Kingfisher shares hit all-time low

ICICI , SBI also dip on loan default worries; expectation, though, of government help to struggling airline.

The shares of Vijay Mallya’s Kingfisher Airlines slumped on Friday, as the cash-strapped carrier continued to cancel flights and there were reports that leasing companies were planning to take back their planes, while more pilots were leaving.

The shares opened at Rs 20.70 on the Bombay Stock Exchange (BSE) and fell as much as 19 per cent, touching a life-time low of Rs 17.55 before recouping half the losses. The stock finally gave up 9.45 per cent, to close at Rs 19.65.

Kingfisher’s woes hurt the shares of other Mallya-controlled UB Group companies, too. United Breweries (Holding), which owns 40.1 per cent in Kingfisher, tumbled 9.7 per cent to Rs 89.15. United Spirits lost 8.6 per cent to Rs 835.25 and United Breweries fell two per cent to Rs 389.35. The shares of ICICI Bank and State Bank of India, which hold a little more than five per cent each in Kingfisher, declined on concern that they may have to take a hit on loans given to the troubled carrier.

ICICI fell 4.55 per cent to Rs 822.5 and SBI by 3.5 per cent to Rs 1,797.65. IDBI Bank, which owns 3.5 per cent in Kingfisher, dropped 3.3 per cent to Rs 107, all on the BSE. “There are concerns that banks may have to suffer losses of Rs 3,000 -4,000 crore on loans given to Kingfisher,” said S P Tulsian, an independent investment analyst.

As of March 31, Kingfisher had about Rs 6,170 crore debt on its books. The lenders had restructured their exposure in the financial year ended March 31 by converting part of the interest dues into equity.

“Stock markets are expecting the government to bail out Kingfisher. It will be done indirectly, most likely by relaxing foreign direct investment (FDI) norms in the sector, if not by giving concessions. However, the stock is likely to fall to Rs 13-14, as any announcement by the government would take a few more days,” said Ajay Pandey, vice-president of institutional sales at ITI Securities. At present, foreign investment of up to 49 per cent is permitted in Indian carriers, but foreign airlines are not allowed to invest directly or indirectly in domestic carriers. According to recent media reports, the aviation ministry has recommended easing of FDI rules to allow foreign airlines to buy up to 24 per cent in local carriers within the existing cap of 49 per cent for foreign investors.

High fuel prices and a rising interest burden have taken a toll on aviation stocks this year. The shares of Kingfisher and SpiceJet have lost 70 per cent each this year, while those of Jet Airways, the big rival, have declined 65 per cent. In comparison, the BSE benchmark, the Sensex, has dropped 16.4 per cent during the period, data compiled by the BS Research Bureau showed.