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Of why Kingfisher Airlines failed ..
Of why public sector banks are more guilty ..
Of why the ministry of civil aviation is more guilty ..
 
 

Lessons from Kingfisher Airlines

for; Government, Companies across sectors, Political Parties & Management Students

 
 

Of why the public sector banks are more guilty ..

 

Excerpt from the 'Branding Logic' article;

'Kingfisher - a popular beer brand in India, nothing else'  - 7 February 2013

 

"The bankers, a big set of them, whose negligent actions have drained millions, have already started yelling for the return of their money. Brazenly, they now claim, everything that belongs to Mr. Mallya belongs to them. Like laymen in lending, these experts of safe lending gave off millions against the dubious brand asset called Kingfisher Airlines …"

 
 

"The KFA fiasco also tells that banks in India are grossly ignorant about lending against brands. KAL (The UB Group) was just too smart to draw more from banks with a valuation note from Grant Thornton which valued the brand KFA at Rs.3406 cr."

 
 

"Our bankers buying into it only speaks of their lack of understanding of how brand impacts business and its relative valuations. KFA’s value as a brand asset, in terms of cash it can fetch to serve as collateral could have been no more than 20% of that valuation and with the business failing in a hurry ..."

 
 

Excerpt from the article;

'Helping the rich with cash' published in governancenow.com - 15 February 2014

 

"A good chunk of the big money lending they do happen to be for big and thriving businesses and much of it defies social and even business prudence. Ever growing and never under control NPAs they build up (they build up) tell about the fault in the system and not really of unexpected casualties caused by economic upheavals. A good check on the NPAs of these banks would tell that most of them relate to fewer accounts, belong to the rich – individuals and otherwise thriving business groups."

 
 

Excerpt from the 'adve advice for Govt of India' article; 'Won’t the public sector banks make lessons from

their NPAs and make them public?'. Published in governancenow.com - 1 July 2015

 

"A good part of bad loans can be attributed to ignorance on the part of these banks; of finer aspects of failing businesses and of the tricks of smarter managements in drawing money with clever arguments and dishonest arrangements. The group of banks that lent to 'Kingfisher Airlines' did so buying the argument that its (Kingfisher Airlines's) extrapolated revenue potential largely derived from its popular parent brand 'Kingfisher' as its brand value which in fact, by the branding perspectives was just ‘nothing’ and thus the banks ended up with a brand with zero collateral value."

 
 

"But to be able to lend on the strength of business potential banks needs to learn finer aspects of the businesses across sectors they wish to lend in. To be able to lend against brand value banks need to have a good understanding of the term in the first place. The careless lending to Kingfisher only tells; they don’t."

 
 

"Very obvious ones among the likely reasons for this mountain of NPAs are; i) lending to projects which are not fit case for lending by banks. Some of the large loans to infrastructure projects prove this point, ii) big and wealthy groups and individuals 'managing' loans out of banks 'out of contacts' many times in excess of allowable limits – 'freeloading' as termed by the RBI Governor, iii) lack of abilities on the part of banks in understanding business fundamentals beyond collateral security and run of the mill feasibility reports, and iv) outright fraud cases."

 
 

Excerpt from the 'adve advice for Govt of India’ article; 'Six Innovations Govts banks (Govt) would shy to try'. Published in governancenow.com - 21 January 2015

 

"To put it as it is, for the generally concerned public, the news from the Gyan Sangam hardly had anything reassuring. A louder one was that of the bankers telling the govt - spare us from your wishes – to be able to manage more objectively. The govt in turn was quick to put in writing of its intentions to be hands off. But in reality the kind of interference that hurts banks are those that are invisible and happen uncontrolled at multi-levels, mutually."

 
 

"In the comfort of lazy competition and the govt tutoring, banks happily over served, over the years, certain classes and segments sinfully under serving the larger market."

 
 

"Banks should learn simpler lessons from the mistakes in HR management in the airlines business and also from their own unwise lending to the unwisely run aviation sector. The gang lending of such huge public money by the PSU banks so callously to Kingfisher Airlines should ideally be used as an example to punish; impropriety, dishonesty and even incompetence in PS banks towards effectively curbing notorious political meddling."

 
 

"The typical line reporting structure and the classification of loans by volume for the sanctions seems to have put the authority on all big loans that make up the larger chunk with just a few at the top who also wield their powers to influence smaller advances down the line."

 
 

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Of why Kingfisher Airlines failed ..
Of why public sector banks are more guilty ..
Of why the ministry of civil aviation is more guilty ..
 
 

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