A leading business daily today reported that LIC may invest 10 per cent stake in Kingfisher Airlines at the behest of the government.

We are not sure whether this deal would be consummated as it would not be easy for LIC to justify its investment in Kingfisher. The government is already knee-deep in this problem and we are sure that they would not be keen to invite more trouble by allowing LIC to acquire a stake in the beleaguered airlines.

Assuming that this deal goes through, it would set a bad precedent and would be considered as a bailout for the private sector company.

Though we at DSIJ believe that if a company like LIC, India's largest domestic Institutional Investor, puts money in Kingfisher Airlines, it might just generate enough confidence for the lenders as well as other shareholders.

Kingfisher has a huge debt of Rs 7000 crore, of which approximately Rs 6200 crore has been lent by the Indian banks. Media reports suggest that SBI has the highest exposure at Rs 1410 crore.  State Bank of India had earlier asked KFA to raise fresh equity of around Rs 800 to 1000 crore if it needed its debt to be restructured or receive more advances.

At current market price of Rs 24 per share of Kingfisher, LIC‘s 10 per cent stake would total a deal value of Rs 120 crore, which we believe is not good enough to revive the fortunes of Kingfisher. There is no point putting good money on a bad deal.