Mon, Feb 27, 2012 - Page 10 News List

Kingfisher must raise own equity before loans: SBI


An Indian passenger make enquiries on Tuesday at the Kingfisher Airlines booking counter in the domestic airport terminal in Mumbai, India.

Photo: AFP

State Bank of India (SBI), the lead lender to Kingfisher Airlines, will not consider any fresh loans for the debt-laden carrier until it raises new equity itself, a senior executive of the state-owned bank said.

SBI is studying a viability report prepared by its investment banking arm, SBI Capital Markets, and any decision on further lending to Kingfisher will be based on that, as well as conditional on an infusion of funds into the airline, SBI deputy managing director R. Venkatachalam said in an interview from his Mumbai office on Saturday.

Desperately strapped for cash, Kingfisher stands on the brink of collapse after multiple flight cancellations and the resignation of dozens of its pilots.

Kingfisher, which has not turned a profit since it was founded in 2005 and is carrying debt of at least US$1.3 billion, has asked for 20 billion to 30 billion rupees (US$409 million to US$613 million) in loans from banks to carry out its day-to-day operations.

“Everything depends on equity infusion — how much comes in, whether that will meet the requirements. First it has to come,” Venkatachalam said.

Venkatachalam heads the mid-corporate division of the bank, which makes loans upwards of 250 million rupees to companies that have a turnover of at least 1 billion rupees.

SBI, which accounts for nearly a quarter of India’s loans and deposits, will wait for some “policy evolution” towards the aviation sector before taking any fresh exposures in airlines, he said.

The government has made some regulatory changes in the sector recently, allowing airlines to import fuel directly, which has lowered their costs, and given more leeway for private carriers to fly overseas.

However, there has been no indication that it is planning to rescue Kingfisher, even though state-run banks own about one-fifth of its equity and three-quarters of its debt.

Venkatachalam said there was no government pressure on the consortium of banks to bail Kingfisher out.

“In all these cases it can’t be one-sided. They have to get the capital first. Without that it will definitely be difficult for banks to lend,” said Venkatachalam, who added that he was upset by “sensational” and “unethical” media reports about SBI riding to Kingfisher’s rescue.

Last week, several newspapers reported that SBI was poised to offer Kingfisher fresh funds, putting the sum variously between 2 billion and 16.5 billion rupees, and one daily said that the money has already been given to the airline.

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