IDBI Bank to declare Kingfisher Airlines 'wilful defaulter'

T E Narasimhan  |  Chennai  

August 16, 2014 Last Updated at 23:02 IST

Public-sector lender IDBI Bank has said it is planning to announce liquor baron Vijay Mallya's Kingfisher Airlines as a wilful defaulter.

The bank, which has a Rs 750-crore exposure to the grounded airline, also clarified it had not been questioned by the Central Bureau of Investigation, though the agency had sought some information from it.

IDBI Bank is the second bank that could list Kingfisher Airlines as a wilful defaulter. Kolkata-based United Bank of India has served a notice on the airline asking why it should not be named a wilful defaulter. Kingfisher Airlines has moved court against the notice. State-owned United Bank of India has a Rs 400-crore exposure to the airline.

The Reserve Bank of India defines wilful default as a situation where an entity does not pay lenders even though it has the capacity to do so, or when it does not use funds for the purpose a loan was given. If a borrower uses short-term working capital for long-term purposes, not in conformity with the terms of a loan, or deploys the funds for creation of assets other than those for which the loan was sanctioned, it is construed as diversion of funds.

IDBI Bank Chairman & Managing Director M S Raghavan said the bankers' consortium was taking steps against Kingfisher Airlines. "We will declare (Kingfisher Airlines as a wilful defaulter) very, very soon. We have already taken it (the proposal) to the (bank's) board," he said and clarified IDBI Bank's exposure to the airline was Rs 750 crore, and not Rs 950 crore as reported in media reports.

IDBI Bank was the first bank to declare Kingfisher Airlines' default and it went to court to recall its loan. The bank is now taking the next step to recover its dues.

State Bank of India leads a consortium of 17 banks that had a total exposure of Rs 6,500 crore to the airline. After banks started their recovery process last year, the total dues are now about Rs 4,000 crore, according to finance ministry data.

In 2009, IDBI Bank sanctioned a loan of Rs 200 crore to Kingfisher Airlines. Subsequently, State Bank of India came out with an assessment saying the gap in the airline's working capital was around Rs 2,000 crore and many banks were approached, including IDBI Bank, which was asked to lend over Rs 1,000 crore.

"But we sanctioned only Rs 750 crore and of this Rs 250 crore was sub-tuned with the earlier sanctioned amount," Raghavan said.

Responding to recent media reports that claimed CBI had questioned IDBI Bank in the Kingfisher Airlines case, Raghavan said the agency wanted to see whether funds were diverted by the airline. If there is diversion it will show up in the airline's bank accounts, so all lenders were asked to provide information. IDBI Bank provided the information and CBI wanted more data, which was provided last Monday.

On the course of action against the airline, Raghavan said RBI Governor Raghuraman Rajan had recently stressed on tigthening the bankruptcy law. "So, we can declare the company insolvent. I am not suggesting this is what we will do. We have an option and the bank can go to any extent," he added.

The bank also said it was looking at mobilising funds through various modes, including selling its stake, partially or fully, in the National Stock Exchange, rating agency CARE and others. "As promoters, we have good stakes in most of these organisations. In NSE and CARE alone, if we divest now, we can easily mobilise Rs 1,000-1,200 crore," said Raghavan.

Raghavan said the bank would need around Rs 6,000 crore of capital over the next two years. It had set a target of around 20 per cent growth annually and about Rs 6,000 crore of capital, besides another Rs 4,000 crore of Tier-I capital, would be required to support that. "We have approached the government for capital infusion, this is the first choice. My assumption is we will get at least Rs 1,000 crore from the government." At present, the central government holds a 76.5 per cent in IDBI Bank. "We have written to the government to lower its stake to 58 per cent or 51 per cent," said Raghavan, adding around Rs 4,500 crore could be mobilised if the stake was brought down to 58 per cent, and Rs 5,500 crore if it came down to 51 per cent.

