Companies & Sectors
Banks reject Kingfisher Airlines’ loan demand; SBI Caps to make revival plan

This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs6,500 crore worth loan was recast

Mumbai: Turning down a request for a Rs200 crore working loan by Kingfisher Airlines, the State Bank of India (SBI)-led lenders consortium on Thursday asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next two to three weeks, reports PTI.

 

Kingfisher chairman Vijay Mallya made a presentation in a meeting with lenders at the Bangalore headquarters on Thursday, the first such meeting after the government’s policy decision allowing foreign airlines to invest in domestic carriers.

 

According to lenders, Mr Mallya did not offer any concrete revival plan as he could not commit on equity infusion by promoters.

 

An official from a public sector bank said the lenders turned down a request from Mr Mallya for an immediate working capital loan of Rs200 crore. Since this January, the airline has not been servicing its Rs7,000 crore bank debt.

 

The official said that the lenders have asked SBI Capitals to make a new revival plan, the third one, for the airline in the next two to three weeks.

 

Though the company suggested a second debt restructuring, nothing was finalised, a source said.

 

When asked whether banks are open to a second corporate debt restructuring (CDR) in two years, the source said that will depend on the SBI Caps proposal.

 

The meeting comes amidst talks of the airline talking to prospective foreign airlines to offload its stake.

 

At the last meeting on 3rd September in Mumbai, the bankers had demanded that Mr Mallya himself should make the revival plan and today's meeting is the result of that.

 

This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs6,500 crore worth loan was recast. Earlier this month, SBI Caps was asked to make another revival plan.

 

Mr Mallya also proposed his interest in replacing the already pledged Goa Villa with another property, the source said, adding but the bankers did not take a call on that.

 

Along with the Goa Villa, the company has pledged the Kingfisher brand worth around Rs4,000 crore and the Kingfisher house in Mumbai with the lenders.

 

The meeting also comes a day after the country's largest liquor maker by volumes United Spirits, said promoter Mr Mallya was in talks with Diageo to sell his personal stake in the company to the British liquor major.

 

The lenders and Kingfisher management would meet in the third week of October again.

 

Meanwhile, industry sources said potential investors in Kingfisher are likely to be private equity players and not airlines.

 

Banks together have an exposure of nearly Rs7,000 crore in the airline and the loans have all become non-performing assets since January. SBI has an exposure of Rs1,500 crore to Kingfisher Airlines.

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COMMENTS

nagesh kini

5 years ago

When KFA blatantly goes back on its words to its employees, banks, MIAL and other vendors by throwing round false promises, and not bringing in fresh promoters' equity infusion, with what face does it come out with fresh demands for advances?
The airline ought to be put on the block for an eligible suitor.

SEB reforms still mean little for the thermal power sector

Oversupply in the thermal power sector means we can expect margins and return ratios to trend downwards. Espirito Santo Securities recommends ‘sell’ on shares of BHEL, Thermax and BGR Energy—key power equipment suppliers

In order to revive the SEBs (State Electricity Boards), the government has initiated large-scale reforms in the power sector, including the restructuring of loans taken by the SEBs. But the expected revival in the power sector is not good news for the thermal power sector, as the risk/reward for investment in thermal capacity is still unfavourable, according to an Espirito Santo Securities insight report. Several near-term concerns remain including Coal India’s plans to import coal and not go in for increase in production. (Please refer Table on the agreed penalty levels for Coal India).
 

As coal is the most important input in the thermal power plant, aggregate coal production for the next decade has been planned for and debated for some time now. It is now clear that any plans implemented towards increased mining of coal within the country would only yield results in the long haul. This is bound to lead to muted order inflow for the next few years for BHEL, Thermax and BGR Energy. As Coal India is freezing capacity for fuel supply, fresh ordering, especially from the private sector, will be elusive in the near term. (Please refer to the Table on the demand-supply gap widening for Coal India).

Consequently, there is an oversupply position in the thermal power sector, in spite of power shortages for the general public in the country. We can expect margins and return ratios to trend downwards, according to Espirito Santo Securities. It is a double whammy for companies now with no visibility of orders on one hand and excess industry capacity on the other. Boiler capacity at 37GW and turbine capacity at 36GW is much higher than industry wide ordering at 25GW, even assuming a revival in orders from FY15 onwards. This oversupply in the industry will keep the long-term profitability of the companies under pressure.

 

The industry oversupply situation would also mean that every incremental order would be bid for aggressively; leading to downward trends for EBITDA margins and return ratios for the power equipment suppliers. Espirito Santo Securities initiates coverage on BHEL, BGR Energy and Thermax with ‘Sell’ recommendations in the equity market (Please refer Table on the Valuation Snapshot for these three companies in the thermal power sector).

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Religare to sell 49% stake in MF arm for around Rs1,000 crore

Without disclosing the deal value, Religare Enterprises said in a statement that Atlanta-based Invesco has entered into a definitive agreement to acquire 49% interest in RAMC

 
Mumbai: Financial services major Religare group is selling 49% stake in its mutual fund arm Religare Asset Management Company (RAMC)to US-based investment management firm Invesco for estimated Rs1,000 crore, reports PTI.
 
Without disclosing the deal value, Religare Enterprises said in a statement that Atlanta-based Invesco has entered into a definitive agreement to acquire 49% interest in RAMC.
 
While the companies did not mention the deal value, sources privy to the transaction said that it could be in the range of about Rs1,000 crore—translating into about 6.5%-7% of the total asset under management of RAMC.
 
RAMC is one of the top 15 asset management companies in India, with combined (onshore and offshore advisory) assets under management of over $2.6 billion (Rs14,600 crore) as of 31 August 2012, and is present in 53 cities across India.
 
Invesco has a presence in India through its affiliate WL Ross & Co and also operates an enterprise centre in Hyderabad with a headcount of more than 600 staff.
 
“This addition will enhance Invesco?s presence in an important and growing market, while providing Religare’s clients access to our broad range of investment solutions,” Invesco President and CEO Martin L Flanagan said.
 
“Our agreement with Religare will expand comprehensive range of investment capabilities Invesco provides to our retail and institutional clients around the world, and further position both firms for long-term success,” he added.
 
RAMC began operations in late 2008 has recorded almost a four-fold increase in its combined assets under management in the last four years.
 
It has also established its Portfolio Management Services (PMS) and Offshore advisory platforms in the last two years and achieved financial profitability in its third full year of operations (year ending March 2012).
 
Commenting on the deal, Religare Enterprises Group CEO Shachindra Nath said: “We are very pleased to bring a global asset manager of Invesco’s repute to India as a partner in our asset management business.
 
“With a good three-year performance track record and solid revenue growth, we believe that both our retail and offshore businesses would be propelled to the next level of their growth journey,” he said.
 
The joint venture, to be called Religare Invesco Asset Management Company, will be headed by Saurabh Nanavati (CEO, RAMC) along with the existing management team.
 
The transaction is subject to regulatory approvals and JP Morgan acted as the exclusive financial advisor to Religare.
 
Besides asset management, Religare group is present in life and health insurance, lending, broking, investment banking, and wealth management businesses.
 

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