SBI's dilemma over to Kingfisher Airlines gets over

Posted By: Religare
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SBI's dilemma over to Kingfisher Airlines gets over
Soon after the CEO of Kingfisher Airlines had a meet with the Directorate General of Civil Aviation (DGCA), markets were surprised by some media reports that stated State Bank of India (SBI) is throwing a life-line to the airline. The amount of loan varied throughout the media, but certainly indicated that new loans would lie in the range of Rs 1,200-1,700 crore.

Though it came as a surprise for some, but SBI had to step in for the rescue even as bank already accounts Rs 1,457 crore as bad-loan to the carrier.

Also SBI owns over 5 per cent equity shares of Kingfisher Airlines that were acquired at Rs 64.28 per share for Rs 182 crore. Due to this, the dilemma before SBI is that it is both lender and equity holder in Kingfisher, and for that it cannot let it go away.

Now since SBI has agreed to lend another bag of good money to the airline, it is still not sure as to whether Kingfisher will be out of its dark clouds soon. The airline currently carries the debt burden of over Rs 7,057 crore and no other surprise would charm its investors unless company gets fresh equity infusion, either through FDI or through its billionaire owner.

Now the reports also say that SBI's first tranche of Rs 700 crore will come as short-term working capital that will be used to meet immediate requirements for paying salaries, tax dues and provident fund payments as well as clearing outstanding arrears of vendors and oil marketing companies.

Also the income tax department has, for now, softened its stance and has unfrozen the airline's bank accounts considering the SBI hands on its shoulders.

Read more about: state bank of india
Story first published: Wednesday, February 22, 2012, 13:31 [IST]
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