Kingfisher Airlines @ Rs 11.75 gasping for Breath !

Have blogged several times on KFA right from 2008 cautioning Investors on the risks ~ Search Engine will throw up all these posts

Kingfisher Airlines (KFA) bleeds some more~wonder how it’s yet holding above par at Rs 11.75 ! thus being Valued by the Market at just under Rs 1000 crs ! though Debt and Accumulated Loss is at Rs 10000 crs !

Yet the Financial Statements have been prepared as a GOING CONCERN 

 Need a Miracle for KFA to fly again ! ~ Who would like to take over KFA ! ? ~ it has now just a few planes to fly ~ but no permit to fly~ Debt and Loss of Rs 10000 crs !~ Even with FDI being allowed in Aviation ,it would be simpler and easier for a new Entrant to simply start a New Airline than to try to revive KFA

 Am intrigued that yet 230000 + Shareholders have the conviction to hold KFA Shares ~ there is yet an opportunity to exit at Rs 11.75 ~ unless of course they insist to hold an aggressive appetite and love Kingfisher ~ the Man ~ His Beer ~ and his Airline ! ~ as long as they are aware of the Risks involved in holding this Conviction ! ~ Remember Global Trust Bank (GTB) Fiasco ~ allowed to trade on BSE and NSE despite it being a lost cause ~ then one fine day trading was stopped and one’s holding was simply obliterated overnight from one’s demat account as the bank ceased to exist ! with RBI intervening and allowing Oriental Bank of Commerce to take over only it’s assets

KFA Shareholders be warned that KFA may just go the GTB way !  

Ask yourself this ~ Did it really matter to me here in India who won the USA Presidency ? ~ am I better or worse off !? ~does it affect my health,my family,my job or business,my wealth….my stocks ! ? ~ am I really going to advice to get out of Indian IT Space !?

On US Foreign Political or Economic Policy Issues,neither Obama nor Mitt Romney would dare to effect any changes that will affect US Interests

Happy for Obama that he won as incumbent…..and his anti India IT outsourcing stance ,am told by Indian IT Insiders is only a local  appeasement tactic to protect American Jobs,as they really have little choice in the matter as of date ~ call it Catch 22 ~ they want to protect American Jobs but in a leveraged economy and a recessionary environment the economics simply don’t work out  not to outsource ~ having said this the cap on H-1B Visa for highly skilled foreign workers has been dropped by USA from 195000 in 2001 to just 85000 this year ~ Indian IT Companies get round this hurdle by rationalising the team numbers on a project,local US Hiring and doing more work on the Project out of India…of course they have been accused of other ways too !

David Bier,an US immigration policy analyst,wrote in Forbes earlier this Year that Foreign Highly Skilled workers on H -1B Visas create jobs not take them ~ in support,he quoted a 2009 finding by the National Foundation for  American Policy that for every H-1B Visa request it co-related with five new jobs at major firms and more than seven new jobs at firms with less than 5000 employees   !

Though  Indian IT may not be a great Investment Theme that it was in the 1990s and earlier part of the 21st Century when all IT majors,except for  Satyam, were simply great multi bagger pickings !, the IT Story is far from ebbing and I’m not going to advice Clients to move out of this space totally ~or even switch from TCS to Infosys like CLSA thinks should be done !

Make no Mistake,Obama will continue to bully India on both fronts and,I daresay, we shall continue to acquiesce quickly without serious debate justifying US entry on grounds of aiding GDP Growth and creating millions of jobs  and upgrading our Infrastructure with latest technology !  ~ We need to be cautious that while USA promotes their Interests aggressively,they will as they need to survive and recover from a faltering and highly leveraged economy,we need to safeguard our interests ~ I genuinely fear this is not happening  ~ we are opening out more US exposure in Insurance,Retail,Defence,Aviation,Agriculture,Banking,Higher Education,Automobiles and allied sectors without the rigors of  an intelligent debate without premediated bias or prejudice on the long term implications of this

1. Opening out FDI and allowing US MNCs to flood and penetrate India overwhelmingly
2. Enter into Billions of US $ Contracts with US Engineering and Technology Companies to manufacture Equipment and transfer technology to set up India’s Nuclear Power for Peaceful Purposes Infrastructure and for other Major Infra Projects

Have a look at my several Obama Posts when he visited India in November 2010 in the middle of his first Presidency

The first one on November 6,2010 lists many issues where USA and India are not on the same page

The last one on November 17,2010 laments how highly US educated Indians are used as pawns by US Corporates

Kingfisher Mallya the King of Good Times and his CA~LENDERS this year !

