As Vijay Mallya and his son Siddharth sit with a Rs 21 crore purse and seven cricketers he can sell to make some money in the IPL auction, India's public sector banks are struggling to recover even a fraction of their Rs 7000-crore loans from Mallya's grounded Kingfisher Airlines.
As Vijay Mallya and his son Siddharth sit with a Rs 21 crore purse and seven cricketers he can sell to make some money in the IPL auction, India's public sector banks are struggling to recover even a fraction of their Rs 7000-crore loans from Mallya's grounded Kingfisher Airlines.
Documents, forensic reports and accounts of people from across the world studied by dna reveal that members of the 17-bank consortium of lenders led by SBI may never be able to recover the money loaned to Mallya's airline.
SBI-Kingfisher tale
The State Bank of India (SBI), the major lender to Mallya's airline, till now has managed to recover only Rs 155 crore out of the Rs 1,623 crore due from it. dna has learnt from official SBI sources that the value of Kingfisher Airlines pledged to the bank has now plummeted from Rs 4,000 crore to Rs 6 crore! SBI is unable to find a single buyer for the 'Kingfisher' trademarks. And Kingfisher Airlines has told Indian courts that it is not in a position to payback its debts.
According to the hypothecation deed signed between SBI and Kingfisher Airlines on August 10, 2010, SBI was given ownership of all trademarks and goodwill if Kingfisher Airlines failed to repay its debts.
These included Fly Kingfisher (label mark & word), Flying Models, Fly The Good Times, Funliner & Kingfisher (label mark). In 2009, global consultancy firm Grant & Thronton valued Kingfisher trademarks at Rs 4,111 crore or roughly $1 billion. In 2012, when the airline's licence was suspended by India's aviation regulator Director General of Civil Aviation (DGCA), Kingfisher Airlines valued itself at Rs 3,008 crore. The current value of the trademarks now stands at a mere Rs 6 crore! "We have put it up for sale. But have not received any satisfactory responses till now," according to official bank sources.
Year Brand value of Kingfisher Airlines Money owed to banks (estimated)
2009: Rs 4,111 crore : Rs 4,000 crore
2012: Rs 3,008 crore : Rs 7,000 crore
2014: Rs 6 crore : Rs 7,000 crore
The role of some banks is also quite suspicious. One of the banks under the radar of the CBI for its loans to Kingfisher Airlines is IDBI. CBI sources reveal that IDBI had extended loans to Kingfisher despite being warned by some board members not to do so. The result is that the bank has ended up with bad debts of Rs 700 crore. Curiously, IDBI gave the loan to Kingfisher after being pledged the airline's now 'junk' trademarks worth a mere Rs 6 crore!
Among the medium-sized banks, Bank of India is owed Rs 308 crore. The bank was mortgaged all the current assets of the airline. It included items like air conditioners, tractors and monetarily unsubstantial items like folding chairs. The bank has been struggling to recover even a fraction of its loan from the sale of Kingfisher's bag of random goodies. How could a bank give over Rs 300 crore after being pledged office stationary like boarding pass printers & folding chairs remains a mystery. BOI did not respond to dna's questions.
Sumanto Bhattacharya, spokesperson of UB Group, denies manipulating the banks, "There is no question of any deliberate undervaluation by Kingfisher Airlines Ltd as the banks themselves had conducted their own due diligence including the security available and also satisfied themselves about the viability of Kingfisher Airlines Ltd before undertaking the debt restructuring."
Property given as bank guarantee
Documents accessed by dna show that Mallya had also given a personal guarantee of several other physical properties – one of which was his 'Hollywood' style Kingfisher Villa located at Candolim, Goa. SBI is awaiting a reply from the District Magistrate who has to give permission for police personnel to step in and help the bank recover the property. The application is yet to be even listed for hearing. Even if SBI gets physical possession of the property, all it will manage is to dent Mallya's ego. The value of the villa, though higher than Kingfisher trademarks, is barely a fraction of the Rs 1,600 crore that Mallya owes SBI.
Another one of 'irrecoverable' properties was Kingfisher House, measuring over 17,000 square feet in Mumbai's suburban Andheri locality, which was given as a personal guarantee by Mallya. The property was originally hypothecated to Punjab National Bank in 2010 and Kingfisher Airlines owes the bank Rs 290 crore. Kingfisher Airlines refused to part with the property and the matter is currently listed in the Chief Metropolitan Court in Mumbai after SBI filed an application under the securitisation and reconstruction of financial assets and enforcement of security interest (SARFAESI) Act, 2002.
Sumanto Bhattacharya, spokesperson of the UB Group, denies playing hardball, "Kingfisher House is owned by Kingfisher Airlines Ltd and not Mallya. Kingfisher Villa is owned by United Breweries (Holdings) Ltd and not Mallya. In any case, Kingfisher Airlines Ltd is a party defendant to proceedings filed in the Goa courts by United Spirits Ltd in respect of Kingfisher Villa and since the matter being sub-judice it won't be appropriate to comment on it."
Other banks caught in Kingfisher's loan trap
Perhaps more curious is the case of Indian Overseas Bank. The airline owes IOB a sum of Rs 108 crore for which it had mortgaged two helicopters in 2008. IOB did not respond to dna's questions on the whereabouts of the choppers. It is believed that the Eurocopters were not in flying condition and the bank is struggling to dispose them of to recover its bad debts. IOB is now a loss-making bank having posted a Rs 516-crore loss this quarter.
There are other smaller banks in the consortium which have lent money to Kingfisher Airlines after being pledged the airline's current assets. Central Bank of India gave a term loan of Rs 350 crore on the condition that all sale proceeds and lease rents would be remitted in an escrow account with the bank. The airline was grounded within a year and the bank couldn't recover the money. Banks like Corporation Bank, State Bank of Mysore and Vijaya Bank gave loans of close to Rs 400 crore after being pledged all movable assets, movable assets and plant & machinery of the airline.
Many of the banks have reached a dead end. A realisation has dawned on them that Rs 7000 crore of public deposits they lent to Kingfisher Airlines have vanished in thin air. Chances of even recovering even a fraction of the amount seem to be fading by the day.
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