Kingfisher losses widen as airline stays grounded

 

Live Mint :P.R. Sanjai  |  Mihir Dalal :Fri, May 31 2013. 10 49 AM IST

Kingfisher posts Rs.2,141.80 crore net loss for Q4; UBHL swings to a loss of Rs.190 crore on finance costs

Mumbai/Bangalore: Vijay Mallya’s Kingfisher Airlines Ltd, which hasn’t flown since October, continued to pile up losses in the fourth quarter, dragging down the fortunes of United Breweries (Holdings) Ltd (UBHL), the holding company of the tycoon’s UB Group, as well.

Kingfisher Airlines’ net loss widened 86% to Rs.2,141.80 crore for the quarter ended March from Rs.1,151.83 crore in the year-ago period. UBHL swung to a loss of Rs.190 crore for the March quarter due to a fourfold increase in finance costs. In the year-ago quarter, UBHL had reported a profit of Rs.2.1 crore.

UBHL’s loss marks another chapter in the steady erosion of Mallya’s family fortunes, which he partly inherited from his father. Mallya’s legacy is under threat after the group’s airline dream turned sour because of costly overreach—the acquisition of Air Deccan in 2007 and the debt taken on to pay for this and other assets, which include a Formula One racing team.

With planes remaining on the ground, the airline had zero sales in the March quarter, compared withRs.782.83 crore in the year-ago period.

Unsurprisingly, the airline posted a net loss of Rs.4,001.12 crore for the fiscal year against a loss ofRs.2,328.01 crore the previous year. Kingfisher Airlines has never made profit since its inception in 2005.

The Mumbai-based airline said it has racked up accumulated losses of Rs.16,023.46 crore and that its net worth was a negative Rs.12,919.81 crore as of 31 March.

Kingfisher’s operating licence was suspended in October by regulator Directorate General of Civil Aviation (DGCA) following a strike by the airline’s employees. The licence has since expired, although it can be renewed within two years.

Last month, Kingfisher Airlines submitted a fresh revival plan to DGCA. Permission to resume flights wasn’t forthcoming as the airline didn’t have no-objection certificates from various stakeholders, including airport operators, bankers, jet fuel vendors and spare parts sellers.

“Kingfisher is almost dead now; I don’t see any way it can come back. There are just too many issues surrounding debt and viability,” said Sharan Lillaney, an analyst at Angel Broking Ltd. “The UB Group is in a big mess right now with all the court cases and lenders selling pledged shares. And UBHL has guaranteed Kingfisher’s debt, so it’s pretty likely that courts will rule in favour of lenders.”

Over at UBHL, total income from operations for the March quarter rose 3.4% to Rs.117.57 crore. Finance costs rose to Rs.238.26 crore from Rs.59.13 crore.

Lenders to Kingfisher Airlines have filed several lawsuits against UBHL, which has given guarantees for Kingfisher’s debt. UBHL has itself filed counter lawsuits in the Karnataka and Bombay high courts against the lenders seeking, among other things, damages of roughly Rs.4,500 crore.

Meanwhile, a consortium of 14 lenders led by State Bank of India is readying to move the Debt Recovery Tribunal on selling Kingfisher Airlines’ assets after having filed a claim under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act to recover dues, marking the last rounds of a bitter battle in one of corporate India’s most high-profile loan default cases.

Mallya is expected to use at least a part of the money he gets from selling a part of his majority stake in group company United Spirits Ltd (USL) to repay Kingfisher’s lenders, which are owed more than Rs.7,000 crore.

On 9 November, Diageo Plc, the world’s largest distiller by revenue, agreed to buy a majority stake in Mallya’s USL for a total consideration of Rs.11,166.5 crore, offering the liquor tycoon a way out of mounting debt woes even as it gains a strong presence in the Indian market.

The complex transaction includes the purchase of a 19.3% stake from UBHL and other promoter entities, and fresh preference shares from the company. The UK-based distiller was to buy the remaining 26% from the public shareholders of USL. But Diageo’s open offer to shareholders failed, with the firm announcing earlier this month that it bought less than 0.5% of USL shares.

