Sicom gets Rs 400-cr loan back from Mallya in 2014

Maharashtra govt entity threatened to sell pledged USL shares in market

While scores of Indian public sector banks failed to get their loans worth Rs 9,100 crore back from Kingfisher Airlines, Sicom, a Maharashtra government-owned finance company, managed to get its dues from Vijay Mallya owned promoter entities — by threatening to sell pledged United Spirits shares in the market.  

In November 2011 — just few months before the airline closed shop, the promoter entities of  Kingfisher Airlines took a fresh loan of Rs 400 crore from Sicom.  An earlier loan of Rs 54 crore from Sicom was used by Vijay Mallya-owned promoter companies — Margosa Consultancy and Redect Consultancy — to buy optional convertible debentures of Kingfisher Airlines.

The Rs 400-crore loan from Sicom was bought as part of the promoters equity of Rs 800 crore when the banks asked Mallya to bring more equity in 2011.

“We had taken pledge worth three times the loan as United Spirits shares. As USL was sold to Diageo, it became necessary for Mallya to get these shares back and our loans were repaid back in full by 2014. We also threatened to sell the shares in the market,” said a Sicom official on conditions of anonymity.  Mallya sold USL to Diageo in November 2012 and required USL shares to complete the $2.1 billion transaction. The proceeds of USL was not used by Mallya to repay Indian banks and a part of the proceeds were paid in offshore accounts of Mallya.

Indian banks, on the other hand, were given collateral like Kingfisher headquarters in Vile Parle in Mumbai which, in an auction held last week, found no takers.  The government-owned banks were also given Kingfisher Airlines brand as collateral which is as good as dud now.  Auditing firm, Grant Thornton had valued Kingfisher brand at Rs 4,100 crore in 2011. The Serious Fraud Investigation Office is investigating on what basis Grant Thornton had valued the brand.  

The UB group companies are under scrutiny by the market regulator, the Sebi,  the Enforcement Directorate and the Central Bureau of Investigation and the ICAI for alleged fund diversion and fraud. UB group auditors including Price Waterhouse and Walker & Chandiok are also under the lens for their auditing and valuation practices.