In an interesting turn of events, the government has decided to ask the Life Insurance Corporation (LIC) to consider picking up 10 per cent stake in the troubled Kingfisher Airlines.

“The government has asked LIC to consider it, but the final decision will be taken by the insurer,” said an official familiar with the development. “If a company like LIC, the largest domestic institutional investor, puts money in Kingfisher Airlines, it will give confidence to the lenders as well,” he added.

Its lenders, who hold around 23 per cent of the debt-laden airline, have asked the promoters to bring in equity before they lend more. LIC, on the other hand, has enough headroom in its equity investment target for the current financial year. Given the attractive valuation, it may get a good bargain.

Going by the present market valuation, it could be quite a buy for LIC, as the airline’s share price has tanked 62 per cent in the current financial year to Rs 24.95 a share on Friday from Rs 66.05 on April 1. Going by the present market value, LIC would be required to invest Rs 124 crore for 10 per cent stake.

An LIC official said the institution was yet to take a call but it was an option. “We have to analyse whether it fits into our investment strategy, where we see long-term value in a company. We are closely watching the developments surrounding the company,” said an LIC official.

Business Standard