BackKFA brand valuation less than Rs100 crore, says second valuer
Valuation a sharp decline from the original Rs4,100 crore assigned to the brand in 2010 by Grant Thornton India
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The valuation of the Kingfisher Airlines (KFA) brand, a year after the airline was grounded in 2012, was estimated at just ₹ 200 crore and currently stands at less than ₹ 100 crore, according to a second brand valuation conducted on behalf of lenders, said two people directly involved in the matter.
This is a sharp decline from the original ₹ 4,100 crore valuation assigned to the brand in 2010 by Grant Thornton Llp India.
In August 2013, a consortium of lenders led by State Bank of India (SBI) decided to hire an independent valuation firm, RBSA Valuation Advisors Llp, to ascertain the potential worth of the Kingfisher Airlines brand.
“The Ahmedabad-based firm arrived at a valuation of less than ₹ 200 crore for brand KFA," said the first person quoted above. A subsequent revaluation in September 2015 pegged down the value of the KFA brand further to just ₹ 100 crore.
“In 2015 September, SBI again appointed RBSA to do another round of valuation for the bleeding airline company. And this time it valued the firm below ₹ 100 crore," said the second person quoted above, an official who was involved in the process.
Mint has also reviewed a copy of the valuation documents submitted by RBSA Advisors to the banks. Rajeev Shah, managing director of RBSA, while confirming the agency’s appointment for the valuation, declined to divulge any information on the matter citing confidentiality agreements.
“We were hired by the bankers to value the brand KFA in 2013 and subsequently in 2015. We have submitted our report to the bankers," said Shah.
The valuation attached by RBSA to the Kingfisher Airlines brand is a fraction of the ₹ 4,100 crore value attached to it by Grant Thornton India. To be sure, there was a three-year gap between the two valuation reports and during this time the airline had been grounded.
On 15 March, Mint reported that the Serious Fraud and Investigation Office (SFIO) has sent a notice to Grant Thornton seeking explanation for the valuation assigned to the KFA brand.
Grant Thornton in an emailed response said that “it stands by the valuation done by it and (it) was appropriate in context of the time it was done and purpose for which it was done".
Even the Central Bureau of Investigation (CBI) has raised concerns on the high valuation and is looking into why the banks took the brand as a collateral.
“While the matter is under investigations by SFIO, CBI and bank’s internal committees, RBSA’s valuation raises serious questions on the high valuation assigned by Grant Thornton," said the second person quoted earlier in the story.
Branding experts differ on whether there could legitimately be such a wide difference between the two valuations.
“We need to see the basis on how the valuations have been arrived at. If both firms arrived at the valuations using the same formula, then there should not be such a huge difference," said Anuradha Salhotra, partner at IPR law firm Lall Lahiri and Salhotra.
As per the documents examined by Mint that were submitted by RBSA to banks, the rights that have been used as collateral are only pertaining to “Kingfisher" brands which are registered under Class 39 of the Trade Marks Act, 1999.
“Class 39 broadly refers to transport; packaging and storage of goods; travel arrangement etc. The banks do not have any right over the intangibles/brands of Kingfisher beer & beverage business category," said the first person quoted above in the story.
If that is the case and banks only have right to the Kingfisher Airlines brand, then the sharp fall in valuation may be justified.
“One of the methods to arrive at a valuation of a brand, is you replace the same company, with another company of the same size and same stature and see how it stands up. Now as Kingfisher Airlines does not exist, the value is zero," said N. Chandramouli, chief executive officer, TRA, formerly Trust Research Advisory, a Comniscient Group company.
To be sure, even the ₹ 100 crore valuation attached to the KFA brand is theoretical, since the airline has been grounded for some time now. As such, there is no hope for banks to recover their dues by selling the brand. Kingfisher Airlines owes the banks ₹ 9,091 crore.
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