Mr Mallya, where's the cash to pay your kingsize debt?

While the company's idea of changing its strategy is a positive sign and its debt has reduced to Rs 6007.30 crore from Rs 7,651 crore owing to the recast, the airline certainly needs to do a lot more if it wants to win back both shareholders and customers.

Sanjit Oberai December 20, 2014 04:46:03 IST
Mr Mallya, where's the cash to pay your kingsize debt?

The 11.8 percent jump in Kingfisher's stock on Thursday (owing to news of a stake sale in Force India) was short-lived. The stock has crashed almost 7 percent today as Hindustan Petroleum Corporation of India (HPCL) cut fuel supply for the second time in the last four months owing to non-payment of dues.

Kingfisher airlines, which owes HPCL almost Rs 130 crore in dues, saw most of its flights cancelled during peak hours yesterday. "HPCL has demanded at least Rs 100 crore" said a person on conditions of anonymity to Mint.

However, HPCL resumed fuel supply to the airline late last night after negotiations. As per an article in Times Of India, the airline requires about 45,000 kilolitres of fuel a month. HPCL is the major fuel supplier to Kingfisher with a daily billing of Rs 7 crore. Indian Oil Corporation (IOC) and Bharat Petroleum supply about Rs20-22 lakh per day and Rs 5 lakh per day, respectively.

Mr Mallya wheres the cash to pay your kingsize debt

Kingfisher airlines, which owes HPCL almost Rs 130 crore in dues, saw most of its flights cancelled during peak hours yesterday. Reuters

Incidentally, this incident comes at a time when the airline launched three new international routes to Colombo.

This is not the first time the airline has faced such issues. Earlier, too, in mid-july, HPCL had stopped supply of aviation of turbine fuel but restarted the service once the airline paid for the fuel. In fact, HPCL had put the airline on the cash-and-carry mode after the airline's outstanding exceeded the bank guarantee and restarted the service only after the carrier had paid Rs 10 crore. It was also in the flax with the Airport Authority of India (AAI) as it still has to clear dues pertaining to non-payment of airport charges.

This obviously is just the tip of the ice-berg. Kingfisher was also in the news as it delayed salary payments for the second consecutive month to its employees. "Salaries are typically credited to the accounts of its employees on the 7th day of every month. They are yet to be credited this month; last month, they were credited only on the 18th" a Mint report said on Thursday.

Mounting debt is a serious concern for the airline which recently decided to exit the low cost Kingfisher Red business. Kingfisher's auditors had also commented that the company's "networth is completely eroded" and its chance of remaining in the sky depends on more cash being pumped into it. The company is in the process of raising Rs 2,000 crore but may find it difficult to raise the required amount. Firstpost had reported earlier that the cash strapped airline may need Rs 3,000 crore to Rs 4,000 crore to get itself back on its feet. It had reported a net loss of Rs263.54 crore for the June 2011 quarter.

While the company's idea of changing its strategy is a positive sign and its debt has reduced to Rs 6007.30 crore from Rs 7,651 crore owing to the recast, the airline certainly needs to do a lot more if it wants to win back both shareholders and customers.

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