Kingfisher's management rejig won't solve crisis: Experts

Kingfisher is fast becoming India's version of too big to fail. The company hasn't been able to pay its staff, taxes and now can't pay for fuel. But it's not just Vijay Mallya's money that's going down. Banks have lent over nearly Rs 7,000 crore in loans and hold a chunk of the company shares.

CNBC-TV18's special show Indianomics discusses if is it time banks walk into the boardroom and force a new management? Panelists include Former SBI Chairman, AK Purwar, Ashvin Parekh, partner of E&Y, and B D Narang, Former Chairman and Managing Director of Oriental Bank. But before that an outline of the problem from Gopika
Critics and columnists are writing Kingfisher's obituary. The company seems to be hurtling towards its end.  Lenders are not ready to put in good money. Already Rs 7,000 crore of banks' money is stuck with Kingfisher. 8 out of 18 lenders have classified the account as non-performing loan in the third quarter.
Lenders are now insisting that the company clear off all the interest dues before they even consider disbursing fresh loans. Vijay Mallya may have committed to repay all over dues by March end, but how will Mallya raise this money? According to Veritas investment research firm, Mallya has very few options available both within Kingfisher and outside.
The cash starved airline company reported a loss of Rs 1700 crore for the 9 month period as against Rs 1006 crore in the same period last year. In Q3 alone, the losses amounted to Rs 444 crores.
The company does not have any assets to raise funds as it is already pledged with banks. Among group companies, Mallya could look at selling the remaining 55 lakh treasury shares in United Spirits. But that again will be difficult as it will dilute the promoter shareholding in the company which currently stands only at 28%.
Vijay Mallya is desperately looking for equity and is in serious talks with some big investors, meanwhile lenders who have not classified Kingfisher as non performing assets could also throw in a lifeline. Here is an edited transcript interview. Also watch the accompanying videos. Q: First let me get the legal issue out of the way. Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and other DRT notifications is it legally possible for the bankers to walk into the boardroom and say, I want another manager? Parekh: There are two parts to this; when the MS Verma Committee was constituted which in fact created some kind of a blueprint for SARFAESI Act, at that point in time five methods of asset reconstruction were actually evaluated and different methods under which asset reconstruction can be carried out by the lenders, by banking companies was envisaged.
When the SARFAESI Act was enacted it very clearly gave the authority to the regulator that is the RBI to work out the regulations associated with each method of asset reconstruction.
Now change of management according to both the SARFAESI Act was envisaged and later on when RBI clarified on this position, has several other legal connotations. There can be recourse available to the management, judiciary intervention and a forced change in the management.
After keeping that into consideration the RBI has actually formed regulations with other methods of asset reconstruction but there is no clear regulation associated with the change of management.
If the management participates in such a programme with the lender, if the management agrees to work with the lender then of course you have a way out and it is not exactly legal. Then it is more business approach in which case the borrower readily agrees that if someone else were to run that business on his behalf there is a better chance, some order of governance can be put out but legally that