Chennai-based public sector lender Indian Overseas Bank, which has exposure of Rs 120 crore (Rs 1.2 billion) to cash-strapped Kingfisher Airlines, said the account might become a non-performing asset for the bank this quarter.
Most lenders to the airline have already classified the account as an NPA. A senior bank official said if the account turned into an NPA, the bank would have to provision 15-25 per cent of the amount (Rs 120 crore) this quarter.
The bank's exposure to Kingfisher is in the form of working capital finance. Currently, the lender considers the airline's account a standard asset, though payments are due. With exposure of Rs 1,500 crore (Rs 15 billion), State Bank of India is the leader of the 17-bank consortium of lenders to Kingfisher Airlines. As of September 30, IOB's gross NPAs stood at Rs 5,930 crore (Rs 59.3 billion), against Rs 3,898 crore (Rs 38.98 billion) a year earlier. Net NPAs stood at Rs 3,378 crore (Rs 33.78 billion), compared with Rs 1,505 crore (Rs 15.05 billion)
a year ago.
Chairman and Managing Director M Narendra said the bank would now focus on recovery. He added in the quarter ended September, domestic fresh slippages stood at Rs 1,600 crore (Rs 16 billion), while international ones stood at Rs 200 crore (Rs 2 billion). Two years earlier, loans to Kingfisher Airlines were restructured under industry dispensation.
However, the airline began to default on payments and in the third and fourth quarters of the previous financial year, these loans turned into NPAs in the books of most of its lenders.
As part of a restructuring package, part of the debt (about Rs 750 crore {Rs 7.5 billion}) was converted into equity. In March 2011, Kingfisher issued about 116 million shares (of Rs 10 each) at a price of about Rs 64 per equity share. These had a lock-in period of a year.
However, the airline stock plunged, owing to which banks had to make provisions. On Monday, the Kingfisher Airlines stock closed at Rs 11.75 on the BSE, a rise of 3.07 per cent.
Chennai-based public sector lender Indian Overseas Bank, which has exposure of Rs 120 crore (Rs 1.2 billion) to cash-strapped Kingfisher Airlines, said the account might become a non-performing asset for the bank this quarter.