UBHL is likely to complete the stake sale in USL to Diageo for about Rs.2,400 crore in June.

The company said its luxury residential building Kingfisher Towers, being built on the site on which Mallya’s Bangalore home stood, was expected to be completed in 2015.

Stocks of both UBHL and Kingfisher have taken a battering over the past few years.

UBHL was trading as high as Rs.970 in May 2006 and at Rs.880 in 2008, when Kingfisher was on a massive expansion spree. By April 2011, UBHL had plunged to Rs.220 after multiple rounds of restructuring of the airline’s debt. In January 2012, the stock fell to as low as Rs.81, as the future of Kingfisher looked increasingly bleak and banks refused to lend more money to the airline.

In October, shares of UBHL rose again to a high of Rs.145 on speculation that Mallya would sell a stake in Kingfisher after India allowed foreign airlines to invest in domestic airlines. However, after it became clear that Mallya was struggling to find an investor, the stock slumped again.

As for the Kingfisher stock, it was trading at Rs.145.15 when the airline acquired Deccan Aviation Ltd, which ran India’s first low-fare carrier Air Deccan, on 1 June 2007. By 1 June 2009, the shares had tumbled to Rs.62.50. By the time DGCA suspended its operating licence in October, the stock was atRs.15.35. From an all-time high of Rs.316.60 on 18 December 2007, it sank to a record low of Rs.5.23 on 24 May this year.

On Friday, Kingfisher dropped 4.89% to Rs.6.03 on BSE, while UBHL fell 2.61% to Rs.37.35 and USL fell 1.14% to Rs.2,415.60. India’s benchmark Sensex fell 2.25% to 19,760.30 points.

15 Indian banks may take Rs 4,000 cr hit on guarantees to Winsome

Goodreturns :Monday, May 27, 2013, 9:40 [IST]


Fifteen Indian banks may have to shell out over Rs 4,000 crore
to international bullion banks on behalf of Winsome, a Mumbai-based jeweller, and walk away without any hopes of recovery due to the absence of adequate securities against exposures to the jeweller.

 Media reports said that banks had released the corporate guarantees and mortgages of Winsome Group last year and now they have nothing left to cover their risk thanks to the "accelerated payment" provision in the gold loan agreement between Winsome and bullion banks. 

As per that agreement bullion banks can invoke LCs well before due dates if they expect Winsome Group to default any time in future. 

A report from the Economic Times said that banks like PNB, Union Bank of India, Canara Bank and Central Bank are among the 15 lenders who may take this Rs 4,000 crore hit as they had provided standby letters of credit (SBLC) facilities.

Amway India chief William Scott Pinckney, 2 directors arrested in Kerala

First post : 14 mts ago :27th May,2013

The Kerala Crime Branch has arrested Amway India Managing Director and CEO William Scott Pinckney and two other directors of the network marketing company, said a report onmathrubhumi.com.

The arrests have been made in relation to two cases of fraud registered against the Pinckney in Wayanad district of Kerala, the report said. He was in Kerala to secure anticipatory bail in these cases. He has already got a bail in another case registered against him in Kozhikode district.

Earlier, the Crime Branch had seized products worth Rs 2.5 crore from various go-downs across the state and arrested the Kerala chief of the company.

Image used for representative purpose only.

After this arrest, the crime branch had decided to probe Amway’s insurance business, an earlier Mathrubhumi reportsaid.

There were complaints that Amway had supplied new products to distributors at high price. Lakhs of rupees thus collected was invested in the insurance business, the report said.

A probe into the multilevel marketing firm found that products that were Rs 37 was sold to consumers for Rs 395 as MRP.

The investigation was conducted after Vishalakshi from Kozhikode complained that she lost Rs 3 lakh on selling Amway products.

Mallya’s move against banks to slow down recovery from KFA

 First post :Adrija Bose May 27, 2013

It seems Vijay Mallya is trying hard to delay banks’ attempts to recover loans from his grounded  Kingfisher Airlines by engaging them in protracted legal battle.

