[T.S.R:17967] Kingfisher & UB Holdings Are Bankrupt-Veritas

 

UB Holdings Limited ("UB" or the "Company"), the parent of Kingfisher Airlines Limited ("KAIR" or "Kingfisher"), is teetering on the verge of bankruptcy, and incidentally, so is KAIR. However, a stock price of approximately Rs. 25 (<US$1) for KAIR and Rs. 114 (<US$3) for UB would suggest otherwise. We believe

investors should SELL both stocks to salvage whatever is left.

 

We believe that KAIR's book equity has been wiped out although audited financials pretend otherwise. The airline is burning cash at a rapid rate, we estimate Rs. 3,011 Million (US$ 65M) in Q1F12, is in a business that requires capital perpetually, has no pricing power given six carriers fighting over the major hubs in India, is dependent on the vagaries of the price of oil and the largesse of state-run financial institutions in India, and its parent UB has run out of financial room to accommodate the needs of this capital-starved child.

 

Moreover, in spite of the so-called debt recast, we believe that once the non cancelable operating and financing lease commitments of KAIR are included, KAIR's enterprise value is less than its contractually required cash obligations, implying negative residual equity value for KAIR, as illustrated.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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