Bankers say Mallya's cases in India will weaken as he would focus on fighting extradition; foremost on their agenda is sale of UB and USL shares that may fetch them over Rs 2,000 crore
Indian bankers believe the noose is finally tightening around the most high-profile wilful defaulter, Vijay Mallya.
Many bankers say this could be the beginning of the long battle in and out of courts so that banks could recover the money.
First on their agenda is the sale of shares of United Breweries and United Spirits that are together expected to bring in over Rs 2,000 crore if the courts allow banks to sell them off, according to a senior banker of the 17-member consortium led by State Bank of India.
The loan outstanding is Rs 9,091.50 crore, of which the principal amount borrowed by Mallya is around Rs 2,500 crore, remaining is the interest accrued.
A senior banker said, "The fact that other countries are also helping India to extradite Mallya is an encouraging sign. Courts in India may also move favourably towards the lenders. Mallya has pledged a good portion of shares in both United Breweries and United Spirits with the banks which, if sold at today's prices, will fetch us about Rs 2,000 crore. But some of these shares are indirectly held by some other company and the courts have to allow us to take possession."
Mallya was proclaimed a defaulter in 2014 by Kolkata-based United Bank of India, fighting off a number of court hurdles before they could even call him a wilful defaulter. It was after this that the bigger banks like State Bank of India and Punjab National Bank followed suit.
So far, the banks have recovered about Rs 600 crore from the sale of USL shares and also sold off the plush seaside villa in Goa earlier this month for Rs 73 crore.
Another banker said, "Our proceedings with Mallya were delayed because at every point Mallya approached the courts. Corporate guarantee of United Breweries Holdings and also his personal guarantee were invoked but nothing could be done. Now most of his money will be spent in fighting off the extradition case in UK rather than the legal hurdles in the country."
Besides the shares, banks also have in their possession, Kingfisher House in Vile Parle, near the domestic airport in Mumbai. But the service tax department, income tax department and some other government agencies have a claim on the property.
After prolonged negotiations with the Kingfisher management from 2011 when stress started appearing in the company's repayment abilities the banks gave the company ample time to repay its dues. In 2013 the consortium of banks declared the account as an NPA and ordered a forensic audit on the company when it was discovered that the company had diverted money to associate business.
A senior banker from the consortium said, "The stress for repayments appeared when United Breweries paid Rs 550 crore in 2007 for a 26% stake in Air Deccan. Just a year later, Kingfisher Airlines debt started to balloon to reach Rs 934 crore due to huge spike in oil prices and being bogged down to run the low-cost airline Kingfisher Red."
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A senior banker said, "The fact that other countries are also helping India to extradite Mallya is an encouraging sign. Courts in India may also move favourably towards the lenders. Mallya has pledged a good portion of shares in both United Breweries and United Spirits with the banks which, if sold at today's prices, will fetch us about Rs 2,000 crore. But some of these shares are indirectly held by some other company and the courts have to allow us to take possession.")
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