Kingfisher is an enigma; the company is accumulating record losses quarter after quarter and it is on brink of a collapse under the debt burden; but yet there are a few who evince interest in it.
In July, Srei Infra bought Rs400 crore worth of Kingfisher loans from ICICI Bank.
Despite all banks declaring Kingfisher as a non-performing asset, Srei snapped up Rs 430 crore worth of debt at a zero discount because the fund would have access and control over UB group shares and Mallya's properties.
Even if Kingfisher does go bust, Srei's losses would be minimal.
Last month, PTI reported that overseas investors have scaled up their exposure to three Indian air carriers -- Jet Airways, Kingfisher Airlines and SpiceJet -- in the April-June quarter of this fiscal. So why are foreign investors suddenly showing interest in this sinking ship again?
Perhaps, the biggest reason is hopes of FDI in the aviation sector. The Economic Times said yesterday that the government is finally ready to go-ahead with this much-needed policy reform even though the Trinamool Congress, the second-biggest member of UPA, remains opposed to the proposal. Yet betting on FDI TO revive Kingfisher's misfortunes is a tall order as India's aviation sector is very competitive and Kingfisher hasn't had a single quarter of profits so far. Any buyer would have to consider whether it's possible to undo the recent damage to the brand, boost employee morale, and regain lost market share as Vijay Mallya's Kingfisher Airlines, once dubbed as the king of good times, is now a mere penny stock. The airline's debt far exceeds the company's worth and is now is on the verge of eating into Mallya's profitable alcohol business too as some of the guarantees given by UB Holdings to Kingfisher are being invoked.
On the brink of a collapse, even lenders to the airline have been trying to cut their losses. They have threatened to take over the personal assets of Mallya, which have been held as collateral with them.
Laden with debt worth Rs 14,000 crore, the airline continues its death spiral as its reported loss of Rs 650 crore, is higher than its market capitalisation of Rs 598 crore. In fact the airline's debt and accumulated losses are higher than the most valued company in the Mallya stable – United Spirits, with a value of over Rs 11,000 crore, reported Firstpost earlier.
Editor's note: This is a revised version of the earlier story, which excludes the analyst quote from Business Standard.