SP Tulsian of sptulsian.com says that sufficient funds would be available for meeting Kingfisher's debt by the realisation of the UB Holdings' shareholding in United Breweries and United Spirits along with the value of other assets and the personal guarantee of Vijay Mallya. Tulsian opines on CNBC-TV18 that agreement reached to recall the loan has been structured to benefit both the banks and the promoters.
Below is the edited transcript of the analysis on CNBC-TV18
Q: The State Bank of India (SBI) has announced that each bank will decide on the course of action to take as far as the recovery process is concerned and nothing is known about the kind of personal guarantees involved. What is your opinion?
Tulsian: It is very difficult to threadbare the individual liability and the securities held by each of the 17 banks. If you add the value of the share-holding of UB Holdings Limited, the promoter of Kingfisher Airlines, of 3 crore shares in United Breweries Limited, the present value of which is close to about Rs 2, 200 crore and 2 crore 40 lakh shares in United Spirits Limited the present value of which may be, at the price of Rs 1,440 per share agreed in the sale of stake to Diageo, at Rs 3, 500 crore, the total amount comes close to Rs 5,500 - Rs 6000 crore.
If you add to this the value of the other assets held by UB Holdings and the personal guarantee of Vijay Mallya, the problem of funds available ceases to exist.
However, this may offer the banks an opportunity to recover their loans in one go and the promoters an opportunity to ask for a haircut which could go as high as 40 percent.
Q: An official from SBI (Shyamal Acharya, deputy MD - associates and subsidiaries, SBI) said that the bank would not be able to provide any estimate of the haircut the banks may have to take. What is your view?
Tulsian: I expect the haircut to be at least 40 percent as it will benefit both the lender and the bankers. I don't think the banks will have much to lose even if they have to forego Rs 3,000 crore.
For the UB Group, if the entire legal process of recalling the loan is enforced, the group will be forced to pay the entire loan amount of Rs 7,500 crore. And if the group plans to sell stake it has to make this company debt-free. And till then, there is little expectation of any strategic investor evincing interest.
So, I will not hesitate in opining that the agreement to recall the loan has been structured for the benefit of the bankers as well as the promoters.
Q: Auditors at UB Holdings last week raised concerns and red flags on the exposure of UB Holdings which amounts to the tune of about Rs 13,538 crore to Kingfisher Airlines. So is it just a problem of Kingfisher Airlines?
Tulsian: The auditors' note is of little concern as it is a matter of procedure incorporated by the auditors in a limited review. If you add all the liabilities of UB Holdings - Rs 7,500 crore due to the bankers, Rs 4,500 crore as salaries and the creditors payable- it comes to Rs 12,000-12,500 crore.