No money or flying permit for Kingfisher but Mallya's 'never say die' spirit intact

FP :Sindhu Bhattacharya Sep 3, 2013


New Delhi: The never say die spirit of Vijay Mallya is admirable. The chairman of Kingfisher Airlines has no flying permit, crores in debt from lenders with myriad legal cases, unpaid employee dues and no visible plan in sight to bring in fresh capital to restart the airline. But he still dreams of restarting the airline. In the annual report for 2012-13, which he has sent to shareholders ahead of the proposed AGM of Kingfisher on 24 September, Mallya has said 

Kingfisher remains in dialogue with “several investors and believes that there is a rationale for investment for various strategic and non-strategic investors. As on the date of this report, your company is engaged in discussions with one such potential investor.” 

Any guesses which investor is now willing to take on a dead airline, faulty planes, absent workforce and insurmountable debt? 

Under the heading ‘Management Discussion and Analysis’ Mallya has referred to several global full service airlines keenly watching the Indian market and financial investors in the Indian aviation industry looking for an exit.

 It is interesting to note that late last year, when news was trickling in about Abu Dhabi based Etihad Airways being in talks with India’s Jet Airways for an equity partnership, Kingfisher had let it be known that Etihad was conducting its due diligence. Vijay Mallya in this file photo. Reuters Though this was never officially confirmed, Kingfisher managed to raise everyone’s hopes on a possible equity infusion by Etihad, which eventually did not happen. So Mallya’s assertion in the annual report again about ongoing discussions with one potential investor are certainly curious. 

Mallya has devoted quite some time in detailing out why a potential investor should come forward. Among the reasons he has put forth include Kingfisher having enough qualified staff, at least 12 aircraft premium slots and a lapsed flying permit which can be renewed.

 Here’s what all he has said: 
1) Will give any investor a foothold in one of the fastest growing aviation markets in the world, that is India. 
2) Growing importance of aviation in policy making, such as opening up of Indian aviation industry to foreign airline investments.
 3) New airports and other aviation infrastructure coming up. 
4) Kingfisher’s promoters are willing to continue support for the airline’s revival. 
5) Valuation of Kingfisher is “very attractive” at the moment. 
6) Brand Kingfisher, where a recent brand valuation conducted by Grant Thornton put the brand value at $550 million once the airline business becomes operational. 
7) Scheduled Air Operator’s Permit (SOP) which can be renewed anytime within two years by capitalising the airline in line with the revival plan submitted to DGCA.
 8) Kingfisher has 12 aircraft and is “confident of” acquiring additional aircraft  during the ramp up. 
9) Senior and mid level managers and sufficient number of pilots, engineers, dispatchers still on Kingfisher’s rolls to operate up to 20 aircraft. Additional staff can be hired as the airline business ramps up. 
10) Ground handling equipment and aircraft spares to support the fleet.
 11) Access to most of the premium slots besides curbside and ramp space at various airports. 

Mallya has also referred to the fact that Kingfisher has already submitted a two phase revival plan to regulator DGCA. Phase one involved restarting the airline operations with a limited fleet of 7 aircraft (5 Airbus + 2 ATRs), gradually increasing to 21 aircraft (10 Airbus + 11 ATRs) in a period of 3-4 months. Kingfisher’s parent UB Group offered to organise funding of approximately Rs 650 crore to implement this phase. The second phase envisaged bringing a new investor with fresh capital. This plan would address the issues of debt restructuring, servicing, and repayment. 

The UB Group agreed to organise financing for a limited restart. Mallya says in the annual report that “While the authorities remain supportive of your company’s restart, these authorities are awaiting recapitalisation of your company for granting the necessary permissions for renewal of the SOP and restart of operations.” 

So in effect, unless Mallya succeeds in getting funds, none of his plans can materialise. Meanwhile, Mallya also said in the annual report that Kingfisher has filed a $234 million lawsuit for damages from International Aero Engines AG citing engine defects. The lawsuit citing deficiency in IAE’s V2500 A5 engine was filed in a court in Bangalore. 

Engine problems and difficult operating environment were cited by the carrier as reasons for Kingfisher’s financial stress. The airline grounded its fleet in October after employees walked out over delayed salaries. 

Thereafter, DGCA suspended the airline’s permit because of service disruptions and the permit lapsed on 31 December last year. Kingfisher’s lessors have repossessed aircraft after payment defaults and the Airports Authority of India sued the airline because it failed to pay Rs 300 crore of airport fees
.