On 26 March, UB Holdings Ltd (UBHL) and its chairman Mallya had filed a suit against the lenders of his grounded airline Kingfisher for selling a portion of the pledged shares of United Spirits (USL) worth Rs 100 crore.  

The case filed against Axis Bank and SBI, among others, had together lent about Rs 7,000 crore to Kingfisher Airlines. 

Banks had initiated a recovery process against UBHL and Mallya, the guarantors for the loans, after KFA defaulted on repayments.

But banks seems unperturbed.

 A senior SBI official told PTI that they will continue to sell USL shares despite the notice. “We have sold a part of the USL shares. We have also received a legal notice from UB Holding restraining us from doing so. But despite that, we decided to sell them and are likely to sell the remaining shares as well as we are confident of the court ruling in our favour,” he said.

According to the official, SBI sold shares worth Rs 100 crore last week, which prompted Mallya to seek legal remedy fearing the move could jeopardise his deal with British liquor major Diageo, for which he announced an open offer details with the exchanges.

Banks have already recovered Rs 800-1,000 crore from debt-ridden KFA and is in the process of recovering the remaining Rs 6,000 crore. But, with Mallya taking the lenders to court, legal experts say the entire recovery process will slow down, reported Business Standard.

Earlier, Mallya had also cancelled the power of attorney (PoA) given in favour of IDBI Trusteeship Services on United Spirits’ pledged shares. So, anyone buying UB Group’s pledged shares of USL will be facing legal action from the former. A power of attorney is issued to the trusteeship, a neutral party, to safeguard the interest of lenders in case of a default by a borrower.

Why is Mallya so worried now?

 UB Group’s four percent stake in United Spirits has been given to lenders as collateral for the KFA loans. But, UB needs this stake to close its deal with Diageo.

Last week, in a breather for Mallya, the Karnataka High court allowed UBHL to sell its shares in USL to Diageo. With this, the $2 billion takeover of USL has crossed a major hurdle. The court order will help Diageo mop-up an initial 27.4 percent stake, provided the lenders to Kingfisher Airlines create no further hiccups.

And Mallya is trying to make sure they can’t.

வங்கி கடன் வசூலுக்கு "எஸ்.எம்.எஸ்'- மத்திய அரசு உத்தரவு

தினமலர் :மே 20,2013,00:


புதுடில்லி:பொதுத் துறை வங்கிகளில், வசூலாகாத கடன் அதிகரித்து வருகிறது. 

இதை கருத்தில் கொண்டு, வங்கிகளில் கடன் பெற்று, உரிய காலத்தில் திரும்ப செலுத்தாதவர்களுக்கு, அலைபேசி வாயிலாக, குறுந்தகவல் (எஸ்.எம்.எஸ்.,) மூலம், நினைவூட்டல் செய்தி அளிக்கும்படி, மத்திய நிதி அமைச்சகம், வங்கிகளுக்கு உத்தரவிட்டுள்ளதாக தெரியவந்து உள்ளது.

 அண்மையில் பாõர்லிமென்ட் நிலைக்குழு, பொதுத் துறை வங்கிகளின் வசூலாகாத கடன் அதிகரித்து வருகிறது என்று சுட்டிக்காட்டியது. குறிப்பாக, சென்ற 2009-10ம் நிதியாண்டில், பொதுத் துறை வங்கிகளின் வசூலாகாத கடன், 59,924 கோடி ரூபாயாக இருந்தது.

இது, 2010-11ம் நிதியாண்டில், 74,664 கோடி ரூபாயாகவும், 2011-12ம் நிதியாண்டில், 1,17,262 கோடி ரூபாயாகவும் அதிகரித்துள்ளது என, நிலைக்குழு தெரிவித்திருந்தது.பொதுத் துறை வங்கிகளின் வசூலாகாத கடன் அதிகரித்து வருவது

, வங்கி துறைக்கு மட்டுமின்றி, அது, நாட்டின் பொருளாதார வளர்ச்சியிலும் தாக்கத்தை ஏற்படுத்துகிறது. 

