UBHL auditors raise concern over exposure to ailing Kingfisher

Auditors of UBHL, the holding company of Vijay Mallya-led UB Group, have raised concerns over its significant financial exposure of Rs 13,500 crore to the grounded carrier Kingfisher Airlines.

United Breweries Holdings Ltd (UBHL) has made "no provision in the accounts for the probable loss that may arise on account of financial exposures (to Kingfisher)," auditors have said.

In their 'limited review report' for the October-December quarter financial results of UBHL, the auditors have said the entity has financial exposures to the tune of Rs 13,538.12 crore to Kingfisher, which is "under severe financial constraints and its operating licence stands suspended".

The auditors, Vishnu Ram & Co, said that certain aircraft lessors and bankers have invoked corporate guarantees given by the company on behalf of KFA. The total amount invoked and outstanding as on December 31, 2012, is Rs 964.79 crore.

UBHL's financial exposure on account of Kingfisher Airlines as on December 31, 2012, include investment in equity of Rs 2,109.31 crore, guarantees given to banks Rs 6,631.35 crore, guarantees to aircraft lessors Rs 2,135.6 crore, advances given Rs 2,271.64 crore, and interest, commission, logo fees receivable Rs 390.22 crore.

United Breweries Holdings Ltd) is the holding firm for Vijay Mallya-led UB group, whose companies include United Breweries Ltd (UBL), United Spirits Ltd, McDowell Holdings, Mangalore Chemicals and Fertilisers, UB Engineering and Kingfisher Airlines (KFA).

For the third quarter ended December 31, 2012, Kingfisher yesterday reported a loss of Rs 755.17 crore against a loss of Rs 444.26 crore in the year-ago quarter.

Certain beneficiaries of corporate guarantees issued on behalf of KFA have filed petition against the company under the Companies Act, auditors said.

The auditors have also drawn attention on the income for the year 2012, a sum of Rs 52.11 crore as guarantees or security commission due from Kingfisher Airlines in spite of the restrictions imposed on it against its payment.

UBHL in a filing to the BSE had yesterday said that guarantee commission arising out of corporate guarantee given and security commission from security pledged in favour of lenders of Kingfisher, has been reversed, not accounted for, in the current financial year, as the airline has been precluded from making payments by its bankers.

It further said certain corporate guarantees on behalf of KFA have been invoked. KFA is negotiating with the beneficiaries in this regard and has initiated steps to resume suspended commercial operations.