Lenders to Kingfisher Airlines will hold on to their equity holdings in the company, though the lock-in period ends on March 31.
Public sector banks’ executives said banks had taken a hit due to the steep fall in the value of the shares. Banks had made provisions in their books for the fall in Kingfisher stock price (it has fallen by a fourth to Rs 16 as of on Tuesday).
“Besides, even if we want to sell (the stake), who will buy it?” asked a banker.
Bankers to the Vijay Mallya-controlled airline had hammered out a debt restructuring package in November 2010 to give the firm a fresh lease of life, under which a part of the debt (about Rs 750 crore) was converted into equity. Kingfisher issued over 116 million shares (of Rs 10 each) at Rs 64.48 per equity share in March 2011. These shares carried one-year lock-in period.
The stock price has ruled well below the issue price throughout the financial year. It forced banks to make mark-to-market provisions from the first quarter (April-June 2011) for the fall in values of their stakes in the airline. On the declining share value, a senior State Bank of India official said: “It is better to have it in ICU (intensive care unit) than in the morgue.”
Bankers said the promoters seem to be working on salvaging the situation in recent weeks. Lenders will wait for a while to see what the promoters will do – bring in equity or restructure business. The official, however, did not elaborate on a timeframe. Explaining the rationale for holding on to the stake, an IDBI Bank official said: “We will not act in haste. Who will buy it and what value would we get by selling stocks of an ailing company at rock-bottom price?”
Selling stake now when the promoters are in discussion with prospective investors will be inappropriate for valuation and a bad signal to the market, said the treasury head of a public sector bank. ICICI Bank, the country’s largest private sector bank, on Monday asked Kingfisher to provide additional security for its Rs 600-crore loan after the airline’s stock hit an all-time low. “ICICI Bank, as matter of routine, requested that security be topped up or that the loan amount be adjusted suitably,” the Kingfisher Airlines spokesperson said, denying reports of loan recall or notice for sale of securities.
The airline claimed that the bank’s request was routine.
