Liquor baron Vijay Mallya's Rs 650-crore investment proposal to revive operations of grounded Kingfisher Airlines has piqued its lenders as the plan does not include repayment of the private carrier's existing bank debts.
The lenders of the beleaguered airlines company, which has borrowed close to Rs 7,500 crore from a consortium of 17 banks, will meet in Mumbai on January 18, to decide on the ways to recover their money.
Kingfisher Airlines has been asked to submit its repayment plan in that meeting failing which the lenders will not be shy of taking the start the process of selling assets of the company which are pledged with them, bankers told Business Standard.
"We have told the airline to start the repayment process. We are expecting some commitment from the management on the meeting which is scheduled on January 18," said a senior SBI official.
Earlier this week Mallya informed his staff that the private carrier has submitted its revival plan to the regulator Directorate General of Civil Aviation (DGCA).
It aims to restart operations by the summer of 2013 and will be infusing Rs 650 crore. The investment will be funded by the airline's parent UB Group.
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However, according to bankers, there is no mention of how the company will repay its debts in the revival plan. They also expressed doubts if this investment was enough to revive the company as its losses are estimated to be around Rs 8,000 crore.
Kingfisher Airlines, which was once the second largest carrier in the country, has lost its flying licence at the end of 2012. It has not flown since October last year and attempts to bring in new investors has not been successful so far.
While loans to Kingfisher Airlines have turned into non-performing assets for most banks, a few lenders were still optimistic that they will be able to recover money from the airlines company as early as this month. Their optimism is based on the way they have structured their loan agreement with Kingfisher Airlines separately and is not a part of the consortium.
But this did not go down very well with other lenders, especially those who have large loan exposures in the airlines.
According to a senior executive with a large public sector bank, if the private carrier decides to repay loans only to select lenders it will explore options of selling Kingfisher Airlines and its chief Mallya's real estate assets to recover money.