Addendum to the Kingfisher saga

My views  on this Kingfisher diaries :

   This report seems to have been prepared sometime around Nov 2011. The current share price is  Rs.11.96  as on 02.July.2012 ( against a fair valuation of Rs.64 by merchant bankers to bail out the airline).. Indian banks already reeling under heavy loss on this investment have lost another 80% after restructuring their loans...

Mallaya on his part has given plenty of verbal assurances about settlement of salaries to his staff..none of which has been adhered to since Jan 2012. Pilots , aircraft engineering staff , operations, cabin crew all have protested plenty of times with no effect since then.

As per Companies Act, PF and tax has to be deducted in advance from employees remitted to  the government every 3 months. If not, the employer is held accountable and the CEO can be imprisoned.But, here , we have a gentleman who is a Honorable Member of Parliament owning swanky cars and horses in his stable and has not remitted the tax and PF deducted from employees for more than 6 months roaming around scott free holding no moral responsibility.

An employer who does not have enough spine to pay his staff salary splurges on parties, owns a team in IPL and Formula One racing, promotes Kingfisher calendar models. How on earth will be have time to look at his constituency when he cannot have his own house and company in order ?

As of 1st July 2012, Vijay Mallaya as a promoter seems to have less than 5% equity.The remainder of promoter holding has been pledged to banks and other financial institutions . His extravagance and arrogance has led to another of his company , United Spirits trying to bail out Kingfisher and loosing heavily on this bad bet.

United Spirits too is now in danger of loosing the entire investment it made in Kingfisher.. Understand that United Spirits has got nothing to do with Kingfisher as they both are in different line of operations.

If you think that FDI will save this white elephant, think twice.

Why should a foreign airline invest in KFA and take aboard Rs.1400 crore debt on an airline which also has just 14 airplanes in operation  and still get a meagre 5% of  stake ?

We make an assumption that Rs.1400 is the total loss.. In theory , that is. But, no one knows the actual loss because , the books can be cooked. Unless a full audit is done, there is no concrete evidence that loss is limited to around Rs.1400 crores only..

In airline industry , except for the top 3 players, every other operator is posting losses.
KFA, is now a domestic player posting Rs.300 - 400 crore of quarterly loss. This means, regardless of whether its planes are in air or ground, the airline will continue to bleed.


Kingfisher, to me , is a good B-school case study on :
   1) Why one should not enter airline business at any time
   2) How one can loose his pants in the airline industry
   3) How big fellas get away with public money and can still be an M.P
   4) Why banks should be held accountable for bad investment decisions .
       After all , it is public money invested in private business.

Technicals :

KFA has broken all supports and generated a SELL at Rs.13 .

It should plummet to single digits soon. Better to book loss and switch elsewhere.

People should learn to love animals..
..
..
They are so tasty...