Banks want revaluation of Kingfisher Airlines brand

Promoters pledged brand in 2010

Bankers have asked for revaluation of the Kingfisher Airlines brand, pledged with them by the airline’s promoters in 2010. The airline brand is registered separately from the UB Group’s beer and wine brands and was pledged with a consortium of banks to raise Rs 2,000 crore in debt. The brand’s worth was included in the balance sheet, boosting the airline’s valuation.

At a meeting between lenders and Kingfisher Airlines on Thursday, bankers asked the management to repay part of the dues by selling some non-core assets. The brand revaluation is seen as a part of the move by banks for debt recovery.

 

The airline has become a non-performing asset (NPA) for banks, including State Bank of India, Bank of Baroda and Punjab National Bank. The move to recover dues by selling pledged assets comes after the company announced a Rs 1,150-crore loss for the quarter ended March, as compared to a Rs 360-crore loss during the same period of the previous year. The airline, owned by liquor baron Vijay Mallya, has seen its market share sink in the past couple of years on the back of huge reductions in the number of flights.

Loans to the airline, around Rs 6,500 crore, have become NPAs even though these were restructured in 2009. The debt recast included conversion of Rs 750-crore debt into cumulative redeemable preference shares and Rs 553 crore as non-convertible cumulative redeemable preference shares, to be redeemed after 12 years.

State Bank of India, which has an exposure of about Rs 1,500 crore, classified the loan as an NPA in the October-December quarter of the last financial year. If a loan account becomes an NPA, banks have to make provisioning towards the loan. That puts pressure on the bank’s profitability.

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