Sunder’s List: The End of Good Times?


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There’s a morbid fascination in watching a train wreck in slow motion. The Kingfisher saga has been going on for sometime: flight cancellations, defaults on payments to suppliers, defaults on paying taxes, defaults on paying salaries and defaults on paying interest on debt. Most travel agents have stopped booking tickets on Kingfisher, airports are making it operate on a cash-and-carry mode and the words “government bailout” has been thrown around a few times. What was once a Rs. 90 stock is now trading around Rs. 24

Indian banks are in too deep at this point. Public sector banks have an exposure of about Rs 5,800 crore via fund-based and non-fund-based limits in the airline.  KFA already went through debt restructuring once and yet has over Rs 7000 crore in debt. In what can only be construed as a desperate attempt at “extend and pretend”, SBI finally threw a Rs 1,650 crore lifeline to help it tide over the short-term.

With oil prices above $100 a barrel and an increasing possibility of a Israel-Iran war, its not just Kingfisher that’s in trouble. Jet Airways and Spice Jet remain mired in losses. American Airlines recently filed for bankruptcy and US airline stocks in general are down 20% since the past year. Its foolhardy to count on a possibility of a “white knight” type of bid coming in from a foreign airline for Kingfisher. A couple of Gulf airlines have already looked and passed.

Where does the “King of Good Times” stand on all this? Vijay Mallya has given a personal guarantee of Rs 248. 97 crore and UB Holdings, which Mallya controls, has also given guarantees against the debt. But make no mistake, Mallya is a smart businessman and he has stared at the abyss before and has always managed to pull a rabbit out of his hat. It should surprise no one if he figures out a way to tag the government or the banks with these losses through some form of debt-to-equity swap or a special tax break. Indian tax payers already own one loss making money pit (Air India), why not add another one?

You can access streaming news about Kingfisher here.

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