SBI stock plunges on talk of loan to Kingfisher

 The country's largest lender State Bank of India (SBI) Wednesday saw its scrip plunging nearly eight percent on reports that it has agreed to provide new loans to cash-strapped Kingfisher Airlines whose stock also fell by seven percent.

The SBI scrip closed the day at Rs.2,257.80 at the Bombay Stock Exchange (BSE), down 7.91 percent from Tuesday's close of Rs.2,451.75. It had fallen over 8.55 percent in intra-day trade to a low of Rs.2,242.

Media reports had claimed that a consortium of banks led by the SBI has agreed to provide Rs.1,650 crore as interim relief for the Vijay Mallya-promoted airline.

According to these reports, the SBI's contribution towards this funding package will be around Rs.1,200 crore. The SBI management, however, declined to comment on the issue, citing client confidentiality.

SBI had, in fact, classified loans given to Kingfisher Airlines as non-performing asset (NPA) in the third quarter of the current fiscal.

"Out of the total fresh slippages (Rs.8,161 crore), as much as one-fourth or one-fifth has come from a single company. So, if you look at the total slippages (net increase) of Rs.6,152 crore, one company alone accounted for around Rs.1,500 crore," SBI chairman Pratip Chaudhuri had then said without naming the airline.

The news about a possible SBI-backed bailout started after SBI Caps, the investment banking arm of the lender which is appointed by Kingfisher to prepare restructuring plans for its debt of around Rs.7,000 crore, presented a proposal to a consortium of banks including IDBI bank, Bank of Baroda and Punjab National Bank.
The cash-strapped airline is facing difficulties in sustaining its operations due to seizure of its bank accounts by the Income Tax department, exodus of pilots, cabin crew and lack of operating funds to carry on the operations.

It has cancelled around 180-200 flight operations since Feb 18.
The scrip of the airline closed in the day's trade  6.53 percent down at Rs.25.05 from Tuesday's close of Rs.26.80.

The airline has reported a loss of Rs.444 crore in the third quarter of the current fiscal.