According to Supreme Court advocate HP Ranina this step will severely hit United Breweries Group because most KFA loans are guaranteed by them.
Kingfisher Airlines (KFA) lenders today finally decided to start the recovery process for Rs 7,500-crore loans given to the grounded airline . According to Supreme Court advocate HP Ranina this step will severely hit United Breweries Group because most KFA loans are guaranteed by them.
"If the banks are serious about recovering their dues, there are no assets in Kingfisher therefore they will take recourse to guarantees which are given by the promoter groups," he told CNBC-TV18.
State Bank of India (SBI) has the maximum exposure with Rs 1,600 crore, followed by Punjab National Bank (PNB) with Rs 800 crore, IDBI Bank Rs 800 crore, Bank of India Rs 650 crore and Bank of Baroda Rs 550 crore.
If loans given to the cash-strapped airline are not recovered before March 31 these public sector lenders will have to bear the burden of huge NPAs, so there is possibility that they are being pressurized by the government or Reserve Bank of India to take this step, Ranina told the channel.
Kingfisher has been grounded since October 1 after a labour unrest due to non-payment of salaries which have not been paid since last May.
Below is the edited transcript of HP Ranina’s interview with CNBC-TV18
Q: This is perhaps an effort on the part of Kingfisher Airlines and the management of Kingfisher to say we can’t do this anymore let us just try and make do of this situation the best that we possibly can and arrive at some sort of a negotiated settlement which works for lenders as well as the management?
A: Possibly that is a view, but the important point is it will have a tremendous impact on the promoters of the company, United Breweries Group because most of the loans are guaranteed by them.
If the banks are serious about recovering their dues, there are no assets in Kingfisher and therefore they will take recourse to guarantees which are given by the promoter groups. So, it will have a tremendous impact on the liquor business.
Q: Could the brand be under dispute now with the banks deciding to take the brand down this road as well?
A: That depends on the nature of the guarantee. It all depends on who was the real owner of the brands. So, we have to wait and watch how this pans out in the coming weeks.
However, the banks are under pressure maybe from the government or Reserve Bank of India (RBI) that they have to recover the dues before March 31 otherwise they will have huge NPAs. This is a very serious issue. I don’t think banks have a choice, but to invoke whatever guarantees they have.
Q: What could be legal recourse as far as Kingfisher is concerned if this is not part of a negotiated settlement?
A: If it is not part of a negotiated settlement then all measures would be taken to invoke the guarantees. Courts are very firm that whenever a company has given a guarantee even that company would go into liquidation if the guarantee is not fulfilled.
So, things have changed now and courts are taking very strict view. Therefore, it all depends on how soon the banks move the courts in case there is no negotiated settlement.
Kingfisher Air stock price
On July 23, 2014, Kingfisher Airlines closed at Rs 3.06, down Rs 0.11, or 3.47 percent. The 52-week high of the share was Rs 6.84 and the 52-week low was Rs 2.06.
The latest book value of the company is Rs -166.59 per share. At current value, the price-to-book value of the company was -0.02.
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