[T.S.R:17986] Why UB Holdings Is Bankrupt?.... Veritas

Kingfisher Airlines & UB Holdings Are Insolvent-Sell

 

With negative equity value at KAIR, it should be no surprise that UB, which has

marketable assets of Rs. 47,134M (US$ 1,037 M), compared to guarantees

provided on behalf of KAIR of Rs. 168,529M (US$ 3,638M), is also staring into a

black hole

2. We believe that the ill-conceived foray into the airline business

has already cost UB shareholders dearly, and that their ownership of India's

premier liquor and beer assets has been sacrificed at the altar of egoistic

ambitions.

 

More importantly, we believe that unless the banking institutions have

provisioned judiciously for the debt provided to KAIR - approximately Rs.

45,670M (US$ 986M) in loans to Kingfisher in addition to standby letters of

credit, etc. – it renders the disclosed capital position of the banks unreliable.

 

We also find the recent exhortations by the Indian Civil Aviation Ministry

involving Air India – the state owned carrier - to pull its act together

duplicitous. Our view stems from the fact that it could be on the diktat of the

regulatory authorities involving various ministries of the Government of India

that an unviable airline, KAIR, which is competing against the incumbent state

carrier and siphoning away its passengers on both the domestic and

international routes, is being supported via taxpayer-funded financial

institutions.

 

It's not only the financial institutions that are suffering. As per the F11 AR, KAIR

was also in default of the dues owed on behalf of its employees to regulatory

authorities, which it doesn't count as debt. As per the auditors of Kingfisher,

"Undisputed amounts payable in respect of employees state insurance of Rs.0.75 lacs (US$

1,619), provident fund of Rs.43.80 lacs (US$ 94,564), tax deducted at source of Rs. 42,297.52

lacs (US$ 93M), service tax of Rs.1,047.76 lacs (US$ 2.3M), professional tax of Rs.2.46 lacs

(US$ 5,412) (In all cases relating to the years 2008-09, 2009- 2010 and 2010 - 2011) and

fringe benefit tax of Rs. 450.70 lacs (US$ 1M) (balance of tax and interest for the financial

year 2008-09) …). The due dates for these amounts are as per respective statutes3.

 

Clearly, KAIR is funding itself at the expense of its employees and the Indian

exchequer, to which it owed tax deducted at source on behalf of its

employees of Rs. 4,229M (US$ 93M) as per the F11 AR.

 

We also find that the auditors have "qualified" reported financials of KAIR, on

multiple occasions, referencing accounting policy changes and expressing

disagreement with management's interpretation of Indian Accounting

Standards. Such practices would be subject to regulatory scrutiny in N.

America. Therefore, we believe that investors have neither reliable nor timely

information on Kingfisher.

 

With financial defaults galore, including salary delays, as outlined in recent

media reports, it is time the financial institutions put an end to the misery of

KAIR and let other airlines that can take to the sky, fly. Moreover, we also

believe that the current management of UB has lost all legitimacy to run the

vast liquor and beer business, and that the financial institutions should auction

the collateral to the highest bidder and recoup whatever is left for their

respective shareholders.

 

SELL UB Holdings Limited. SELL KAIR. We believe that both organizations are

effectively insolvent.

 

 

 

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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