Banks hold deliberations on Kingfisher crisis

Bankers of Kingfisher, who met in Mumbai on Saturday, are expected to have more rounds of deliberations on its debt restructuring. Kingfisher is looking for additional working capital to tide over its severe cash crunch

New Delhi: Beleaguered Kingfisher Airlines would have to wait some more time for relief as its lenders continued deliberations Sunday towards resolving the crisis, a day after prime minister Manmohan Singh said the government would explore ways to help the private carrier, reports PTI.

The cash-strapped airline cancelled 40 more flights on Sunday taking the total number of cancelled services to over 250 flights in one week putting thousands of passengers to inconvenience.

Bankers of Kingfisher, who met in Mumbai on Saturday, are holding more rounds of talks on its debt restructuring.

Kingfisher is looking for additional working capital to tide over its severe cash crunch.

Kingfisher has approached lender-banks for a reappraisal of working capital requirements following a surge in price of jet fuel in recent months.

Civil aviation minister Vayalar Ravi has ruled out any bailout package for the airlines but said efforts would be made to help the ailing aviation industry.

Asked whether the government had decided on allowing foreign direct investment (FDI) by foreign airlines in India, Mr Ravi told reporters “it is not a matter to be decided in a day. The proposal may come and then it will be considered”. Kingfisher promoter Vijay Mallya is making a strong pitch for allowing foreign airlines to pick up stakes in Indian carriers.

Mr Ravi, who is leaving for Bahrain on a three-day visit from on Monday, said he hasn’t yet met the prime minister on problems faced by Kingfisher and the aviation industry.

In a tweet, Mr Mallya said foreign governments go “out of the way” to support airlines but a leading industrialist and Bajaj Auto chief Rahul Bajaj said the private sector should not be bailed out by the government and “those who die must die”.

Opposition parties like the BJP and CPI (M) have also opposed any government bailout for the private airline.

The prime minister, while returning from the Maldives, told reporters “we will explore ways and means in which the airlines can be helped”.

At the same time, he said private airlines should be managed efficiently, “but if they do get into difficulties, we have to find ways and means to help them get out of the process.” 

Bankers of Kingfisher, who met in Mumbai on Saturday, are expected to have more rounds of deliberations on its debt restructuring. Kingfisher is looking for additional working capital to tide over its severe cash crunch.

It approached lender-banks for a reappraisal of working capital requirements following a surge in price of fuel in recent months.

Meanwhile, industry sources said the 13-bank consortium, led by State Bank of India that has lent to Kingfisher, are not yet ready to provide a bailout package for the debt-ridden company.

After the first round of meeting, the banks have asked the airline promoters to put more equity into the venture and disclose additional financial details to them.

A core bankers’ committee has also been set up to vet the additional financial details to be provided by the airline management over the next few days, the sources said.

The bank representatives would meet their respective managements to take a call on the future course of action, the sources said.

Besides SBI, the consortium includes ICICI Bank, IDBI Bank, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore.

Together, these banks now hold a 23.4% stake in the airlines and have an exposure of over Rs7,700 crore.

ICICI chief Chanda Kochhar said her bank’s exposure in the troubled airline was very less and there were no overdues.

The airline has suffered a loss of Rs1,027 crore in 2010-11 and has a mounting debt of Rs7057.08 crore.

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COMMENTS

SANJAY

5 years ago

let vijay mallya use his own billion dollars to save it why he is asking our tax money ,He has Around more then Rs 22,000 Crore (2,20,000 million), why he wants our money now ,SBI has suffered loss he is ruining SBI also , he compelled them to buy shares at premium at rs 180 where as it share price was only Rs 19.89 but why due to the the influence , and pressure of Vijay as he is MP too , loans were converted into share of rs 190 each where as share price was only 19 , most of intrest was waived, and % was lowered much , why such prev ledges to king fisher that too from common man banks and bailout from common man tax money , so that Vijay mallya could spend for night parties , yacht ,women , calenders , for his extravagant luxury from common man money and bank which he common man from village to cities depend upon , We again will pay prices for Vijays luxury , We can Bailout for Vijay mallyas Luxury ,parties and dont want to ruin our bank of 143 crores because of mallya why r they spending on him so much And no bailout for common people they r left on their own , increase in fuel prices first bailout common people Pranab told while increasing oil price that hard steps r to be taken then why not for kingfisher ,let them face on there own ,if Govt gives bailout it means the Govt is only for corporate s not for common people ultra luxury house, his son can f*** around girls, he can own expensive horses, has time to go to parties He is building 30 floor opulant high rise in bangalore, wants to buy Brindavan hotel, raze it and build , Father-son recently spent Rs.16 crore to buy a flat in mumbai for their keep Deepika. How do these people drum up the concience to spend so much when in debt?
let us give our hard-earned taxes to Kingfisher... In any case we do not get proper returns of the services promised in lieu of these taxes... The street lights still don't function properly nor are water connections, education system or health systems, what they should be... Atleast all of Indians will be proud to see our taxes put to good use... Government you have our permission... BUT bail me out too... I have no money left to pay for petrol for my scooter...

http://www.reuters.com/article/2011/11/1...


http://www.moneylife.in/article/why-gove...

State-run banks speed up recovery efforts as NPAs pile up

Gross NPAs of listed banks crossed Rs1 trillion by the end of the September quarter, a full 33% higher than a year ago, on the back of a hardening interest rate regime, slackening growth in some sectors like steel and mining, along with system recognition of bad assets

Mumbai: Following a steep rise in bad assets in the past two quarters, public sector banks are devising various ways to ramp up the recovery in the rest of the fiscal, such as setting up special recovery cells and aggressive follow-up of sticky accounts, reports PTI.

