Kingfisher: Turnaround at the markets

After being abandoned by investors and written down as an airline waiting to get grounded, Kingfisher Airlines (KFA) has had a miraculous turnaround, at least at the stock markets. The stock which had hit a low of Rs 7 on August 13, 2012 has over last 11 trading sessions risen by 92 per cent to close at Rs 16.95 on Thursday. The amount of investor and trader interest in the stock is reflected by the fact that KFA topped the list of most active securities by volume at the NSE on Thursday. Its traded quantity stood over 8.4 crore and turnover crossed Rs 141 crore.

The government's decision to raise FDI limit for strategic investors to 49 per cent was certainly the trigger point. If that set the ball rolling, UB Group's proposed move to sell stake in United Breweries and Mangalore Chemicals & Fertilizers to raise capital has also provided thrust. The market is rife with speculation that the group will raise between Rs 2,000 –Rs 2,500 crore and utilise the same to recapitalise KFA, which will be a key to attract foreign players. Mallya has also said that KFA is in talks to sell stake to a foreign player.

The developments have attracted investors in the company and its traded quantity has jumped. Data at BSE shows that the ratio of deliverable quantity of shares to total trade in the stock has gone up from around 20 per cent to over 30 per cent in the recent past. So, there has been a relatively higher growth in delivery-based trading. But there is an underlying risk. The stock has witnessed high volatility and thus has a high value at risk (VaR) margin of 25.5 per cent. VaR is collected on gross open positions and is low for less volatile, frequently traded and highly liquid stocks and vice versa. Contrary to this, VaR margin for RIL and HUL stood at 7.5 per cent.

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