Lenders on Wednesday took the first step to initiate the legal process in recovering their loans of nearly Rs 8,000 crore to Kingfisher Airlines (KFA). They formed a sub-core group of four banks including State Bank of India (SBI), IDBI Bank, Punjab National Bank and Bank of India.
Lenders on Wednesday took the first step to initiate the legal process in recovering their loans of nearly Rs 8,000 crore to Kingfisher Airlines (KFA). They formed a sub-core group of four banks including State Bank of India (SBI), IDBI Bank , Punjab National Bank and Bank of India .
"The group is mandated to start the legal process on behalf of the entire consortium," a top official from a large bank told moneycontrol.com on condition of anonymity.
"The group will decide the future course of action. As and when things happen, they will keep individual bank posted about it. They will also meet frequently. Quite a few collaterals are recoverable in KFA. In case of loan defaults, every bank has a legal right on the collaterals," he said.
It is learnt that the sub-group will first examine all the documents related to collaterals. Later, it will appoint a law firm to carry out and advise on the entire recovery process. However, the four-member cluster has not yet sent any notice of recovery to the company. It will do it soon.
Earlier, the 17-lender consortium had formed a core lenders' group to deal with KFA in finalising restructuring scheme. However, efforts were in vain. After meeting the company management on Tuesday, banks decided to recall their loans to the Vijay Mallya-owned airline company.
This means, banks will send notice to the borrower to refund the entire money it had borrowed from them instead of going for any restructuring scheme.
"The entire process will take some time. It is a big case. Hence, we need to handle it meticulously. Four banks have been chosen based on their respective credit exposure," said another banker who attended the meeting of bankers on Tuesday held at a SBI office in Mumbai.
Some of the collaterals include Kingfisher shares given to lenders at the time of credit disbursal, corporate guarantee from the United Breweries Group, the parent entity for KFA, personal guarantee from the promoter Mallya and fixed assets appearing on KFA balance sheet.
"The sub-group will look into the matter whether any revaluation of pledged securities is needed. Legal compliance is also required. The situation is a bit fluid," said a general manager of a bank with substantial credit exposure in KFA.
SBI stock price
On October 13, 2015, State Bank of India closed at Rs 243.40, down Rs 1.1, or 0.45 percent. The 52-week high of the share was Rs 335.90 and the 52-week low was Rs 220.60.
The company's trailing 12-month (TTM) EPS was at Rs 17.32 per share as per the quarter ended June 2015. The stock's price-to-earnings (P/E) ratio was 14.05. The latest book value of the company is Rs 165.49 per share. At current value, the price-to-book value of the company is 1.47.
READ MORE ON SBI, State Bank of India , IDBI Bank, Punjab National Bank , Bank of India, Kingfisher Airlines , KFA, core group , sub-core group , Vijay Mallya, recall, recovery , law firm
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