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India Billionaire Watching His Kingfisher Airlines Disappear

Posted on: October 23, 2012

Vijay Mallya, a Forbes billionaire from India. His Kingfisher Airline’s days are numbered.

India billionaire Vijay Mallya may have no choice, to save his ailing airline, Kingfisher, he might have to sell huge stakes in his successful beverage giant, United Breweries. If he did that, it would shrink his empire and his net worth considerably. If he doesn’t, Kingfisher Airlines might not last another year.

The airline has unpayable debts of around 80 billion rupees ($1.5 billion). If they were payable, banks in India would feel confident lending money to Mallya, until now a successful businessman. Instead, banks are rejecting lending more life-line money to the airline because it fears it will never get paid back.

In the meantime, Kingfisher has failed to pay worker salaries, taxes and even fuel bills. Pilots have gone on strike. Engineers have gone on strike. It is wonder Kingfisher is even airborne at this point.

Its market share is now just over 3 percent. Three years ago, it was closer to 15 percent. Businesses with far lesser problems have collapsed in the past, but Mallya’s clout in New Delhi and Mumbai has kept Kingfisher alive, for now.

Arguably, not for long. Mallya alone will need to pull a rabbit out of his hat to save this airline in 2013. It can be done. He is a billionaire afterall, and he didn’t get that way playing the lottery. But if Kingfisher survives in tact, it will undoubtedly be a shadow of its former self.

Kingfisher Airlines shares plunged on the Indian exchanges after bankers rejected the company’s request for a loan of Rs 200 crore (about 2 billion rupees). Shares in the company fell 4.95 per cent on the BSE after nearly doubling on investor speculation that Mallya’s rabbit was nosing its way out of its hat. It was not, and on Friday, a lending consortium led by India’s largest commercial bank, State Bank of India, asked for a revival plan for Kingfisher to be finalized, yet again, in the next two-to-three weeks, the

Press Trust of India news agency reported.

At what point will lenders run out of patience? Probably when it becomes clear that either Mallya, himself, will not raise capital from his own sources, or the company agrees to sell stakes to interested parties and shrink itself down to an entry-level player’s size after being one of the big boys.

Mallya has seen his better days, no doubt about that.

On Thursday, the India Credit Ratings Agency downgraded Mallya’s United Spirits, part of the United Breweries Holdings family, for a delay in loan payments. The downgrade comes at a time when United Spirits is in talks to sell the stake to British drinks giant Diageo. The revision in the bank line ratings reflects delays in debt servicing by the company in the month of March, 2012, said the rating company.

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