Is Mallya ready with a revival plan for Kingfisher?

Lenders to Kingfisher Airlines (KFA) will meet its promoter, Vijay Mallya, and the rest of the brass on Monday, to chart a way forward for the grounded airline.

While the bankers hope the management comes with a clear plan of action for the debt-laden carrier, chances of the meeting being decisive are slim.

Fund infusion plans will top the agenda. The company management is expected to make a presentation on the issues between it and the aviation regulator, and on its detailed business plans.

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An executive with a public sector bank (PSB) based here said only middle-level executives from banks would attend. Top bank officials would meet separately at a later date, based on what happens on Monday.

There have been a series of meetings between banks and the company management but without much headway. The lenders have said they might start the recovery process if Mallya fails to give a clear plan of action.

However, the banks don't have enough collateral to initiate the process; the collateral KFA has given is just a fraction of the total debt of about Rs 7,500 crore (Rs 75 billion).

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The head of another bank said there was very little hope of revival with the current management of Kingfisher. Only the induction of a strong airline as a new partner, which would pump in money and take control over a period, might give hope for some recovery. Kingfisher has said it was in talks for selling stake to Etihad, the national airline of the United Arab Emirates.

Pratip Chaudhuri, chairman of State Bank of India (SBI), had said the airline needed infusion of at least $1 billion (Rs 5,500 crore) to make it fly again. Kingfisher has been grounded since October, following a strike of its engineers. Later, on October 20, the Directorate General of Civil Aviation suspended its flying permit.

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It was almost a year earlier when most lenders declared their loans to the airline as non-performing assets (NPAs).

Till then, the loans were treated as sub-standard loans, for which banks were required to make 15-20 per cent provision.
With no sign of revival and repayment, the account could slip into the doubtful category, adding to the provisioning from January 2013. Many banks have already made extra provisions.

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Indian Overseas Bank is the only bank still treating its exposure to Kingfisher as standard asset. With payments due for more than 90 days, the bank will declare it an NPA in the third quarter.

The credit head at a large south-based PSB said with the lack of assets in the company, the banking regulator might even ask for 100 per cent provisioning.