Oct. 20: Banks, which have an exposure of over Rs 13,000 crore to Kingfisher Airlines, are likely to feel the heat of the DGCA decision to suspend the licence of the Mallya airline.
Kingfisher has been saddled with a loss of Rs 8,000 crore and a debt of another over Rs 7,524 crore, a large part of which has not been serviced since January.
“Recovery of loan extended to Kingfisher seems uncertain… a large part has to be written off. Some of the debt can be recovered from the collateral guarantee given by the UB Group, but that will take years,” an asset restructuring analyst with an accounting firm said.
Around 17 banks, led by the State Bank of India, have an exposure of over Rs 7,500 crore to the airline. In addition, the lenders together hold around a 23 per cent stake in the airline after they restructured loans worth Rs 6,500 crore into equity in March.
Lenders such as the SBI said recovery of loans through sale of assets was the last option.
“We are concerned as we have no control over these developments. The last thing we bankers want is a complete shutdown of the airline, as we want the airline to resume operations and repay our money,” S.Vishwanathan, managing director (mid-corporates) of SBI, told PTI.
According to Vishwanathan, “There are three options for the airline and the banks. First, the airline restarts working and then starts repaying us; second, a new investor comes and we finance him or he repays our debt and runs it on his own; and finally, the airline is completely shut down, in which case we will have to look at recovery measures.”
Kapil Kaul, aviation analyst with the Centre of Asia Pacific Aviation (Capa), said, “Major banks, which finance aircraft, are upset with the fact that our regulatory structure is not aligned to international standards. So, most of the companies are facing problems in taking the aircraft out. It will have a huge impact on banks, staff, leasing companies and vendors.”