The Kingfisher airlines is now become a troubled asset for the Indian banking industry. DGCA’s suspension of the airline’s license is a thinking point for Kingfishers’ Seventeen banks lead by SBI. These banks now accumulated a bad debt of Rs 7500 crore while giving funds to the Mallya promoted company.
A difficult aspect about the recovery is the lack of quality of the pledged assets. The pledge includes the brand name of Kingfisher which was valued at R s 4500 crore. How can make recovery from the brand name which is worst hit in the crisis?
The banks themselves were forced to convert their debt into equity during the last financial aid plan to the company. This means that for Rs 6500 crore, the banks hold 23% of the company’s equity.
Kingfisher’s total debt is estimated at RS 13500 crores by the DGCA, which includes debt from nonbanking entities and payment obligation to the staff.
The responsibility to make the next initiative is with the lenders themselves as they can’t continue with the large funds blocked.
But the next take off prosperity for Kingfisher is remote at least in the immediate future. Even foreign airlines may not show interest in the troubled asset generated by the management.