Mallya's stake in Kingfisher Airlines drops below 10%

On Wednesday, IDBI Trusteeship invoked and transferred pledged equity shares worth 7.31 per cent in Kingfisher Airlines to the depository account of lenders. As a result, UB Group chief Mallya’s holding in the now defunct airline has fallen to 8.55 per cent from 15.86 per cent in March.

At the beginning of this year, his stake in the airline stood at 30.14 per cent.

Following IDBI Trusteeship’s move on Wednesday, lenders to the airline have invoked all its pledged shares. About a week ago, Kolkata-based United Bank of India (UBI) had issued a wilful defaulter’s notice on Mallya, after the consortium of lenders to the airline failed to make headway in recovering dues.

FLYING LOW

• 7.31% Value of Kingfisher Airlines' shares invoked and transferred by IDBI Trusteeship to lenders depository account
• 8.55% Fall in Vijay Mallya's stake, which was at 15.86% by March-end
• 30.14% Mallya's share in the beginning of 2014

UBI has exposure of Rs 400 crore to Kingfisher Airlines, which it has classified as a non-performing asset.

According to Reserve Bank of India guidelines, banks can categorise defaulters as wilful if the borrower doesn’t repay when it has the capacity to honour the obligation, or the funds are diverted and not used for the purpose it was taken for, among others. “If a borrower is so tagged (as a wilful defaulter), it will find it difficult to obtain a loan from any bank. The borrower become ‘untouchable’ for lenders,” said a senior official of a public sector bank.

Kingfisher owes Rs 6,000 crore to a consortium of banks, led by State Bank of India (SBI). After it defaulted on the loans, the lenders have classified the loans as non-performing. The loans were restructured in 2011 and a part of the debt was converted into equity.

As a large part of the loan was unsecured, most lenders made 100 per cent provisioning on this account. At Rs 1,600 crore, SBI has the highest exposure. Recently, the bank had said it was exploring options to tag the airline as a wilful defaulter.

Banks have been recovering part of their dues by liquidating the promoter’s personal guarantee, which includes financial assets and various physical assets.

To send the right signals to such borrowers, the finance ministry has been prodding banks to improve their recovery processes and identify wilful defaulters.