State-owned United Bank of India has become the first of the 17 lenders to publicly admit that it no longer expects to recover its dues from the beleaguered Kingfisher Airlines.
Interestingly, the Kolkata-based lender was the first bank to attempt to get Vijay Mallya, the chairman of Kingfisher Airlines, tagged as a wilful defaulter.
Mallya and UB Group, however, challenged this tag in the court.
The lenders have so far been able to recover just about Rs 1,000 crore from Kingfisher Airlines out of their over Rs 7,500 crore exposure (excluding penal interest), since they recalled the loan in February 2013, by selling pledged shares in group companies.
“Now, nothing is happening on the Kingfisher account and we are not getting any amount. We may ultimately get a few more crores by selling that building (Kingfisher House in Mumbai) and other collaterals,” United Bank of India Managing Director and CEO P Srinivas told PTI.
“But when you look at the total loan amount, what we may ultimately recover is just equivalent to interest component. In last two years, we lost interest payment and we may be able to recover that much and the principal amount we may not,” he said.
The bank had extended Rs 400 crore in a consortium lending when Kingfisher Airlines was still flying. The airline was grounded in October 2012.
The airline, owned by flamboyant Vijay Mallya, owes Rs 6,500 crore now (after around Rs 1,000 crore recovery) to a 17-lender consortium led by State Bank of India, which has an exposure of Rs 1,600 crore to the grounded airline.
Other banks that have exposure to the airline include Punjab National Bank and IDBI Bank (Rs 800 crore each), Bank of India (Rs 650 crore), Bank of Baroda (Rs 550 crore), Central Bank of India (Rs 410 crore).
Besides, UCO Bank has to recover Rs 320 crore, Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).
This February, SBI had taken over the possession of the airline’s prime property Kingfisher House, near the city airport, after a protracted court battle.
Over 17,000 sqft-property at Vile Parle near the domestic terminal is valued at around Rs 100 crore.
When the airline was flying smoothly, it had its loans restructured twice in three years, the latest being in November 2011.
The problems of the lenders get further confounded from the fact that they have practically got nothing substantial in collaterals. While the company pledged the Brand Kingfisher, valued at Rs 4,000 crore then, as collateral, the other collaterals include the Kingfisher Villa in Goa valued at around Rs 30 crore and the shares of UB group companies.
It could be noted that last September, United Bank had become the first lender to declare Kingfisher Airlines, Mallya and three other directors as wilful defaulters.
The three other directors were Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly.
However, later in December a three-judge bench of the Calcutta High Court set aside the single-bench decision that allowed United Bank to tag them as wilful defaulters, on technical grounds.
SBI, PNB, and IDBI Bank had also declared them as wilful defaulters but have been challenged in various high courts by the company.
The airline hasn’t flown since October 2012 and had accumulated losses of Rs 16,023 crore, while its networth fell to a negative Rs 12,919 crore at end of March 2013.
Launched in May 2005 Kingfisher Airlines never made any profit.