In a meeting on February 17 with the consortium of banks that have lent to KFA, the airline had sought working capital of Rs 200 crore to fund its operations. But according to sources with direct knowledge of the development, only two banks have lent a total of `5 crore to the airline, while other banks have flatly refused to lend any further.
A consortium of about 18 banks headed by State Bank of India have lent over Rs 7000 crore to KFA, and most of them have already classified their exposure to the company as a non-performing asset. "Most banks have independently taken a decision of classifying KFA as NPA in their books. There is no question of extending any further funding to the airline unless it starts paying back its dues or the promoters bring some cash to the table," said a senior official from a state-owned bank on the condition of anonymity.
Industry estimates suggest that KFA needs about Rs 2,500 crore to fund its operations. But following stringent action by the IT department which has frozen the companies accounts; and with bankers taking a tough stand, the airline has sharply reduced the number of daily flights, threatened to lay off a large chunk of its employees and shut down operations in some domestic and all international routes.
Lenders like ICICI Bank have also asked KFA to bring in more collateral for its loans, since the loans were originally backed by shares of KFA and Mallya's flagship liquor business, UB Spirits. The share prices of both these companies have fallen sharply in the recent past, as a result, bankers will not be able to derive any value from the collateral either. "There is no point selling the shares of KFA because nobody will pay for them. We have started providing aggressively for these exposures, and the only way out is if the promoter brings in more capital," said a senior banker.
(Source- http://economictimes.indiatimes.com)
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