Kingfisher lenders plan to sell R6,500-cr USL shares

Written by Ashish Rukhaiyar | Vishwanath Nair | Mumbai | Updated: Feb 14 2013, 07:32am hrs
Bankers say they will sell R6,500 crore worth of shares of United Spirits (USL) to recover Kingfisher Airlines (KFA) dues.

Shyamal Acharya, deputy managing director, State Bank of India, said on Wednesday that the value of total securities and guarantees held by the consortium of lenders, exceeds the exposure of R7,000 crore they have to KFA. These are low-hanging fruit the shares of USL and those of Mangalore Chemicals, Acharya told a TV channel. SBI is confident the recovery will begin within the current quarter, Acharya said.

Since the majority of the consortium members have declared KFA as a non-performing asset (NPA), the recovered amount will come into a pool. The amount would be shared among consortium members depending on their exposure, Acharya explained, adding SBI has a 25% share in the consortium and would, therefore, be entitled to 25% of the recovered amount.

As security, bankers hold 3.5 crore shares of United Spirits, which were valued at around R6,518 crore as per the closing price of R1862.45 on the BSE on Wednesday. This amounts to nearly 90% of bank exposure to KFA.

According to latest data, promoter entities of the airline that has been grounded since October last year have pledged more than 90% of shares with various banks and non-banking financial companies (NBFCs).

According to stock exchange data, while promoters hold around 36% in the company, 90.10% is pledged with various entities. Two promoter entities United Breweries Holdings (UBH) and Kingfisher Finvest India have pledged their entire collective holding of around 25% in the airline. Banks also have a corporate guarantee from UBH and a personal guarantee from chairman Vijay Mallya.

However, bankers feel recovery may be a long-drawn process. Among the 17 banks in the lenders' consortium, the core group including SBI, Bank of India (BoI), Bank of Baroda (BoB), Punjab National Bank (PNB) and IDBI Bank met on Wednesday to decide the course of recovery but could not reach a conclusion.

SBI has the highest exposure of around R1,600 crore, followed by Punjab National Bank with R800 crore, IDBI Bank R800 crore, Bank of India R650 crore and Bank of Baroda at R550 crore.

According to an official at a public sector bank, lenders do not need any approvals to sell the shares pledged to them and can do that immediately, if they feel so.

Once the banks send out a recall notice to a borrower, they can either file appeals in the court or in debt recovery tribunals or come to the banks with a settlement proposal. If the company takes the legal route it is possible that the recovery may take a significant amount of time, the banker said.

On Tuesday, representatives from the consortium of lenders had met with the airline management and had come to the conclusion that they will not be giving KFA any more time.

The consortium felt that this is a dead end and it is time for terminating the relationship, Acharya had said after meeting with the management.