. We believe a significant fund infusion by the
KFA promoter remains very crucial for running the business, going
forward. Hence, due to the deferral on the fund raising front and
unfavourable risk reward ratio given the uncertainty on the company’s
future outlook, we recommend that investors EXIT the stock.
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