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Business News/ Politics / Policy/  Vijay Mallya offers banks Rs6,000 crore debt repayment plan

New Delhi: UB Group chairman Vijay Mallya on Wednesday offered to pay as much as 6,000 crore to settle 9,091 crore in dues his defunct Kingfisher Airlines Ltd owes to banks.

Mallya promised to pay 4,000 crore upfront by end September and an additional 2,000 crore if he wins a lawsuit filed against a plane engine maker, C.S. Vaidyanathan, the lawyer representing Mallya, told the Supreme Court on Wednesday. Vaidyanathan did not give details of the lawsuit.

Mallya, who was ranked the 45th-richest Indian with a net worth of $1 billion by Forbes in March 2012, left for London on 2 March, days before a group of creditors approached the Supreme Court to bar him from leaving the country. His Kingfisher Airlines, founded in 2005, was grounded in 2012 amid mounting debt and losses.

Mallya’s settlement offer to banks is not too bad, said Parag Jariwala, vice-president at Religare Capital Markets.

“The loss to banks on Kingfisher Airlines loans is actually less than the Reserve Bank of India’s loss given default (LGD) estimate," said Jariwala.

LGD is a measure of actual loss to banks at the time of default.

“The actual loss if banks accept Mallya’s proposal will be just 7% on principal," he said

Lawyers for Mallya submitted the settlement proposal to the court in a sealed envelope on behalf of United Breweries Holdings Ltd, Kingfisher Airlines and Mallya.

The consortium of banks, led by State Bank of India (SBI), sought a week’s time to consider the proposal. The case will be next heard on 7 April.

The nation’s top lender said it’s evaluating the offer.

“State Bank of India has received an offer for settlement of dues today which is being examined," it said in a statement on Wednesday.

In the next hearing, lenders will likely tell the court if they will accept Mallya’s offer.

“If the banks do not accept the offer, then the case will continue. If they do, then they might even withdraw the cases against him," said a lawyer familiar with the developments who did not want to be identified.

In a 13 March statement, Mallya claimed that banks had already recovered 2,494 crore from Kingfisher Airlines since 2013.

The additional 2,000 crore payment that Mallya promised to the banks relates to a lawsuit filed by Kingfisher Airlines in 2013 or 2014 before a civil court in Bangalore against a company for allegedly supplying defective engines for its aircraft, said S.S. Naganand, one of the lawyers appearing for the lenders’ consortium.

“KFA (Kingfisher Airlines) could have claimed in court those defective aircraft engines caused their airline business to decline and they have asked for compensation," he said.

A bench comprising justices Kurian Joseph and Rohinton F. Nariman asked Mallya’s lawyers if the businessman was back in the country as the court had issued a notice to him earlier. To this, Vaidyanathan replied that Mallya was yet to return.

“He has had two rounds of meetings with banks through video conferencing," he said.

On 9 March, the Supreme Court issued a notice to Mallya on the plea by a consortium of banks seeking to stop him from leaving the country.

“The court should ask him to appear here and bring his passport. We also want a disclosure of his assets," attorney general Mukul Rohatgi had told the court. Rohatgi was representing the creditor-banks.

SBI, which has the biggest loan exposure to Kingfisher Airlines at 1,600 crore, and 12 other banks moved the top court a day after a tribunal blocked Mallya from accessing a $75 million (about 515 crore) payout promised to him by Diageo Plc. SBI declared Mallya a wilful defaulter in November last year.

On 25 February, Diageo agreed to pay Mallya $75 million over five years and drop all charges of financial impropriety against him in return for stepping down as chairman of United Spirits Ltd, a company now controlled by the UK liquor maker.

The other creditor banks include Axis Bank Ltd, Bank of Baroda, Corporation Bank, Federal Bank Ltd, IDBI Bank Ltd, Indian Overseas Bank, Jammu and Kashmir Bank Ltd, Punjab and Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank and United Bank of India.

Shares of United Breweries Holdings surged 12.2% to 20.70 on the BSE on a day the benchmark Sensex gained 1.76% to 25,338.58 points.

Vishwanath Nair in Mumbai contributed to this story.

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Updated: 31 Mar 2016, 03:42 AM IST
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