MUMBAI: State Bank of India (SBI), the lead lender to Kingfisher Airlines will not consider any fresh loans for the debt-laden carrier until it raises new equity itself, a senior executive of the state-owned bank said.
SBI is studying a viability report prepared by its investment banking arm, SBI Capital Markets, and any decision on further lending to Kingfisher will be based on that as well as conditional on an infusion of funds into the airline, Deputy Managing Director R Venkatachalam told Reuters in an interview from his Mumbai office on Saturday. Desperately strapped for cash, Kingfisher stands on the brink of collapse after multiple flight cancellations and the resignation of dozens of its pilots.
Kingfisher, which has not turned a profit since it was founded in 2005 and is carrying debt of at least $1.3 billion, has asked for 20-30 billion rupees in loans from banks to carry out its day-to-day operations.
“Everything depends on equity infusion – how much comes in, whether that will meet the requirements. First it has to come,” Venkata-chalam said.
Venkatachalam heads the mid-corporate division of the bank, which makes loans upwards of 250 million rupees to companies that have a turnover of at least 1 billion rupees.
SBI, which accounts for nearly a quarter of India’s loans and deposits, will wait for some “policy evolution” towards the aviation sector before taking any fresh exposures in airlines, he said.
The government has made some regulatory changes in the sector recently, allowing airlines to import fuel directly, which has lowered their costs, and given more leeway for private carriers to fly overseas.
But there has been no indication that it is planning to rescue Kingfisher even though state-run banks own about one-fifth of its equity and three-quarters of its debt.
Venkatachalam said there was no government pressure on the consortium of banks to bail Kingfisher out.
“In all these cases it can’t be one-sided. They have to get the capital first. Without that it will definitely be difficult for banks to lend,” said Venkatachalam. (Agencies)