Reliance Mutual Fund picks up 3.5% in Air Deccan

Low-cost airlines seem to be the flavour of the season for large corporate groups looking for financial investment. Soon after the Tata group investment company picking up 7.5% in the Delhi-based SpiceJet, it now turns out that the Anil Ambani group company, Reliance Mutual Fund, has been slowly building up a position in Air Deccan. Reliance Vision, a mutual fund scheme under the Reliance Mutual Fund umbrella, has acquired a 3.5% stake in Air Deccan. A Reliance Capital spokesperson said the stake has been acquired over the past few months purely as a mutual fund play, one amongst many in the mutual fund portfolio. Commenting on the group’s plan to pick up a strategic stake in the airline, he said the company has no plans to enter the aviation business.

The average price of the acquisition could not be ascertained. The Air Deccan share fell 10% to Rs 119 on BSE. Sources see the interest as good news for the sector that has received a severe drubbing on the bourses in 2006. “The fact that institutional investors are beginning to see the potential in the business is a healthy sign,’’ says Vijay Mallya, chairman, Kingfisher Airlines. Low-cost airlines have for long highlighted the fact that only about 2% of the Indian population travel by air and there is huge potential in terms of people who currently use the railways or road. However, losses have kept away most retail investors from companies like Jet Airways, SpiceJet and Air Deccan.

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