Kingfisher on ground, banks money up in the air

CRASH LANDING
Quarter ended
(~cr)
2,000 1,000 0 -1,000 -2,000 Dec Mar 2010 Jun Sep 2011 Dec Mar Jun Sep 2012 Dec Mar Jun Sep 2013 -3,000

GROUNDED
NOV 2010 : Banks restructure ~7,500 crore loan. A portion of the loan was converted into equity, fresh funding granted and repayment term extended JANUARY-MARCH 2012: Banks begin to declare KFA loans as NPA after the airline fails to service interest OCTOBER 2012: Kingfisher shuts operations MARCH 2013: Lenders sell pledged shares of United Spirits and Mangalore Chemicals and Fertilisers Ltd APRIL 2013: Kingfisher moves Bombay High Court against sale of shares, does not secure relief MAY 2013: Lenders recall Kingfisher's entire ~6,000-crore loan

Net sales Net profit Source: Capitaline (Standalone data)

Compiled by BS Research Bureau

Share price on BSE in ~

30

20

21.05

4.98

10

Jan 2, 2012

Dec 6, 2013

about ~600 crore. That is all tion of it into preferential shares. banks have secured so far; their The banks announced a tworecovery drive has been stymied year moratorium on the repayAbout a year after Kingfisher by the airline challenging all ment, reduced interest and Airlines shut shop, the only one claims against it. In March this additional funding. After the still confident of a revival of the year, UB group moved the restructuring, the airlines total airline is Chairman Vijay Mallya. Bombay High Court against the debt fell to ~6,300 crore. Just two months ago, the flam- sale of shares, but secured no To worsen matters, in March boyant promoter of Kingfisher interim relief. In May, the 2011, ~750 crore of preferential Airlines and the UB group lenders recalled the entire loan shares issued to banks was conannounced he was in talks with of about ~6,000 crore, asking verted into equity shares at an investor to sell the airMallya to return the ~64.48 a share, a premium of 61 line. He had given a entire amount at once. per cent. During that quarter, deadline of 90 days for Through the last banks and other financial instithe sale. eight months, UB group tutions held 23 per cent stake in But as days pass, few and the lenders have the airline. A year later, when share Mallyas optimism. been at loggerheads over the lock-in period for shareRISING the possession of holding ended, banks started Slowly, Indian banks are realising they arent left DEFAULTS Kingfisher House, the selling shares at a loss, reducwith much, in terms of airlines office here, and ing their holding to 13 per cent. PART 2 their loans to the airline. Mallyas villa in Goa. The banks had hoped the Mallya, who sold 25 per Both properties were giv- debt restructuring would procent in his United Spirits to en as security against the loan. vide a breather to the airline and Diageo for $1 billion early this To recover the dues, the lenders allow it to restructure its operayear, didnt use this money to have also filed applications in tions. On its part, the airline repay the loans. The 14 banks, the Debt Recovery Tribunal announced plans to reduce debt led by State Bank of India (SBI), (DRT) Bangalore. The presid- and make changes in its busiwhich lent ~6,500 crore to the ing officer of DRT Bangalore has ness model. Till then, the airairline, are now involved in liti- heard the banks, but line ran two service models (the gation over the money, as Kingfisher's defence against the full-service brand and the noMallya has sued them in multi- interim applications is yet to be frills service, introduced after ple courts. Bankers say they heard. In the interim applica- the airline bought Air Deccan). started the recovery process in tion, banks have sought a declaThe airline estimated the March 2013, as the companys ration of assets, injunction reduction in finance costs and dues had exceeded ~2,400 crore. against delineation of proper- tweaking the business model Not just banks, investors and ties, attachment of properties would lead to gains of ~2,190 employees of Kingfisher Ai- and such other relief, said a crore. It firmed up plans to hive rlines are also going home emp- banker privy to the develop- off its ATR operations, loyalty ty-handed. The airlines stock ment. programme and engineering has seen a steady decline We will not be able to gen- unit into separate companies, from its peak market value of erate more than ~1,000 crore none of which materialised. ~3,888 crore in 2007, the com- through the sale of shares and Despite a generous debt recast, panys value has fallen to ~407 from the Mumbai and Goa the airline was unable to genercrore. The stock is being quoted properties, the banker said. ate profits. In fact, it didnt at about ~5. The airlines em- Therefore, the case before DRT record profits in its seven years ployees havent received salaries is crucial, as an order will allow of operations. By March-end for the last year-and-a-half. lenders to lay claim even on 2013, the airlines accumulated Kingfisher Airlines took off Mallyas and UB groups per- losses stood at a staggering well in 2005, even carving a sonal and non-pledged assets. ~16,000 crore. niche for itself. But a ~550-crore However, the tribunal By December deal in 2007 to buy out was overburdened Vijay Mallya owes 2011, about a year Gopinaths Deccan Airways, and a final recovery money to banks, after the debt along with other sundry mis- order in the Kingfisher employees, tax restructuring, SBI takes, pulled it down. Today, case might take years, officials, caterers, said Kingfisher Mallya owes money to banks, lawyers say. aircraft leasing loans had turned employees, tax officials, caterThe Karnataka HC, companies, fuel bad. The bank had ers, aircraft leasing companies, while hearing a wind- supplier, taxi exposure of ~1,500 fuel supplier Hindustan ing-up petition again- operators crore to the airline. Petroleum Corporation and to st the airline, asked Soon, other banks taxi operators, too. banks to maintain status quo, declared Kingfisher loans nonKingfisher Airlines did not with regard to the companys performing assets (NPAs). respond to an email query seek- Mumbai office, till December 6, Following this, the airline made ing comment. as the airline said it was in talks a pitch for additional loans, but The entire aviation industry with investors for a revival. A these were denied. Then, the airhas seen difficult times. The local court in Goa, too, stayed line approached smaller banks reason for airlines making loss- banks attempts to take pos- in the consortium, banks that es has been a high increase in session of Mallyas villa in Goa. hadnt categorised the loans as fuel cost through the last couple Two days ago, banks secured a NPAs. A series of meetings of years, coupled with weaken- restraint order from DRT between banks and Kingfisher ing of the rupee. Further, inter- against UB group company Airline executives followed. est costs have also increased due Kingfisher Finvest, restraining it Mallya then made a few presento the purchase of new aircraft. from transferring any property tations, outlining revival plans The increased costs due to all t- or dealing with the proceeds for the airline. In October 2012, hese factors cannot be directly from the sale of its shares. the airline stopped operations, passed on to customers in view If this year has been marked after engineers stopped work of the price war among airlines, by acrimony, 2010 was a period due to non-payment of salaries. says M P Chhajed, a city-based of bonhomie between the air- The Directorate General of Civil auditor. line and its lenders. In a contro- Aviation suspended the airlines Banks, meanwhile, started versial decision in November operating permit. As for the sale selling shares of United Spirits 2010, public sector banks, failing of the airline, Mallya remains and Mangalore Chemicals and to read the signs of a financially optimistic. Fertilisers, given as collateral sick airline, restructured ~7,650 against the loan, and netted crore of debt, converting a por- Tomorrow: Zoom Developers ANEESH PHADNIS
Mumbai, 6 December