This is the Reality from the Prediction a few years ago ! ~ a forced change in focus ~ from swelte and sexy bikini clad models hand picked from hundreds, that Loyal Photographer Atul Kasbekar clicked for the Annual Kingfisher CALENDAR to a survival business model being thrashed out with CAs and LENDERS for Kingfisher Airlines whose license has just been suspended !

In the past few years Blogged a few times on Kingfisher Airlines and it’s financials,right from the time I highlighted the risk of the Brand being valued for leveraging debt on this Intangible ! ~ use search on the blog to locate these

Mallya is a true role model for my blog’s tagline “In India,Companies may fall sick but Promoters rarely do!”

In a Sense I do sympathise with him ~ and in the same Sense I don’t ! ~ a few good reasons for this ! ~ his UB group and him hold 28.98cr shares FV Rs 10 or 35.83% of KFA’s Equity ~ all pledged

In a Sense I do sympathise even with the Lenders ~ and in the same Sense I don’t ! ~ a few good reasons too for this !~ SBI,IDBI Bank,ICICI Bank and Bank of India have converted some part of loan to shares at I think @ Rs 60 ! ~ they collectively own 7.1 cr shares of FV Rs 10 or 8.78% of KFA’s Equity as at September 30,2012

In a Sense I do sympathise with the 214000+ Shareholders of KFA ~ and in the same Sense I don’t ~you guys took a flying risk despite clear indications of  heavy turbulence during Flight !

Where I do really sympathise is with the Employees ! ~ try living without salaries for even a month ! ~ and when Mallya last met them I was stunned by his attitude ~ literally chiding them for holding flyers to ransom by resorting to go slow,strikes and no shows ~ did they have any other Choice except to resign and leave and probably say goodbye to their dues too ! ~ Mallya has not kept his word to them in the recent past and even this oral offer of paying  three months salaries for the seven months due before Diwali is not in writing ~ and when he had crucial meetings with lenders he was seen in the Control Room of the Formula I Singapore Grand Prix monitoring his Force India  Cars !

Meanwhile KFA valiantly struggles to remain above par at Rs 10 on ground BSE and NSE despite none of it’s Planes in the Air currently ! ~ In fact The Planes have been bolted in the Hangars by AAI till dues are cleared and those who own them and had leased them or sold them on instalments to KFA have been unable to recover possession of the planes

What do you guys think of KFA  !?  Multibagger or MultiDestroyer  ! ? ~ Mallya is desperately looking for a Buyer ~Who will invest in KFA with Debt of Rs 8000 crs and Accumulated Losses of several thousand Crs already !? ~ unless there are write offs in Lending and SEt Off in Losses !

So if you have faith in Mallya and are as adventurous,aggressive,and make or break risk taker and flamboyant as him then you have only Rs 10 to lose ! and maybe Rs 20 and much more to gain in 2013 !

Figuratively,if not Literally Fly at your Own Risk !

Cheers !

Congress led UPA has just played their Final Ace ! ~ Announcing this evening at one Shot pending FDI reforms and Specific Disinvestments in PSUs ! 

Clearly the Government was on a long back foot on Corruption Accusations on an unprecedented scale on Coalgate and 2 G

The PM courageously asserting that if they have to go down they will go down Fighting !

