Vijay Mallya disappoints lenders with indecision

Fails to come up with a concrete plan as to how he will pump more equity into loss-making Kingfisher Airlines

It was disappointment for the State Bank of India (SBI)-led consortium of lenders which have a total exposure of about Rs 7,000 crore towards Vijay Mallya’s loss-making Kingfisher Airlines. Although Mallya attended the lenders’ meet at his UB Group corporate head office here, he did not spell out a concrete plan about how he will pump in equity into his airline, reeling under debt of about Rs 9,000 crore. The brass of SBI had asked Mallya to be personally present at the meeting.

According to sources, Mallya again requested the lenders for an additional Rs 200 crore of working capital, which they declined. In fact, the Kingfisher management has been trying for this for the past year, but the lenders, whose exposure is already being treated as non-performing assets (NPAs), have held that Mallya should first infuse equity before the request for extending working capital can be considered. At the annual general meeting (AGM) of Kingfisher Airlines on Wednesday, Mallya had said the promoters have infused a massive Rs 1,154 crore into Kingfisher Airlines, without elaborating how the money was put to effective use by Kingfisher Airlines.

According to bankers, the Kingfisher Airlines management told them that since the government announcement of allowing foreign carriers to buy stake in Indian airlines came only a few days ago, the firm would need more time to finalise a deal and repay some interest payment, long overdue. The airline, however, gave no timeframe to the banks on this issue, bankers said.

“Our immediately priority is that the airline make payments regularly,” said a senior banker from a public sector bank. Banks have been reeling under huge provisioning burden as the loan has become an NPA.

Another senior public sector banker said Kingfisher executives conveyed that the UB Group was talking to private equity players for infusion. They made presentations on the operations and steps taken to improve financial parameters. They also reiterated demand for working capital support, the banker added.

SBI, the leader of the lender’s consortium, has an exposure of Rs 1,400 crore to the cash-strapped carrier, of which 90 per cent has already been given. The other banks with exposure to the airline include: IDBI Bank (Rs 727 crore), Bank of India (Rs 575 crore) and Bank of Baroda (Rs 537 crore). Recently, ICICI Bank sold its entire exposure of Rs 430 crore to a debt-fund run by the Kolkata-based Srei Infrastructure Finance.

The lenders’ meeting that went on for two hours also saw the appointment of SBI Caps to work out a restructuring package.

The top executive of a south India-based public sector bank said it was just a preliminary meeting. It would take at least three-four months to see firming up of a clear road-map. The group has begun steps to arrange funding, including equity. The issue of replacing collateral was yet to be resolved. Sources say there will be another lenders’ meet during the third week of October to take further steps.

Mallya reportedly told the lenders that he is talking to strategic global airlines and private equity investors for investment into Kingfisher Airlines. Mallya is considering a proposal to offload a part of his stake in his other group company – United Spirits, and channel a part of the proceeds into Kingfisher Airlines -- to infuse equity into Kingfisher Airlines.