Eleven public sector banks that were allotted shares by leading private carrier Kingfisher Airlines as part of a debt recast package have seen attrition of about Rs 165 crore in the value of the 17.5 per cent equity held by them in the Rs 7,600-crore debt-ridden carrier.
These banks, including state-run State Bank of India, Punjab National Bank, Bank of India and IDBI Bank were allotted 8.8 Kingfisher shares on March 31, at Rs 64.48 apiece, according to the formula set out by market regulator Securities and Exchange Board of India (Sebi).
However, the market price of the share had declined to Rs 40.95 even before the actual allotment took place.
While the scrip price has since improved to Rs 45.70 (Friday closing), it is much less than the allotment rate resulting into the erosion of the valuation of the Kingfisher shares allotted to the banks.
Of the total debt of about Rs 7,600 crore, in all 13 banks, including private sector ICICI Bank, agreed to convert loans worth Rs 750 crore into equity. The bulk of the burden was taken by the PSU banks - Rs 568 crore. The value of this portfolio has since gone down to Rs 403 crore resulting in erosion of Rs 165 crore, as per market information.
The debt recast package was agreed to by a consortium of banks led by the State Bank of India (SBI) in November last year on the Reserve Bank of India's (RBI) advice as the aviation industry was facing financial crisis due to the global economic slowdown.
While Kingfisher's rival Jet Airways posted a profit of Rs 118.23 crore during the quarter ended December 2010, Kingfisher Airlines suffered a loss of Rs 253.69 crore during the period. Kingfisher had incurred losses of Rs 1,647.22 crore during 2009-10.
Courtesy: Mail Today