எனவே, வங்கிகள் வழங்கிய கடனை, திரும்பப் பெறும் வகையில், நடவடிக்கை மேற்கொள்ள வேண்டும் என, நிதி அமைச்சகம் தெரிவித்துள்ளது.

குறிப்பாக, வங்கிகள் அவற்றின் வாடிக்கையாளர்களுக்கு, உரிய காலத்தில் கடனை திரும்பச் செலுத்தும் வகையில், எஸ்.எம்.எஸ்., மற்றும் தொலைபேசி வாயிலாக, நினைவூட்டல் செய்திகளை தெரிவிக்க வேண்டும் என, கேட்டுக் கொள்ளப்பட்டுள்ளது. 

வங்கிகள் வழங்கிய கடனை, ஒரு வாடிக்கையாளர், 90 நாட்களுக்குள் திரும்பச் செலுத்த தவறினால், அது வசூலாகாத கடன் பிரிவின் கீழ் சென்று விடுகிறது. 

எனவே, அதுவரை, காத்திராமல், வங்கிகள் உரிய காலத்தில், வங்கி கடனை திரும்பச் செலுத்தும் வகையில், வாடிக்கையாளர்களுக்கு தகவல் அனுப்ப வேண்டும். 

அவ்வாறு செய்வதன் மூலம், பல வாடிக்கையாளர்கள், உரிய காலத்தில் பணம் செலுத்த துவங்குவர் என, நிதி அமைச்சகம் தெரிவித்துள்ளது.

இதுகுறித்து, பொதுத்துறை வங்கியின் தலைவர் மற்றும் நிர்வாக இயக்குனர் ஒருவர் கூறியதாவது:எங்கள் வங்கியில், வங்கி கிளையின் உயரதிரகாரிகள், கடன் வாங்கியவர்களை, நேரடியாக தொடர்பு கொண்டு, கடனை திரும்பச் செலுத்தும்படி அறிவுறுத்தி வருகின்றனர். 

இது தவிர, எஸ்.எம்.எஸ்., மற்றும் நினைவூட்டல் கடிதங்கள் வாயிலாகவும், அவ்வப்போது தகவல்களை அனுப்பி வருகின்றனர். 

கடனை திரும்ப பெறுவதற்கான அனைத்து நடவடிக்கைகளும் மேற்கொள்ளப்பட்டு வருகின்றன. இவ்வாறு, அவர் கூறினார்.

Kashmir Inc opposes SARFAESI Act in J and K,

TOWSEEF AHMAD MAY 18:2013

Will launch agitations if need arises: KEA

Srinagar:The announcement of the government to enact the SARFAESI Act in Jammu and Kashmir has come under severe criticism from the Kashmir Inc fearing the move was a step to dilute Article 370. The Valley business community has threatened an agitation if government takes initiative for the implementation of Act in J&K.

The Kashmir traders said Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) had nothing to do with the increase in Credit Deposit Ratio (CDR) but would “only dilute the special status of the State granted under Article 370.  
Notably, Former Chairman JK Bank and a leading economist Haseeb A Drabu in his recent article in business newspaper Mint stated that SARFAESI is neither a necessary nor a sufficient condition for bank lending.

 “At worst, inapplicability of SARFAESI should increase the risk of lending in J&K which, in turn, should have an impact on the pricing of loans and not the volume of lending. As such, the question that needs to be asked is how did the credit deposit ratio reach a level of 62.5% in 2008 and how did it plummet to 38% four years later?,” he wrote.

Arguing further Drabu said “how was the credit deposit ratio raised from 37.4% in 2004 to 62% in 2008? What was done right then and what has gone wrong now? Clearly, the CDR was high even though the SARFAESI was not in force.”

 “The real reason for the low level of lending in J&K is that the lending methodology adopted by commercial banks is unsuited for the structure of business enterprises in J&K,” Drabu questioned. 

 
SARFAESI Act 2002, allows banks and financial institutions of India to own and auction properties—both residential and commercial—when borrowers fail to repay their loans.
The Act is not applicable to J&K as non-state subjects cannot own property in the state because of the Article 370.

