For the beleaguered Kingfisher Airlines,
controlled by billionaire Vijay Mallya, shocks seem to be a routine affair.
The latest shocker is its share prices tumbling to
an all-time low of Rs 9.62 and making it a penny stock.
MUST READ: What are penny stocks?The stock fell after LKP Finance disclosed it had sold shares of the carrier in the open market while the Sensex, which had ended flat, led to the share fall as well.
LKP Finance, in its disclosure to the exchanges, said that it has further offloaded its stake and pared its holding to below 10 per cent. As of June 30, the non-banking finance company had a 16.48-per cent stake in the carrier, which was mostly raised via the conversion of warrants.
"Now, it has become a penny stock. LKP Finance had bought the shares not as a shareholder but to recover its loans and this offloading is the logical way to recover the amount. The selling, which has been happening for the last few weeks, is the reason for the fall in Kingfisher's share prices," Kishore P. Ostwal, chairman and managing director, CNI Research, said.
"To come out of the crisis,
they will now have to negotiate with the lenders and restructure its loans or sell stake to another airline preferably a foreign carrier. For this, however, the government has to relax foreign direct investment (FDI) norms," Ostwal added.
On Tuesday, the carrier's share prices closed a tad higher at Rs 9.66 compared with its close of Rs 9.94 a day ago. On both the trading days, the share price closed below the face value of Rs 10 per share. In comparison, the stock price was at a 52-week high of Rs 40.60 on July 18, 2012.
FULL COVERAGE: The crisis at Kingfisher Airlines With Tuesday's closing price, the carrier's market cap stands at Rs 781 crore.
"I think this was waiting to happen and it had happened finally. The company and the stocks have reached a logical conclusion as this was one of the businesses that was done without proper homework," Jagannadham Thunuguntla, strategist and head (research), SMC Global Securities, said.
"Even if FDI in aviation would have been allowed, it would have hardly mattered," he added.
The carrier owes lenders, led by the State Bank of India (SBI), a whopping Rs 7,500 crore. The majority chunk of Rs 1,400 crore has been borrowed from SBI. Kingfisher, which has never posted profit since inception, is under immense pressure from lenders to work out a turnaround plan. The carrier, which had reported a loss of Rs 1,153 crore and revenue of Rs 741.28 crore for FY12, has defaulted on employees salaries for the past many months.
Once the second-rung carrier (among major carriers), Kingfisher now ranks last after it was forced to ground most of its fleet.
The promoters' holding has also fallen by 35.86 per cent while they have pledged over 90 per cent of their shares.
Courtesy: Mail Today 
Kingfisher Airlines Chairman Vijay Mallya 
Special 