It had  played all it’s cards but one ~ FDI Reforms ,especially to open out to a 51% in Multi Brand Retail ,were kept Pending because of huge opposition by Congress allies in the UPA itself

Yesterday evening Government announced Rs 5 hike in Diesel Prices and a LPG Cylinder Subsidy Cap at Six Cylinders per annum per family ~ this is to reign in Oil Subsidies that have been  a major reason for huge fiscal deficits year after year

This bold move,predictably and vehemently opposed by Opposition Parties and so expect a Nationwide Bandh called by BJP and the Left,came quickly after positive and stock uplifting announcements on September 12 by the German Court holding the European Stability Mechanism as constitutional and allowing Germany to financially support it and on September 13,US Fed Governor ushering in QE 3 by announcing a further buying of mortgage backed securities to the tune of US $ 40 Billion a month aggregating to US $ 480 Billion a year

And buoyed by  Stocks rallying,this evening the Indian Government finally played it’s last Ace in my view by announcing at one go a slew of Pending Economic reforms of which major ones are

1. Allowing 51% FDI in Multi Brand Retail
2. Allowing 49% FDI in Aviation
3. Disinvestment of 9% to 12% in Five PSUs ~ four are already listed ~ Oil India,MMTC,Hindustan Copper and National Aluminium ~ while unlisted RITES will make an IPO

However in my view Stocks,given these rapid fire recovery measures announced ~ RBI should join the Party on Monday by announcing a CRR Cut ~ and  enough evidence of growing  Investor Interest and Liquidity ,stocks are expected to sustain buoyancy in the Short term ~ At a macro level expect 5% to 10% returns in the Indices from current levels  in the next few months ~ Sensex and Nifty are up 2% already today at 18500 and 5500+ levels  ~At a micro level one can chase and make Alpha Returns much superior to Indices Movements with astute Stock Selections even though Macro Risks remain

Seems Diwali will be Brighter this Year in mid November ! By then,from indications, US President  Obama would have been elected (November 6 Presidential Elections) to serve a second term !

Second Time to take some Alpha Risk this year after January 2012

Cheers !

Mallya deserves the nasty tweets that are doing the rounds

• Naresh Goyal of Jet and Mallya of Kingfisher Airlines should merge… their new Airline would be called GOL-MALL AIRLINES !….. GOyaL combines with MALLya
• What’s the Difference between Vijay Mallya and Richard Branson ?… Branson’s Airline is Virgin while Mallya’s is F____d !
• Mallya was to fly to New Delhi to explain to the Prime Minister about KFA woes but his flight got cancelled !

Kingfisher Airlines Bank Accounts have been frozen and All across India KFA Flights have been cancelled leaving passengers furiously stranded

Have been watching the heated arguments on this on  Arnab Goswami’s Times Now Debate on Why should the Government bail out Kingfisher…. and was getting increasingly furious at ad man and man around town, Suhel Seth and head of a leading Travel Agency, Ashwini Kacker aggressive monologues defending Mallya… these filibustering ‘I know it all’ egotists, who think only their View is the Only View, kept arguing, actually yelling aggressively…. Kacker used the term ‘bloody’ more than once when he argued that Mallya had pledged his ‘bloody’assets and even his ‘bloody’ life !…. I seriously doubt he has pledged all he has… Remember my tagline for this Blog… Companies may go sick but Promoters rarely do !… and if I recall correctly, a Fixed Deposit Ad by his United Group Company showed him as  Director with a USA Address… Suhel Seth said that the Bank will have to be patient as thousands of crs are involved and if the Airline closes down, they stand to lose all they have lend… it is different if they have lent just Rs 100… they will chase the borrower for life for this !… he sounded and makes it out as if it was the banks fault that they lend in the first place  to KFA !… you cannot blame Mallya for this ! says Seth

Arnab, get me on Times Now against condescending Suhel Seth on this issue…when he is championing conscience and morality causes I’m on his wavelength but when he defends the indefensible like this,he is just being turgid ! 

… And Kacker…Even if Mallya has pledged all, So what !… KFA is a private business and like any business that does not make money, he would be wise to exit, even at a loss rather than bleed all stakeholders to death… simply because I hold the view that he does not have the ability to turn around KFA… I have blogged several times on KFA woes and the dangerous precedent of State Bank of India lending heavily on the Brand Name… I have no personal axe to grind … am a King Club Member too…. and would love for KFA to revive… but for this miracle to happen,Mallya needs to stop digging first and even have the humilty to apologise for the state of affairs… instead his stooges, like Suhel Seth and Ashwini Kacker, simply pass the buck to the Aviation Industry Woes that have engulfed most Airlines…. Wanna bet ! even if he gets funding,Mallya will yet run his Airline to Ground yet again !… he needs to leave his ego aside and exit the sector