RBI Governor D Subbarao, during his recent visit to Valley said Omar Abdullah had assured him that state government would enact SARFAESI Act in the Assembly or extend it through an ordinance shortly. RBI Governor was replying to a question in a press conference regarding the poor performance of banks in terms of Cash Deposit Ratio. He said the banks blame absence of SARFAESI Act for not lending in J&K, as it does not allow them to take over the property of the defaulting borrowers.

Kashmir Economic Alliance, an amalgam of trader bodies said the introduction of this Act will prove detrimental for the business fraternity of Kashmir.

 “It is unacceptable that the state government has expressed its willingness to introduce the Act.  We will launch a strong agitation and will come on roads if the need arises,” Chairman KEA Muhammad Yaseen Khan said.

Khan also said that the act will go against the constitutional safeguards guaranteed to the citizens of Jammu and Kashmir.

 “The SARFAESI Act is not presently in force in Jammu and Kashmir due to the special status the state enjoys by virtue of Article 370. But the enactment of the said Act will pave for the non-state subjects to become owners of the state property which is a clear violation of article 370,” he added.

Associated Chamber of Commerce and Industries Kashmir (CCIK ) while expressing their reservations over the enactment of SARFAESI said that the act was against the interests of the State.

 “SARFAESI is against the basic interests of Kashmir and Kashmiri people. What will we do with CDR when our interests are at stake,” said CCIK Joint Secretary Tariq Rashid.
Federation Chamber of Industries Kashmir (FCIK), a representative body of Kashmir industry and trade, opposed the implementation of the Act.

 “The government is relating two different things. SARFAESI has nothing to do with the increase in CDR. They cannot relate two different things to enact such an act that has serious implication,” said Zahoor Ahmad Bhat, President FCIK.

He said that the ordinance would pave way for the authorities (outside banks) to seize the properties of bank defaulters.

  
“The proposal of RBI will pave way for the transfer of property, land and assets into the hands of outsiders through the proposed auction violating the status granted under Article 370,” he added. 

“If any borrower fails to repay the loan under the terms of a loan obligation, they can claim the ownership rights of the collateral. It would mean that the non-state subjects will become the owners of the State land.” 

Restructuring pressure to continue for SBI in Q4

By Simran Gill, ET Now | 20 May, 2013, 10.38AM IST

State Bank of India could see a significant rise in its restructured assets for the fourth quarter. The country's largest bank is due to announce its fourth quarter results onThursday, May 23, 2013.

 According to sources, SBI could see restructuring close toRs 8000 crore for the fourth quarter.

 The chunk of the restructuring for the quarter includes one large account which is Suzlon, where SBI's exposure is close to Rs 1600crore . 

The other restructured accounts are mainly smaller accounts coming from sectors like infra, mid-corporates, iron and steel. 

According to analysts, this high amount of restructuring could see a significant rise in provisions on restructured accounts for SBI in Q4. The Reserve Bank of India has recently enhanced provisioning requirements for banks' restructured assets, and this amount may end up being a drag on the bank's profits.

However, asset quality overall seems to have eased for the bank. Though SBI saw bad loans rise through FY13 with fresh slippages as high as Rs 10000 crore in Q2 FY13, Q4 seems to have eased the pressure. According to a person with direct knowledge, fresh slippages for the fourth quarter could be between Rs 5000-6000 crore, a figure much less than what the bank has seen in previous quarters.

Sources also say that write-offs for Q4 could be to the tune of Rs 2000 crore, and loan recoveries could amount to Rs 1000-1200 crore.

 Not just that, upgradations of loans from theNPA to standard category could also be high for the quarter, at around Rs 4500-5000 crore.

Even the bank's chairman Pratip Chaudhuri has told media "NPAs for Q4 will be much lesser than Q3 and also what they saw in the previous quarters. Gross non-performing assets have come down to Rs 49,000 crore from the Rs 52,000 crore earlier in Q3 down to 4.5 per cent from 5.3% in preceding 3 months period. The bank still continues to face stressfrom contractors which are facing delay in payments, iron and steel, infra and construction sectors to name a few."