The low-cost airline‘s operations came to a standstill on Wednesday after oil marketing companies did not supply jet fuel due to overdues.
Just because a person is in intensive critical unit (ICU) it doesn’t mean everyone around should start discussing his death, says N Kamakodi, managing director and chief executive officer, City Union Bank in context to the current spate of negative events surrounding SpiceJet.
The low-cost airline’s operations came to a standstill on Wednesday after oil marketing companies did not supply jet fuel due to overdues.
But that is not worrying Kamakodi who is a banker to the airline company as he is comfortable with the exposure the bank has.
“We have been working with the promoters- the Maran family- for the past 20 years. We are their bankers for their other businesses too and hence, are confident about them. So, I am not reading too much into the current situation,” he adds.
Below is the verbatim transcript of N Kamakodi's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Ekta: There have been multiple different statements which have been coming out with regards to lenders and their association with SpiceJet at this point in time. The latest that we had is one of the government officials saying that banks can lend to SpiceJet as per their internal norms. Yesterday we had some statement saying that banks can lend up to Rs 600 crore with a promoter guarantee. Can you put things into perspective, have you heard from the government at all in terms of any lending norms to SpiceJet and also have you heard from SpiceJet directly?
A: Firstly, we have not received any communication from the government to go for extra lending. Coming to the SpiceJet per se, we are in constant touch but they have not made any request to us for fresh issue of any loans as of now. We are comfortable with whatever exposure we have taken now and we are continuously monitoring the situation and taking calls from there.
Anuj: As of now is there any overdue from the aviation company right now at this point of time, you have any cause of concern or that still hasn’t come yet?
A: There are some delays as we discussed it in the previous conversation last week and it is in special monitoring account but beyond that this is a normal practice but we don’t have any alarming situation so far at the SpiceJet and we don’t anticipate any major problem from that and we are in continuous dialogue with the management of the SpiceJet.
Ekta: Can you tell us what the management of SpiceJet is telling you in terms of the lenders, what has your communication been with the company?
A: The problem started about three-four quarters back when the losses started and we have been in constant touch and they were trying to go for few capital infusions with the few other global airlines, which did not materialise as per their expectations and sudden crippling in terms of you cannot book tickets for more than 30 days and all created a panic, which created some unexpected jitters.
Apart from that, there are issues as everybody knows that all information was in the public domain and there have been losses which are mounting and the promoters have been continuously pumping and they were not depending too much on the banks for extra funding and the bank exposure also is getting repeatedly compared with the few other airlines’ failures. The total exposure for the banking system is only a fraction and we don’t anticipate our -- we know there is a problem, there are delays, there are issues but we are not reading too much into that and we are confident that things will get better as we move from here.
Ekta: Can you give us a sense that if in case SpiceJet comes to you and asks you for incremental working capital loans, will you be confident to lend to SpiceJet just so that they possibly in terms of helping resurge their operations at this point in time?
A: It is basically an hypothetical question -- once we receive any request, one thing that we have to clearly tell is that we are very comfortable with the promoter and the group. They have been our customers for over two decades and we have been bankers for their other activities also and they are also one of the big depositors for us through their other companies. That is why we are having hopes and confidence on the promoters and all decisions will be taken based on the regulatory and other norms.
Anuj: What is your sense looking at the situation, what is your gut feeling, do you think it is ending the same way as Kingfisher did or do you think things will be different?
A: As I told you, there is a problem, the person is suffering from heart attack and he is in ICU but it is too premature and it is not correct for everyone to think about any unexpected eventuality. Yes, there are issues but the management has got sufficient resources and wherewithal and with the help of all other stakeholders, they should be in a position to come out of the issues and we are also hoping and we are also confident about the capability of the management and the promoter.
Ekta: What is the sort of collateral that you have at this point in time versus your exposure to SpiceJet?
A: Basically most of our exposure to all the companies are backed up by the immovable collateral with the wide variety of margins and this particular exposure is also supported by the immovable collateral with good amount of margin.
Ekta: Does this situation or maybe the uncertainty that SpiceJet is throwing up make you more cautious in terms of lending to other aviation players at all?
A: We don’t have any other aviation exposure and we are not expert into that. We don’t lend for any aviation companies. This particular exposure we took mainly on the connection we have with the group companies for over two decades.
Another point is that the total problem that you anticipate here is only the fraction of the problems -- for example, if you compare the banking exposure by all the banks put together for SpiceJet, it is only fraction of the total bank exposure taken for other aviation company, which you are comparing.
The magnitude of the problem was smaller but it got aggravated only particularly when the booking could not be done beyond a month. I think once that restriction has been relieved, it should be getting to the path with the commitment from all stakeholders and we want to see SpiceJet coming back to the normalcy and we all hope for that.