Mallya himself spoke to Arnab on the telephone earlier today on Times Now and said he had no idea where to go as KFA Bank Accounts have been suddenly frozen overnight !… that is why he cannot pay salaries! Hogwash! ‘Bloody’ False….Employees have not been paid for three months now, Taxes have not been paid,Aviation Turbine Fuel has not been paid for as also Lease Rentals on the Aircraft… the fact is that Mallya simply has failed to run KFA properly…he had infact no idea of how to run an airline in the first place… blaming an appreciating dollar and higher Oil Prices or the government for high taxes, delaying FDI in Aviation, making it mandatory to run unprofitable routes etc are simply excuses… DGCA and the Lending Banks has been soft on him for too long

Mallya has got it all wrong… floating more in the air than being rooted to ground realities,when actually his Planes should be doing this !…. he acquired Air Deccan from Captain Gopinath… was a big mistake… he ignored the Low Cost Carrier Model and refurbished his planes luxuriously… for the past few years Kingfisher Planes were often lying at Airports all over India instead of flying as the Airline had no money for  spare parts and Pilot Salaries… Lease Rentals, being high, were therefore not being covered by Revenues…. all this was revealed by Capt Ranganathan

KFA needs to simply cease operations till it gets it’s own house in order…. you can’t have a situation where you want Government to subsidize your Losses while all gains would be Private !…. The Private Airlines Business Model needs to be tweeked to cover the pulls and pressures in the Industry… KFA simply was too complacent to do this !… It’s paying the Price and so are all it’s stakeholders!… Mallya and KFA have been unable to get Funds in the past year…. A US $ 300 m GDR Plan never took off… Private Equity Players are not flying KFA… Banks are reluctant to lend any further…in fact they want KFA to reverse guarantee commission of over Rs 50 crs paid to United Group and Mr Mallya personally… it’s your own business and you cannot make monies like this on your own business and look on this as a private income stream !.. is the Banks Cry

Mallya would be more successful and better off in deciding whether Dravid should open the Royal Challengers IPL Innings! rather than run the Airline he started !

Only Aggressive Risk Takers would hazard a long in KFA at Rs 27…. Interestingly there seem to be quite a few of these as Daily Volumes cross a Million Shares on BSE….. 52 Week High and Low has been Rs 49 and Rs 18

I wonder if Mallya’s friends Suhel Seth and Ashwin Kacker are long or short in KFA on the bourses!

Kingfisher Airlines…Fears come alive of Borrowing on the Brand….The struggling Airline is virtually grounded with Heavy Debt … some taken even against the Brand…..Pilots are leaving enmasse and flights are being cancelled daily…Share Price has sunk below Rs 20

http://www.hindustantimes.com/News-Feed/SectorsAviation/Kingfisher-seeks-Govt-bailout-40-more-flights-cancelled/Article1-767695.aspx

Management and Mallya are putting up a Brave face…will have to quickly come up with atleast Rs 500 crs and in the next few months raise over Rs 1000 crs to stay in the Air…With the Intangibles Channel of the Brand now being exhausted to raise funds,the only way for Mallya is to either sell out the Airline or sell or pledge Group Assets to raise funds

The King of Good Times is now begging the Government to bail his Airlines out in Pauper Times !…Ironic !…hope the Government does not fall for this again !….Of course there is a larger Picture involved to support our Aviation Industry but First the King needs to infuse some more himself by leveraging or selling his Group Assets…IPL…Formula One…Kingfisher and United Group Real Esate Assets…their kingfisher dhun “Oooh la la la la aey oh!” has whittled down to just “Aey Oh!”….and I’ll let you on to something here…the last time the Banks lend to the Airlines,the Agreed Arrangement Fees to an Intermediary related to one of the Lender Banks was not paid in full…in fact was reduced from Rs 20 crs to just Rs 1.5 crs….Now ! Now !…more than meets the eye here too !  

