Investors fret over reports of bailout loan for the ailing airline even as the govt- run bank denies giving fresh credit

FPJ BUSINESS DESK Mumbai

Shares of State Bank of India plunged sharply by over 8 % on Wednesday on reports that it has agreed to provide fresh loans to cash- strapped Kingfisher Airlines whose stock also fell by 7% on continuing financial and operational troubles. The airlines has a debt of Rs 7,057 crore with SBIs exposure alone placed at Rs 1,500 crore.

The SBI scrip closed the day at Rs. 2,257.80 at the Bombay Stock Exchange ( BSE), down 7.91 percent from Tuesdays close of Rs. 2,451.75. It had fallen over 8.55 percent in intra- day trade to a low of Rs. 2,242.

Reports had claimed that a consortium of banks led by the SBI has agreed to provide Rs. 1,650 crore as interim relief for the Vijay Mallya- promoted airline.

According to these reports, the SBIs contribution towards this funding package will be around Rs. 1,200 crore. The SBI management, however, declined to comment on the issue, citing client confidentiality.

SBI had, in fact, classified loans given to Kingfisher Airlines as non- performing asset ( NPA) in the third quarter of the current fiscal.

" Out of the total fresh slippages ( Rs. 8,161 crore), as much as onefourth or one- fifth has come from a single company. So, if you look at the total slippages ( net increase) of Rs. 6,152 crore, one company alone accounted for around Rs. 1,500 crore," SBI chairman Pratip Chaudhuri had then said without naming the airline.

" Sentiments turned adverse for the SBI counter on reports that the bank has committed close to Rs 1,200 crore to the problem stricken Kingfisher airlines," Shanu Goel Research Analyst Bonanza Portfolio said.

Share of two other lenders IDBI Bank and PNB, which have significant exposure in the ailing carrier, also plunged by 6.92 % and 4.62 %, respectively.

The cash- strapped airline is facing difficulties in sustaining its operations due to seizure of its bank accounts by the Income Tax department, exodus of pilots, cabin crew and lack of operating funds to carry on the operations.

It has cancelled around 180- 200 flight operations since Feb 18.

Notwithstanding reports that the lead banker of the consortium State Bank of India ( SBI) has agreed to provide Kingfisher a Rs 1,650 crore relief package, the bankers were tight lipped about what they were planning.

However, sources in the consortium said that Kingfisher could look for any fresh loans only if the main promoter United Breweries gets an infusion of fresh equity.

The air carrier is understood to have been told by the bankers that it should get at least 25 % of the Rs 3,000 crore loan it is looking for in the form of fresh equity. Sources said that Mallya is not in a position to give any commitment and the bankers will take the next step only on such an assurance.

MUMBAI: Kingfisher Airlines, battling for survival, Wednesday submitted a new flight schedule to the industry regulator amidst buzz that the carrier has got a lifeline from a consortium of banks.

The airline, however, cancelled 30 flights for the fifth consecutive day as it told the Directorate General of Civil Aviation ( DGCA) that with 28 aircraft it would operate around 170- 180 daily after the regulators nod.

Sources in the DGCA said the regulator has received the new schedule and was studying it. DGCA chief E. K. Bharat Bhushan also briefed Civil Aviation Minister Ajit Singh on Wednesday about his discussion with the airlines management.

Tax dept rejects KFs plea to defreeze a/ c Reports indicated that the tax department has rejected the beleaguered airlines plea to lift the freeze on its accounts as Kingfishers offer to make a partial payment was viewed as too small. The airline has about Rs 300 crore dues pending with the IT department.

News agency PTI quoted Central Board of Excise and Customs ( CBEC) Chairman S K Goel as saying that the airline has to pay Rs 40 crore dues in indirect taxes by March 31.

" Kingfisher had an outstanding ( service) tax dues of Rs 70 crore and the company had promised to pay in installments," Goel said.

The company paid Rs 10 crore in December, Rs 20 crore in January and they have to pay Rs 20 crore in February, he said.

RBI not opposed to more loans to KF T he Reserve Bank is not opposed to the State Bank of India extending support to the cash- strapped Kingfisher Airlines, Deputy Governor K C Chakrabarty said . RBI does not oppose " professional decision" of the bank, Chakrbarty said.

" Banks are commercial entities. If they feel by supporting a unit, if the unit can survive, they must explore that possibility," Chakrabarty said. " Banks are risk- taking entities".