Shares of Vijay Mallya-led Kingfisher Airlines got hammered on Monday after the aviation regulator suspended its flying licence last weekend, even as the airline made a last ditch attempt to revive itself by offering up to three installments of its employees’ salary dues.
The stock fell 4.8% at R10.9 to touch the lower circuit soon after opening trade both on the Bombay Stock Exchange (BSE) and the National Stock Exchange, and industry experts said it could fall further in the coming weeks. The lower circuit prevents further trades in the stock during the day at a lower price.
“The stock price of the company is expected to only go down from here on in the given situation,” said a senior analyst with an international consultancy who did not want to be identified. “Retail investors are expected to dump the stock in the coming week unless there is a miracle.”
The Directorate General of Civil Aviation (DGCA) suspended the scheduled operator permit (SOP) of Kingfisher Airlines last weekend, following its failure to come up with a viable financial revival plan. The suspension implies an immediate halt to all bookings on the entire Kingfisher network as well as through travel agents. The DGCA had also earlier rejected the carrier’s winter schedules for flight departures.
The cash-strapped airline had on Friday extended the lockout until October 23 after negotiations with employees failed.
In a statement to the BSE Kingfisher said: “We would like to clarify that this (DGCA order) is not a cancellation but a temporary suspension which is valid only till such a time that we submit a concrete and reliable revival plan to the satisfaction of the DGCA.” The company, however, did not specify by when it would submit the plan.
A 17-bank consortium has an exposure of around R7,600 crore in the airline. The consortium expects to recover only about 10-15% of the total exposure, said a banker.
“Though there is nothing new following the DGCA suspension, we are concerned as we have no control of these developments,” said S Vishwanathan, managing director, mid-corporates, State Bank of India.
The fleet of Kingfisher — which was India's second-largest airline until a year ago but now has a market share of just 3.5%, the smallest of the country’s carriers — has been grounded since the beginning of the month. The airline currently has only 10 operational aircraft from an earlier strength of around 66 a year ago.
(with agency inputs)