Banks to meet Kingfisher on Sept 27 to find future course of action

Despite loan recast, Rs 8,000 loans to KFA has become non-performing and banks had to make provision

Lenders to Vijay Mallya promoted Kingfisher Airlines will meet on Thursday to discuss the future course of action by the troubled airline. Banks has been asking the promoter of the company for equity infusion, as was agreed during the time of loan restructuring. The meeting will be held at Bangalore.

Despite loan recast, Rs 8,000 loans to KFA has become non-performing and banks like State Bank of India, Punjab National Bank, Bank of India and Bank of Baroda had to make provision.

The meeting also assumes significance as this will be bankers’ first interaction with KFA management after foreign direct investment in aviation sector is allowed. In addition, Vijay Mallya – the flamboyant chairman of Kingfisher – is also talking to liquor maker Diageo to sell 49 per cent of its stake in Whyte & Mackey, its Glasgow-based subsidiary.

 “We have heard nothing concrete from them after the policy relaxation on FDI. Newspaper reports say they are in talks (with foreign airlines to divest stake). I am sure Mallya will come to us when he has something tangible," SBI Chairman Pratip Chaudhuri said. In the last meeting, bankers had demanded KFA chairman Vijay Mallya’s should personally should be present in the next interaction.

SBI – which is the lender of the consortium have an exposure of Rs 1400 crore. Some other banks that have exposure to the airline are IDBI Bank (Rs 727 crore), Bank of India (Rs 575 crore) and Bank of Baroda (Rs 537 crore).  Recently, ICICI Bank sold its entire KFA exposure of Rs 430 crore to a debt fund run by Kolkata-based infrastructure finance company Srei Infrastructure Finance.

“The brand Kingfisher is very important for Mallya and the talk of selling non-core assets like Mangalore Refineries is welcome," Chaudhuri said, adding "Mallya is keen to keep control of Kingfisher...So the sense we have from him is that he is willing to do everything possible, including big sacrifices.”  

SBI sources said Kingfisher has informed the banks that it is talking to Etihad Airways for divesting a part of its stake. Interestingly, KFA’s domestic competitor Jet Airways has also initiated discussion with Etihad after FDI was opened up in this sector last week.