Some banks are even mulling offloading some of the non-performing assets (NPAs) to asset reconstruction companies in the fourth quarter, to clean up the balance sheets.

“We have a high focus on recovery. We have instructed teams of general managers to work towards this. In some cases, we are trying to recover the loan amounts through compromise settlements and one-time settlement schemes,” Indian Overseas Bank chairman and managing director M Narendra told PTI.

The Chennai-based public sector lender, which recovered around Rs600 crore in the first half, aims to recover around Rs850 crore in the second half, the chairman said, adding that bank will open ‘asset recovery branches’ soon.

Gross NPAs of listed banks crossed Rs1 trillion by the end of the September quarter, a full 33% higher than a year ago, on the back of a hardening interest rate regime, slackening growth in some sectors like steel and mining, along with system recognition of bad assets.

Since March 2010, the Reserve Bank of India (RBI) has upped short term interest rates by 525 basis points to 8.5%.

Most of the incremental addition of NPAs has happened in public sector banks, which control 75% of the system.

“Due to system recognition, the flexibility of classifying NPAs is no longer there. So, we start following up a sticky account after 60 days in case of possible defaults,” Bangalore-based state-run lender Vijaya Bank's executive director, Subhalakshmi Panse, pointed out.

A standard asset turns a non-performing one if the borrower doesn’t service the loan for 90 days together.

Ms Panse also said a special department is taking care of the bank’s recovery efforts now.

Vijaya Bank had a cash recovery of Rs354 crore in the first half, while it upgraded Rs890 crore worth of portfolio during the same period.

Referring to this, a top bank official of IDBI Bank said though his bank can’t give a recovery target for the second half, it is looking at recovery on case to case basis.

“Our approach is case to case basis. While some of them are restructured, some are settled though compromise and in others we have to take legal route,” IDBI Bank's executive director Rajkumar Bansal said.

Bankers also said they would take a call by December end whether to offload some of the bad assets to asset reconstruction companies (ARCs).

“We had offloaded around Rs330 crore of bad assets last financial year to ARCs. Going forward, we will take a call about this,” Mr Narendra of IOB said.

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Investing locally

For successful investing it is necessary to realise, that any country where the government protections are so bad that their own citizens are leaving, there is no place for foreigners to be going the other way

To pick a good restaurant the expression goes, find a place with a full parking lot or a line out the door. This is also true of investing. The proven concept of momentum is always a good way to make money. Finding a hot stock that everyone wants and then going with the flow for a short time is an excellent strategy. It is also wise to ask the locals. They invariably know the best places. This is true for investing in countries as well. Sadly no one does it.

 Most investors believe the BRIC (Brazil, Russia, India and China) countries are great places to invest. There are no less than 340 BRIC investment funds sold in different markets around the world. Although in the past six months these funds have fallen about 15%, in the two years prior to April 2011, these funds have increased over 100%. This is supposed to be evidence of the vibrant growth of emerging markets until you contrast it to the US market which increased 75%.

 Still if we look at the turbulence in Europe, the BRIC countries do seem to be an attractive place to invest in the long-term. Economists and analysts have other good reasons. Certainly the European sovereign debt crisis is an excellent example that the developed world has too much debt. The second reason is that the developed world is too old. There are too many retirees for each worker. Third, the developed world has too few natural resources. These are all good reasons, but they miss the most important ingredient of economic growth. It is not important that economists believe in it. For the forecasts to be accurate, the local people have to believe in them. In places like Russia and China the locals don’t.

 In Russia many people just want to leave. According to a recent survey the number of people, mostly young people, thinking of leaving has risen to 44%.The well-educated readers of the Novaya Gazeta, a newspaper famous for its investigative coverage, were even more adamant about getting out, 62% wanted to go. For good reason, it takes 10 to 20 years to buy a flat and five years to buy a car. There are no chances for promotion. It's very hard to set up your own business and loans cost 20% to 30% a year. A half a million Russian citizens have moved to China including businessmen, students and even pensioners.

 It is not just the young. The rich want out too. The price for high-end London real estate in September of 2011 was 4.5% higher than the last price peak reached in March 2008 due to purchases by wealthy Russians. Cypriot banks have a tonnes of off shore Russian money which they sadly invested in Greek debt. So much so that Moscow is negotiating a 2.5 billion euro loan to Cyprus to shore up its banking system.

 But it is not just the Russians. The Chinese and their money are leaving too. According to a real estate agent of expensive international real estate, “The primary motivation for Chinese buyers is to export wealth out of the country… They prefer luxury properties because they can transfer large amounts in one go.”  According to a survey taken by the Bank of China about 60% of rich Chinese people, wealth in excess of $1 million, have already begun the process of emigrating or are considering doing so. They cannot even keep the corrupt officials. They have exported an astonishing $123 billion over the last 10 years.

The reason is simple, poor governance. China is plagued with institutionalised corruption that infects every part of society. The food is often poisoned. Doctors have to be bribed to get good treatment. According to one mom, “Nine out of ten of my friends complain that they have to bribe their children’s teachers or schools in order to get proper or better education”. The real problem is the lack of any protections for rights, both human and property. In China there is no security for wealth or possessions. They can be taken away at any time.  

The leaders of Russia and China have powerful security services. They routinely spy on all aspects of their citizen’s lives. One would think that equipped with this power they could crack down on corruption. They can’t, for the simple reason that they would be arresting themselves.

What these leaders along with western economists, investors, and commentators do not understand is the economic cost. If your best and brightest are heading toward the exits in droves, they will take with them capital and expertise necessary for economic growth. For successful investing it is necessary to realise, that any country where the government protections are so bad that their own citizens are leaving, there is no place for foreigners to be going the other way.

(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected]).

 

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