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CBI probes how banks took Brand Kingfisher as collateral

“Lending on the brand value of Kingfisher Airlines is a major concern. We have questioned the banks. It is basically an intangible asset. We are digging into the issue,” said CBI sources.

Written by Khushboo Narayan | Mumbai | Updated: March 4, 2016 4:58 am
Vijay Mallya Vijay Mallya

THE CBI has raised concerns over the high valuation of the Kingfisher Airlines brand by its lenders and questioned them on why they used it as collateral while extending loans to the Vijay Mallya-promoted

“Lending on the brand value of Kingfisher Airlines is a major concern. We have questioned the banks. It is basically an intangible asset. We are digging into the issue,” said CBI sources.

In its 2012-13 annual report, Kingfisher Airlines had said that at its peak it was the largest airline in India, with a five-star rating from Skytrax. A brand valuation by consultancy firm, Grant Thornton put its value at $550 million (Rs 3,000 crore) on resumption of operations. The airline’s brand had been registered separately from the Kingfisher beer trademark.

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The airlines brand name was pledged to 14 lenders, including State Bank of India (SBI), IDBI Bank, Punjab National Bank, Bank of India and Bank of Baroda under a debt recast agreement in which loans valuing Rs 6,500 crore were restructured and converted into equity.

According to a banker, who did not wish to be named, it is not common for banks to accept brands as collateral. “None of the banks in India have capitalised brand value in their balance sheets. It is an intangible asset,” said the banker.

The CBI is currently investigating a case against Kingfisher Airlines and its former management for cheating and defrauding 17 banks of at least Rs 7,000 crore. According to CBI sources, the amount involved in the alleged fraud by Kingfisher and its promoter may increase.

The agency has already pulled up banks for not registering a complaint against the grounded airlines or its promoter despite the default. Kingfisher and SBI did not respond to emails seeking comment. The CBI, too, did not respond to emails seeking official comment.

In April 2014, after Kingfisher defaulted on loans, the banks put up nine pledged trademarks of the airlines for sale. However, SBICAP Trustee Co. Ltd (STCL), a wholly owned subsidiary of SBI Capital Markets, which had sought an expression of interest (EoI) from parties to acquire the trademarks, did not get any serious bids for the trademarks.

The nine trademarks that remain unsold include Fly Kingfisher, Flying Models, Funliner, Fly the Good Times, Kingfisher and Flying Bird Device, registered in the name of Kingfisher Airlines or held by the UB Group but transferred to the airline for use.

Brand consultant Harish Bijoor, owner of Harish Bijoor Consults Inc, said banks will never be able to monetise the Kingfisher Airlines brand as the mother brand Kingfisher primarily represents a completely different category of product — beer owned by United Breweries.

“There can be no sole ownership of the Kingfisher brand. So essentially, the Kingfisher Airlines brand that the banks hold is a dud. Banks will never be able to sell the trademarks,” said Bijoor.
The banker, who spoke to The Indian Express, also said that banks would not be able to monetise the Kingfisher brand till they get an injunction from a court restricting United Breweries from using the Kingfisher trademark.

In the past, United Breweries has clarified that it fully owns the Kingfisher brand that is registered by the company under trademark classes pertaining to alcoholic beverages and that this hasn’t been hypothecated or pledged to any lender to secure loans.

In a separate development, SBI has moved four applications against Mallya in the debt recovery tribunal (DRT) at Bengaluru. SBI’s application has asked for impounding of Mallya’s passport, his arrest, first right to the $75 million settlement of Mallya with Diageo and a full disclosure of his assets in India and abroad.

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  1. G
    Mar 4, 2016 at 5:33 am
    This is such an obvious fraud perpetrated by the banks, using their customers money to fund a non profitable enterprise for the longest time. It can't happen without the bank executives getting paid.
    1. T
      Mar 4, 2016 at 12:06 am
      The senior officials of lenders were floored by two long legs and deep gully posted by Vijay Mallya which resulted in accepting b as collateral.
      1. A
        Mar 4, 2016 at 10:39 am
        Great Shame, if a common man defaults on any commitments, bank / government will seize his ests, like car/ house/ seal his bank account. The rich get away with any thing, This is day light robbery committed by Malaya , who has managed to sell his stake in the Brewery to Heniken and Spirits to Diageo, without the banks getting anything, Malaya has huge overseas ets all over the world, lock him up and recover the money, The money belong to the People who have deposited their hard earned money in the bank. which will be ultimately be paid from the hard earned taxes which we pay the government. God save India
        1. A
          Mar 4, 2016 at 4:51 pm
          Conversion of their overdue loans into equity by lenders at highly inflated value, under the garb of sebi guidelines should also be investigated.
          1. A
            Mar 4, 2016 at 2:24 am
            Arrest all the bank executives who had given loan to mallya then only next time executives would think of giving loans the executives are the real culprit can any one take b name as collateral and does it take so many years to find out.the culprit are also the auditors arrest them
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