Once known as the King of the Good Times and Indian version of Richard Branson, liquor baron Vijay Mallya has now become the most wanted man for the banks, regulators and the judiciary in India as he owes no less than Rs 9000 crores to the lenders.
In 2010, Vijay Mallya’s Kingfisher Airlines was on the brink of a collapse, following which the lenders decided to give it a second lease of life. He is being held responsible for the failure of the business and delayed loan repayments.
In 2010, Mallya approached lenders, majority of whom got agreed to take the big risk of lending for the airline again. In its eight years of operations, the Kingfisher Airlines never earned profit and was grounded in 2012.
Loss, loss and loss
In March 2012, Kingfisher stopped its international operations to Europe and Asian countries in March 2012, while, the local flights were cut down to 110-125 per day with 20 planes from 340 flights earlier in order to save the money. It has been grounded since October 2012.
Kingfisher, which was once the second-largest airline in the country, witnessed a loss of Rs 2,142 crore for its quarter ending in March 2013, compared with a net loss of Rs 1,150 crores in the previous year. The accumulated losses as of March 2013 were Rs 16,023 crore.
The dues to banks, airports and others rose to over Rs 15,000 –Rs 16,000 crore, while its flyinf licences expired at the end of the year. Mallya submitted revival plans for the airlines to the aviation regulator twice, but didn’t succeed.
“We have not submitted an ambitious plan. We have submitted a holding plan," Mallya said. However the government wasn’t convinced. "The problem is in the last two to three months, he's given so many plans and he's not adhered to any of them," the then Aviation Minister Ajit Singh had said.
Panic among banks
Panic began to grip the banking industry, especially the ones that were the majority in the banking consortium. Banks were answerable to shareholders for further lending to Mallya in 2010.
In 2011, the bank consortium had converted the debt worth Rs 1,400 crore into equity at a 60% premium to the prevailing market price. On 22 June 2015, Kingfisher last traded at Rs 1.36 on the BSE.
Most banks declared Kingfisher Airlines an NPA at the end of 2011 and beginning of 2012. The major burden of the loans was on the bankc owned by the government.
Kingfisher Airlines hardly has any assets left for banks. So, the chances for banks getting their funds back from Mallya are very slim. Even if Kingfisher’s assets are sold, they will fetch only a fraction of what is at stake.
The only hope for banks is now that Mallya pays off bank loans from his personal wealth, which includes shares worth Rs 7000 crore in various companies and fixed assets. Now, it is yet to be seen whether the lenders get their money back!