In a major shift from its earlier stand, the consortium of 13 banks that has a Rs 7,700-crore exposure to the bleeding Kingfisher Airlines has indicated that it could agree to provide about Rs 600 crore of additional working capital required by the carrier to tide over its financial crisis. However, the banks led by the State Bank of India (SBI) will meet shortly to decide on the riders that the airline would be required to follow.
The government is expected to move fast on allowing foreign direct investment into the cash- starved aviation sector, a move that would ease the pressure off Indian carriers.
“Once the FDI proposal is cleared, the situation of the country’s airline majors would be healthier” a government official told Hindustan Times on the condition of anonymity. “Banks are therefore not averse to providing the additional capital sought by Kingfisher.”
A chairman of a public sector bank, which has a significant exposure to Kingfisher said that an amount of over Rs 7000 crore cannot be allowed to turn non-performing. Besides, banks would be required to provide the additional capital as part of the airline’s debt restructuring exercise carried out last fiscal.
“We would naturally have strict conditions for the private carrier and banks would keep a close eye on its cash inflow,” the chairman said.
SBI has an exposure of Rs 1,410 crore to the beleaguered airline, promoted by UB Group chairman Vijay Mallya. IDBI Bank, Punjab National Bank (PNB) and Bank of India (BoI) have exposures to the tune of Rs 719 crore, Rs 702 crore and Rs 552 crore respectively to Kingfisher.
Private sector lender ICICI Bank also an exposure of Rs 430 crore to the airline.
The consortium of banks, which held around 5% stake in the airline till December last year, now holds 23.4% in the airline, thanks to last year’s debt restructuring package under which a loan amount of about Rs 7,651 crore was converted into equity at Rs 64.5 per share.
KFA’s credit card partners fidget; draw back-up plans, alternatives
Banks and credit card issuers such as American Express and ICICI Bank which have co-branded cards for its valued customers with Kingfisher, are busy drawing up back-up plans for and offering alternative value propositions. Though they have no immediate plans to pull out their co-branded cards from the market, the companies are being flooded with queries from worried cardholders.
SBI Cards — a joint venture between SBI and US conglomerate GE — too has a tie up with the airline, under which it offers free flights to its valued customers and regular credit card users. The companies, however, said they were closely monitoring the current situation and the current crisis would not dent their brand value.
“We are hoping that Kingfisher steers out of the crisis soon but we have also started working on providing alternative plans for our customers,” a senior executive of American Express told Hindustan Times.
Card holders who have won enough “reward points” could even get back cash in exchange of their accumulated reward points. Amex has already held a meeting to take stock of the situation on Friday.
A spokesman for ICICI Bank said that though customers would be provided with other equivalent benefits, there was no immediate cause to worry, ” he said.