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The promoters of the ailing Kingfisher Airlines (KFA) are facing the threat of being completely pushed out of the company if the entire chunk of pledged shares is sold by the banks that have already decided to initiate proceedings to recover loans amounting to Rs 7,500 crore.
According to the latest data, the promoter entities of KFA, that has been grounded since October last year, have pledged more than 90% of their shares with various banks and non-banking financial companies (NBFCs).
Stock exchange data shows that while promoters hold around 36% in the company, 90.10% of it is pledged with various entities. Two promoter entities — United Breweries (Holdings) and Kingfisher Finvest India — have pledged their entire collective holding of around 25% in the airline.
Unfortunately for the lenders, they will not be able to recover much even after selling the entire chunk of shares as the total value is pegged at only Rs 277 crore. Shares of KFA lost 5% on Wednesday to close at Rs 10.58. The shares have lost over 60% in the last one year.
Interestingly, Vijay Mallya, who holds 1.87% or 1.51 crore shares in the company, has not pledged a single share out of his direct stake. Another promoter entity — UB Overseas — also has not pledged any share out if its 1.68% stake in the airline.
Market experts, while acknowledging the fact that promoters face the risk of losing control in the company, say that any kind of fire sale of the pledged shares would take some time due to legal and other compliance issues.
“While the shares are pledged with various banks and NBFCs, there is hardly any equity value left,” says Sonam Udasi, senior vice-president and head — research, IDBI Capital. “However, since the shares are pledged with a consortium of banks, any action will happen only after a consensus is reached. The latest development could also be a pressure tactic to make the promoters act,” he added.
Late on Tuesday, the consortium of banks led by State Bank of India (SBI) said it will initiate the process of recovering Rs 7,500-crore outstanding loans as the company failed to come up with any specific revival plan. has been grounded since October 1 last after a labour unrest broke out due to non-payment of salaries.
SBI has the maximum exposure with Rs 1,600 crore, followed by Punjab National Bank with Rs 800 crore, IDBI Bank Rs 800 crore, Bank of India Rs 650 crore and Bank of Baroda Rs 550 crore. All the 17 banks have provided for their exposure to the airline and declared them as bad loans. The airline has not serviced the loan since January 2012.
While the airline is sitting on a debt of over Rs 7,500 crore in bank loans, accumulated losses and unpaid salaries, taxes, and vendor dues amount to over 10,000 crore.