Had warned in July 2009 that while Borrowing on the Brand was interesting,it did throw up some huge risks

No Airline…No Brand !….How then would a lender against the Brand, State Bank of India recover it’s dues of @ Rs 2000 crs !…What good is the Brand in such a situation !…you can’t sell it to a rival airline ! can you ! ?

Check out earlier Blogs on this

Auditors warn of ‘Kingfisher Airlines’ being a ‘going concern’ problem in the making!

Thursday, September 15th, 2011 

Borrowing against Brands !…Interesting,but Risky area opening out !

Thursday, July 23rd, 2009

Some Wednesday Wanderings !…May’s Heat Wave causing a Lot of Bouncing !…Kingfisher Airlines Cheques…Adnan Sami…Tata’s JLR Debt woes forcing sale of TCS Shares…and our Sensex !

Wednesday, May 6th, 2009

Todays Economic Times Headlines scream that Auditors warn of ‘Kingfisher Airlines’ being a ‘going concern’ problem in the making!

http://economictimes.indiatimes.com/news/newsbyindustry/transportation/airlines/aviation/Vijay-Mallya-promoted-Kingfisher-Airliness-auditor-BK-Ramadhyani-Co-raises-doubts-over-companys-survival/articleshow/9987287

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/kingfisher-airliness-auditor-raises-doubts-over-companys-survival-stock-falls/articleshow/9989691

In mid 2009,I had blogged twice on KF Airlines…once when their Cheques were bouncing and later when they valued their Brand and took loans against this !

Some Wednesday Wanderings !…May’s Heat Wave causing a Lot of Bouncing !…Kingfisher Airlines Cheques…Adnan Sami…Tata’s JLR Debt woes forcing sale of TCS Shares…and our Sensex !

Wednesday, May 6th, 2009

Borrowing against Brands !…Interesting,but Risky area opening out !

Thursday, July 23rd, 2009

The Risk is clearly playing out for KF Airlines…It has never stopped bleeding

What will be the Brand Value of Kingfisher Airlines if there is no Airline left !…How then will SBI recover what it has lend KF Airlines against their Brand Value ! ?

Merrill Lynch Capital Markets Espana SA SV picked up 1.6 million shares of Spicejet at Rs 57.02 on February 26,2010 in a Bulk Deal…It has begun March closing at Rs 58.90 today with some heavy volumes of 6.6 million shares on the BSE

Earlier on February 5,2010 in Bulk Deals yet again,we saw Istithmar World PJSC Fund knock off 31.49 Million shares of Spicejet at Rs 52.01 to several Buyers….Reliance Growth Fund picked up 4.5 Million shares,Birla Mutual Fund picked up 10 Million,DWS got 8.85 Million and Damani Estates & Finance Pvt Ltd got 2 million

It’s moved up 10% in a month…and over 30% in Three months and a fabulous 265% in a year….so what’s the Spice?….the company yet has a negative Book Value

Equity is Rs 241 crs (FV Rs 10) with just under 13% held by those who ensure Spicejet remains in the air!…….Though December 2009 Quarter has seen a turnaround with a PAT of Rs 109 crs,the Accumulated Net Loss at December 31,2009 is yet very high at Rs 850 crs….netted of positive reserves of just under Rs 229 crs it yet reflect a negative Reserve of Rs 621 crs…..

However of Interest is the Infusion of US $ 100 Million into the Company by WL Ross & Co and the FCCB Conversion of US $ 80 million at Rs 25/share in 2010.This would increase the Equity to Rs 467 crs and  reduce Debt of @ Rs 500 crs to under Rs 300 crs…but importantly with Profitablity expected to be @ Rs 250 crs in FY 11,the Negative Networth of under Rs 400 crs expected at March 31,2010 will swing back to Positive in FY 11 with the FCCB Conversion and the  Turnaround Profitability….FY 11 EPS should try for Rs 5 levels

So FY 11 is going to be the turnaround Year for Spicejet…Back into the Black…a Positive and climbing Networth…New Strong Institutional Buyers….International Routes…Better Operations with higher occupancies over 80% and higher margins,especially if the Sales Tax on ATF is reduced from the average of 28% to just 4% as begged for by the Aviation Industry…and Valuation-wise,the market is offering competitor,Jet Airways a much higher latitude

Looks Like Spicejet will fly into the Rs 75-Rs 100 Zone this year

Yesterday there was a change of CEO guard at Jet Airways…The Austrian,Wolfgang Prock Schauer makes way for Nikos Kardassis after a tenure of six years…Schauer was quite emotional at the press meet yesterday…how he loved India and had steered Jet from loss to profit and from 40 planes to 110 planes and the IPO in 2005…He spoke lovingly to the media,appreciating the job that they do in communicating to investors….but he should spare a thought about the Investors themselves !  

