Kingfisher Airlines has given a little over Rs 50 crore as commission to its chairman and key promoter Vijay Mallya, who provided guarantees worth more than Rs 6,100 crore for the airline’s loans and other liabilities during the last fiscal.
The airline, whose share price has crashed by over 20 per cent in the past three trading sessions, is working hard to improve its financial health as well as operating performance, and as part of these efforts it plans to shut down its low-cost service Kingfisher Red in the next four months.
For providing the additional level of collateral for its funding needs, the company gave Rs 50.87 crore to Mallya as “guarantee and security commission” during the year ended March 31, 2011, Kingfisher has told its shareholders.
The airline disclosed the guarantees worth Rs 6,175.63 crore provided by Mallya and the commission paid to him in its Annual Report for the year 2010-11, which were made available to the shareholders ahead of its AGM last week in Bangalore.
Mallya had also furnished guarantees totalling Rs 2,799.56 crore in the previous fiscal 2009-10 on behalf of the company for loans taken and other liabilities, but did not get any commission that year.
The company did not reply to detailed queries regarding the need for collateral from Mallya and the exact details of loans and other liabilities for which he had to furnish his personal guarantee.
However, Mallya told the shareholders, during his address at the AGM on Wednesday last week, that he “personally stepped in to provide a third level of comfort to the lenders who have been extremely supportive of Kingfisher.”
Kingfisher, which claims to be the country’s single largest airline with a market share of about 20 per cent, is taking various steps to improve its operating performance and as part of these efforts has decided to phase out its low-cost service Kingfisher Red in about four months.
However, the plans could not arrest a free-fall in the airline’s share price, which has plunged by over 20 per cent since Wednesday to Rs 20 apiece now.
It has lost nearly Rs 250 crore of market value in just three days and the stock has fallen by nearly 78 per cent from its 52-week peak of Rs 91 scaled on October 8, 2010.
The airline’s market value has now fallen little below Rs 1,000 crore, from nearly Rs 4,500 crore about a year ago.
Its total revenue rose by 23 per cent in 2010-11 to Rs 6,496 crore, while it narrowed its net loss to Rs 1027 crore from Rs 1647 crore in the previous year 2009-10.
In the latest quarter ended June 30, it posted a net loss of Rs 263.5 crore, while its revenue rose by 15 per cent to Rs 1,911 crore.
Mallya said that the airline implemented a debt-recast programme to lower its debt liabilities and Kingfisher was continuing to work with the consortium of banks with a view to further reduce the interest costs.
Kingfisher said in an investor presentation in June that the recast lowered its total debt by about Rs 1,650 crore to Rs 6007.30 crore.
“The banks have not only given relief to Kingfisher in the form of moratorium on repayment, extended tenor of the loans and reduced interest rates but also converted 30 per cent of their outstanding loans into preference and equity capital,” Mallya said.
“By the same measure, I too have given my personal comfort to the Lenders over and above the securities provided by the Company and the additional collateral of UBHL guarantees,” he added.
Besides Mallya’s guarantees, Kingfisher Airlines also got guarantees worth Rs 16,853 crore during 2010-11 from its holding company United Breweries (Holdings) Ltd (UBHL), which was paid commission of about Rs 58 crore.
UBHL had also got commission worth Rs 49.5 crore in the previous fiscal 2009-10, during which it had given guarantees of about Rs 6,985.5 crore.
Mallya said that promoters have consistently supported the airline through direct investment, advances from the holding company, guarantees from the holding company and also by securing third party funds to meet exigencies in Kingfisher.
He said that UBHL has provided Kingfisher with corporate guarantees totalling Rs 9,135 crore and each of these primary obligations was supported, in the first instance, by Kingfisher’s assets and cash flows.
The UBHL guarantees are by way of additional collateral to further strengthen the Promoters commitments, he added.
At the end of the latest financial year 2010-11, the airline’s total secured loans stood at about Rs 5,184.5 crore, up from Rs 4,842.4 crore a year ago. Its unsecured loans were, however, lower at Rs 1,872.55 crore as on March 31, 2011, from Rs 3,080.17 crore a year ago.
Kingfisher paid a total of about Rs 1,119 crore as interest charges and Rs 191.5 crore as bank charges and guarantee commissions during 2010-11, up from Rs 1007.6 crore and Rs 88.8 crore respectively in the previous year.
