Lenders Set To Recover About Half Their Dues From Vijay Mallya’s Kingfisher

Kingfisher Airlines is now among the top recoveries for Indian banks.

<div class="paragraphs"><p>Vijay Mallya at a Westminster Magistrates' Court in London. (Photographer: Jason Alden/Bloomberg)</p></div>
Vijay Mallya at a Westminster Magistrates' Court in London. (Photographer: Jason Alden/Bloomberg)

Nine years after Kingfisher Airlines Ltd. was grounded, lenders to the Vijay Mallya-promoted airline have managed to recover Rs 5,942 crore in dues by selling securities pledged against the loans.

Dues were recovered through a sale of shares of United Breweries to Heineken N.V. via block deals on the stock market on Wednesday.

According to data available on Bloomberg, the sale was concluded at a price of Rs 1,498.8 per share. The shares sold represented a 14.98% stake in United Breweries. With the acquisition, Heineken's shareholding in the company rose to 61.5%, from 46.52% earlier, the exchange notification said.

The sale of shares has helped lenders recover 44% of total dues of Rs 13,500 crore, according to people familiar with the matter. The dues are inclusive of principal, interest and penal charges on overdue loans.

The proceeds from the sale will first go to a debt recovery tribunal in Bengaluru, which allowed the lenders to proceed with the sale. After the tribunal has completed the necessary legal proceedings, the money will reach the lenders, a banker directly involved with the proceedings told BloombergQuint.

On June 18, BloombergQuint reported that the debt recovery tribunal had allowed lenders to sell the 3.96 crore shares of United Breweries, 25 lakh shares of United Spirits Ltd. and 22 lakh shares of McDowell Holdings Ltd. through block deals on June 23. In a separate notification, the court also allowed another 1 crore shares of United Spirits available to them on June 25, through a block deal.

According to the banker quoted above, the lenders have not found buyers for the shares of United Spirits and McDowell Holding yet. Once the buyers are found, the shares available to lenders will be sold too. As per Wednesday's closing price, the shares available in United Spirits and McDowell Holdings are valued at around Rs 850 crore.

Should these sales go through as well, lenders would have ended up recovering half of their dues to Kingfisher Airlines. At Rs 6,792 crore, the recovery will be at over 90% of the principal amount of about Rs 7,500 crore.

The quantum of recoveries will mean that lenders managed to recoup more of their dues from Kingfisher as compared to other large stressed accounts of similar vintage.

Through the Insolvency & Bankruptcy Code, banks have managed to recover nearly 80% of their dues in Essar Steel Ltd, 63% in Bhushan Steel Ltd, 41% in Bhushan Power & Steel Ltd and around 40% in Ruchi Soya Industries Ltd.

Pratip Chaudhuri, former chairman at SBI, who headed the bank at the time Kingfisher Airlines defaulted, said the value recovery, despite the time lapse is a good sign for banks who are often deemed "reckless".

"It shows that bankers were not reckless in taking securities and lending money. But we also have to remember that the group companies were taken over by a foreign buyer (Diageo) and since then the value of these pledged securities have gone up," Chaudhuri said. "Typically as time passes, the value of the security goes down."

Some of the other large lenders to Kingfisher Airlines include Punjab National Bank, IDBI Bank and Bank of Baroda.

The securities sold by banks were originally released for sale by the Enforcement Directorate under directions of the Prevention of Money Laundering Act Court. Earlier, these securities had been attached by the investigating agency as part of its investigation into Kingfisher Airlines' owner Vijay Mallya.

The Enforcement Directorate and the Central Bureau of Investigation are investigating fraud charges against Mallya for alleged misappropriation of funds received from banks. Mallya had left India for London in 2016, after which he was tagged as a fugitive economic offender. Indian officials have been trying to extradite him from the United Kingdom, proceedings for which are ongoing.

On Wednesday, the Enforcement Directorate, in a post on Twitter, said it has attached and seized assets worth Rs 18,170 crore in the case of Vijay Mallya, Nirav Modi and Mehul Choksi and transferred Rs 9,371 crore to public sector banks and the government.