The stark fact remains how an outlandish IPO Pricing can ruin the company and the shareholders…they issued the share in 2005 at Rs 1100….It got listed on March 14,2005 and touched a high of Rs 1339 that day and a few weeks later an all time high of Rs 1382……It never really took off and the share price has been landing ever since !….Promoter Naresh Goyal hold 80% of the Equity of Rs 86 crs,nearly all of it through Tail Winds Ltd…This itself had raised a stink as to who really owns Tail Winds…whose money really was being routed here !…Of course Promoters never bring in Monies at the IPO Pricing like we do !…if they do,it’s only a token shareholding…whether it be the Tantis of Suzlon or even Anil Ambani of Reliance Power or Goyal of Jet Airways….their shareholding is mostly at par and not at premium…so our risk is significantly more than theirs.

Jet Airway’s Share Price opened 2006 below Rs 1000 and 2007 below Rs 650 !…In the euphoric end 2007 and early 2008,it climbed back past Rs 1000 and then simply crashed to Rs 130 end October 2008 and even lower at Rs 115 in the first half of March this year ! It recovered to the Rs 250-Rs 300 range and has only just spurted past Rs 400

The Aviation Sector is reeling worldwide and India is no exception…Recession,Intense Competition,High Operating Costs,High Aviation Fuel Price and Mindless Expansion are some of the reasons for this state of affairs….Jet has declared a Q1 FY 10 loss of Rs 225 crs…the tough conditions are expected to continue 

Rs 1100 at a 10% CAGR in a Bank’s Fixed Deposit would have fetched you close to Rs 1800 in Five years…Instead with the share price of Jet at Rs 430 today,IPO shareholders still holding out in hope would have seen an erosion of 60%…better than the 90% erosion when price had crashed to Rs 115 in March this year ! 

This should be a great lesson to genuine companies who have a sustainable business model….if you obscenely price your IPO,you will end up screwing both,your shareholders and yourself !….If you want to command long term loyalty be fair in your pricing…leave something on the table for the shareholders to swear by you and not at you !

Cheers !  

August 18,2009…Private Airlines,members of FIA,have just announced that will not operate nationwide services on this Day…only for the Day…but could even be indefinitely if there is no positive response from the government

This announcement comes on a day when the Sensex has reached the highest level in fourteen months …15670 

The Aviation Sector is facing a survival issue in India…says Naresh Goyal of Jet Airways“ all of us are bleeding…private sector or the public sector”

Vijay Mallya of Kingfisher Airlines cries “we lose money because we are taxed to death”

Jeh Wadia of Go Airways laments that the policy and tax structure continue to create inefficiencies“We are demanding a Transperant Tax Structure…Fuel as a % of Total Cost is 45% in India while everywhere in the world it is 26 %…this is because of higher taxes of @ 27% on ATF..This Tax on ATF should be given a ‘declared goods’ status to bring the taxes down”

The Heavy Depreciation of the Rupee in 2008/9 has also increased the cost of Operations and Maintenance of Airplanes.The Sector should reveal a Rs 10000 crs loss in 2008/9…that’s just over two billion dollars 

The government on the other hand feels that the woes of the Aviation Sector are largely due to the mindless expansion of the Airlines 

Methinks this could open out some opportunities for Investment in selective Aviation Sector scrips if they continue to dive and are avaliable at throwaway prices…on the assumption that a solution will have to be found to resolve critical issues that are threatening this sector and that this sector will not be allowed to crash land

Keeping an Eye on the Skies to grab opportunities if the Price is right…Spicejet,Jet Airways,Kingfisher Airlines…..