KFA case: Decoding implications of 'wilful defaulter' tag

Written By Unknown on Senin, 01 September 2014 | 18.00

United Bank has declared Kingfisher Airlines and its promoter Vijay Mallya as 'wilful defaulter'. The bank is in the process of sending formal notices to the company and will inform RBI as well.

Now with this wilful defaulter tag on, there would be no debt kind of issuances from the banking sector

Ashvin Parekh

Managing Partner

Ashvin Parekh Advisory

United Bank  has declared Kingfisher Airlines  and its promoter Vijay Mallya as 'wilful defaulter'. The bank is in the process of sending formal notices to the company and will inform RBI as well.

United Bank is the first bank to declare the grounded airline as 'wilful defaulter' . Even State Bank of India  and Punjab National Bank  are in the process of doing so. The step came after KFA officials did not show up for the meeting with the United Bank's grievance cell at 10:30 am Monday. United Bank has Rs 350-crore exposure to KFA.

The consortium headed by SBI is looking to sell collateral to recover dues.

Discussing the implications of a 'wilful defaulter' tag, Ashvin Parekh, MD, Ashvin Parekh Advisory Services, said that in case the company is just a defaulter, then it still has options to either go through the CDR route or rebuild its assets, which will demonstrate the banking system that the company/promoter has adequate amount of business viability left.

However, in KFA's case, the bank will step in each and every aspect of it. Now with this wilful defaulter tag on, there would be no debt kind of issuances from the banking sector and this will extend to all group companies as well, said Parekh.

United Bank stock price

On September 01, 2014, United Bank of India closed at Rs 47.20, up Rs 1.60, or 3.51 percent. The 52-week high of the share was Rs 61.65 and the 52-week low was Rs 23.40.


The latest book value of the company is Rs 64.81 per share. At current value, the price-to-book value of the company was 0.73.


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