UB Group stocks wilt under banker snub

A day after bankers refused to give Rs 200-crore lifeline to Kingfisher Airlines (KFA), the week-long, speculation-driven rally in UB Group stocks ended with losses on Friday, though the markets were up significantly.

While Kingfisher Airlines (KFA) declined 4.72 per cent at Rs 16.15, over the previous close, United Spirits (US) was down 3.55 per cent at Rs 1,216.10. United Breweries, and the holding arm of the group, United Breweries (Holdings) Limited, fell 5.04 per cent and 6.70 per cent and closed at Rs 653.55 and Rs 134.55.

On Thursday, at the lenders’ meeting, when Chairman of KFA, Vijay Mallya, reportedly sought a Rs 200-crore working capital loan, bankers who have a collective exposure in excess of Rs 7,000 crore to the loss-making airline, refused and instead, asked him to come up with specific plans to reviving the ailing airline.

Mallya’s reference to “talks” with foreign investors was vague and a “disappointment”, according to a banker who attended the meeting. “Mallya did not mention any foreign airline evincing interest in KFA, contrary to some reports,” he said, requesting anonymity.

Yet, the stocks had a good run over five trading sessions starting from September 24, with KFA gaining the most, almost 21 per cent. Over a month, it has gained almost 82 per cent. The rally was initially due to the buzz after the relaxation in FDI norms in domestic carriers, and subsequently, on Mallya's statement at the KFA Annual General Meeting on Wednesday that “not only foreign, but also domestic investors” have shown interest in picking up stake in KFA.

The “stake” sale news that was splashed across newspapers and TV channels prompted the BSE and NSE to seek clarification from the company on Thursday.

The week also saw a spike in volumes of all UB Group shares that changed hands on the exchanges. On Friday alone, about 72 lakh shares each of US and KFA were traded on the two exchanges. On Thursday, 10 crore shares of KFA were traded on BSE & NSE, while 1.59 crore shares of US changed hands at the two exchanges. When juxtaposed with the trading volumes on August 28 (US - 88.67 lakh shares, KFA - 1.41 crore shares), it is apparent that the two stocks were driven by speculation, as fundamentally, there was hardly any development to push up prices and volumes.

Responding to clarification on talks about stake sale, Kingfisher Airlines informed the NSE that it not disclose  as it did not consider it “price-sensitive information”.

“The company is in talks with foreign carriers as well as domestic investors to sell a stake, pertains to a statement of a very general nature, which in our view can hardly be classified as price-sensitive information,”KFA  informed  NSE.