The Mehta who surprised Mallya

 BE :Dev Chatterjee  |  Mumbai  July 6, 2013 Last Updated at 00:56 IST

Untill early this week, not many outside the Indian fertiliser sector had heard of Sailesh C Mehta, 52, chairman and managing director of Pune-based Deepak Fertilisers and Petrochemicals. 

Like the company, Mehta also kept a low profile. 

In fact, he is known among peers as "overcautious". 

So his move to take on UB Group ChairmanVijay Mallya for control of Mangalore Chemicals & Fertilizer (MCF) has taken everyone by surprise.

"We wanted to make some noise about this acquisition," says a group insider about the 24.46 per cent acquisition, worth Rs 180 crore, in MCF. "We had first made a friendly gesture to take over the company but the UB group was not interested."

The acquisition bid has taken UB Group by surprise, as it was planning to sell MCF to Saroj Poddar of Zuari Agro. Poddar already owns a 10 per cent stake in MCF. Of Mallya's 22 per cent stake, 11 per cent is pledged with banks and financial institutions. MCF became a target after UB Group began facing liquidity issues after the collapse of its Kingfisher Airlines.

This is when Mehta, who took over as chairman of Deepak from his father last October, saw an opportunity and decided to take the plunge.

 An offer was made to UB. Mehta's company has presence in Gujarat, Haryana, Madhya Pradesh, Punjab, Uttar Pradesh and Maharashtra.

 A takeover of MCF would give it access to urea and non-urea capacities of 380 billion tonnes and 26o billion tonnes, respectively, and access to the Andhra Pradesh, Karnataka, Kerala and Tamil Nadu markets.

A Deepak Fertilisers insider said: "Our offer was a win-win deal for both companies and we think this is a good fit with our business."

But by taking on Mallya, who has fought many a 

corporate battle and won many, has Mehta bitten off 

more than he can chew?

"There has to be some understanding between Mallya and Mehta on Deepak Fertilisers," said a banker who worked closely with Mehta.

 "Mehta is not the sort of person who will go for a hostile takeover bid. I am expecting a lot of negotiations in the next six months between Mallya and Mehta over MCF."

Here, the banker said, the experience of JM Financial's Nimesh Kampani would come handy, as he is close to both Mallya and Mehta.

 JM is the advisor to Deepak Fertilisers and was also advisor to UB's Diageo for its United Spirits' deal. Kampani is also on the board of Deepak Nitrate and shares a close bond with Mehta's father, the founder of the group

Deepak Fertilisers declined to comment but insiders said the company was ready to negotiate. Deepak would make an open offer soon to other shareholders, the sources said, as they were close to the threshold limit of 25 per cent shareholding, which triggers a compulsory open offer.

Mehta, who has a management degree from Texas, took over as managing director in 2002, and chairman in October 2012, after his father, C K Mehta, decided to devote more time to social work. The Mehtas own 43.32 per cent Deepak Fertilisers.

But it's not MCF alone that is occupying Mehta's time these days. He is also busy developing new businesses, including constructing a mall in Pune and exporting fruit and vegetables across the world. His brother, D C Mehta, runs Deepak Nitrate, another group company. The next six months will decide whether a hitherto cautious Mehta was right about making a grab for MCF or not.

WHO IS SAILESH MEHTA

• 1991 Joined family-owned Deepak Fertilisers, Pune
• 2002 Took over as managing director
• 2005 Elevated to vice-chairman and managing director
• 2012 Became chairman and managing director

SBI sends notice to Kingfisher Airlines

financialexpress:APR 10 2013, 12:14 IST

State Bank of India (SBI) has sent Kingfisher Airlines a legal notice to recover its loans, bankers said on Tuesday. The airline can either suggest an out-of-court settlement or take legal recourse, in which case bankers will move the Debt Recovery Tribunal, a banker explained.

Although the lenders have sold shares of United Spirits and Mangalore Chemicals and Fertilisers, banks are still not confident of recovering their entire loans from Kingfisher.

 “It looks like we will have to invoke the corporate guarantees given by United Breweries Holdings to recover the loans,” a banker with direct knowledge of the development said.

Kingfisher owes over Rs 7,000 crore to a consortium of 17 lenders led by SBI which has the maximum exposure of Rs 1,800 crore.