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Kingfisher Case

Kingfisher Airlines was founded in 2005 by Vijay Mallya and grew to become the second largest airline in India's domestic market. However, Mallya focused on expansion rather than profitability, and the airline began incurring large debts. As losses mounted, Kingfisher Airlines struggled and eventually had to shut down in 2012 after defaulting on loans totaling around 9,000 crores (US$1.2 billion) to multiple banks. The document analyzes Kingfisher's financial statements from 2009-2013 which show declining revenues, increasing expenses and losses, demonstrating how overexpansion and debt led to the airline's demise.

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79 views

Kingfisher Case

Kingfisher Airlines was founded in 2005 by Vijay Mallya and grew to become the second largest airline in India's domestic market. However, Mallya focused on expansion rather than profitability, and the airline began incurring large debts. As losses mounted, Kingfisher Airlines struggled and eventually had to shut down in 2012 after defaulting on loans totaling around 9,000 crores (US$1.2 billion) to multiple banks. The document analyzes Kingfisher's financial statements from 2009-2013 which show declining revenues, increasing expenses and losses, demonstrating how overexpansion and debt led to the airline's demise.

Uploaded by

BizEasy Advisors
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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KINGFISHER AIRLINES :- A CASE TO ANALYSE FINANCIAL STATEMENT BY

USING VERTICAL AND HORIZONTAL ANALYSIS


He belonged to a well to do family, his father Mr. Vitthal Mallya was an accomplished
investor who invested in ‘United Breweries Limited’ and purchased stakes in this company
and later on he became the director of this company and continued to become the chairman.
Mr. Vitthal Mallya died in 1983, after which Vijay Mallya became the chairman of ‘United
Breweries Limited’ (hereinafter UB Group).

Vijay Mallya took charge of UB Group when the turnover was 350 crores. Under his
chairmanship, the valuation of the company went from 40 crores to 6000 crores. He was a
successful businessman who invested in various fields such as chemicals, engineering
business, liquor, newspaper etc. In 2015, UB Group was the 2nd largest liquor maker in the
world. He was given a Doctorate in Business Administration by the Southern California
University because he was administering such a huge business which was growing at an
unexplainable rate.
In 2005, Vijay Mallya launched ‘Kingfisher Airlines’ which was known for its luxury travels.
Soon it became the 2nd largest airline in the domestic market having 1/4th of India’s share of
domestic travellers. He wanted to expand Internationally and hence he acquired ‘Air Deccan’.
His company was running in negative and he only focussed on expansion rather than
profitability, that’s the reason when he acquired ‘Air Deccan’ his debt started increasing.
Market stake of Kingfisher started decreasing eventually and it acquired more debt. He opted
for Foreign Direct Investment (FDI) to cover his debt and negotiated with the Etihad
Company, but FDI was not allowed at that time in the civil aviation Industry in India.
Kingfisher Airlines entered a bad phase and employees started leaving, eventually Kingfisher
Airlines shut down. In December, 2012 the government also cancelled the license of
Kingfisher Airlines. Burden of loans acquired from banks started increasing after that, Vijay
Mallya started taking maximum loans from PSU Banks (Public Sector Banks). State Bank of
India alone issued a whopping 1600 crore loan to Kingfisher Airlines. Vijay Mallya took
loans from 17 different banks out of which the majority were PSUs.
Banks finally applied for debt restructuring whereas the debt was converted into equity shares
of 1400 crores loan by valuing shares of Kingfisher Airlines at Rupees 64.49/- which were
trading at only Rupees 39.90/-, this was all possible due to good political connections as he
was a Rajya Sabha member at that time. Later on, even IDBI bank provided around 800 crore
loans to Kingfisher Airlines when it was already in huge losses.
In March 2016, when the loan became outstanding around 9000 crores along with interest,
Vijay Mallya agreed to pay approximately 6000 crores which was the principal amount along
with the condition that all the other loans should be waived. Banks did not agree to this
condition and therefore, Vijay Mallya could not repay the loan and went to Britain. Now he is
in the ‘Wanted List’ for wilful default.
Kingfisher Airlines has to pay around 9000 crores rupees along with interest to 17
different banks:
BANK AMOUNT
SBI 1,600
PNB 800
IDBI 800
Bank of India 650
Bank of Baroda 550
United Bank of India 430
Central Bank 410
UCO Bank 320
Corporation Bank 310
State Bank of Mysore 150
Indian Overseas Bank 140
Federal Bank 90
Punjab and Sind Bank 60
Axis Bank 50
Total of 14 Banks 6,360
Other 3 Banks 603
Total of 17 Banks 6,963
The following data gives a detailed overview of the Financial statement of Kingfisher
Airlines. Data is provided for the period of five years. March 2013 is the last year in which
the company presented its Financial statements. After that, the company closed down its
operations. You are given this opportunity to identify what went wrong with the company
and was there anyway, by which it can be mitigated.

Kingfisher Airlines Previous Years »


Standalone Profit & Loss
------------------- in Rs. Cr. -------------------
account
Mar 13 Mar 12 Mar 11 Mar 10 Mar 09

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations
501.38 5,493.41 6,233.38 5,067.92 5,269.17
[Gross]
Revenue From Operations
501.38 5,493.41 6,233.38 5,067.92 5,269.17
[Net]
Other Operating Revenues 0.00 0.00 126.26 0.00 0.00
Total Operating Revenues 501.38 5,493.41 6,359.64 5,067.92 5,269.17
Other Income 182.08 330.50 135.92 24.36 836.43
Total Revenue 683.46 5,823.91 6,495.56 5,092.27 6,105.60
EXPENSES
Cost Of Materials Consumed 0.00 0.00 0.00 1,843.88 2,653.81
Aircraft Fuel Expenses 402.17 2,945.89 2,274.03 0.00 0.00
Aircraft Lease Rentals 710.08 868.45 984.00 0.00 0.00
Operating And Direct Expenses 0.00 0.00 0.00 1,108.82 1,112.85
Employee Benefit Expenses 349.16 669.51 676.01 689.38 825.42
Finance Costs 1,436.15 1,276.34 1,312.94 1,007.67 696.23
Depreciation And Amortisation
238.78 341.87 241.04 162.80 133.20
Expenses
Miscellaneous Expenses Written
0.00 0.00 0.00 54.49 38.39
Off
Other Expenses 1,848.24 3,167.96 2,528.34 2,343.36 2,563.38
Total Expenses 4,984.58 9,270.00 8,016.35 7,210.39 8,023.28
Mar 13 Mar 12 Mar 11 Mar 10 Mar 09

12 mths 12 mths 12 mths 12 mths 12 mths

Profit/Loss Before Exceptional, -


-3,446.09 -1,520.78 -2,118.12 -1,917.67
ExtraOrdinary Items And Tax 4,301.12
-
Profit/Loss Before Tax -3,446.09 -1,520.78 -2,118.12 -1,917.67
4,301.12
Tax Expenses-Continued Operations
Deferred Tax 0.00 -1,118.08 -493.42 -764.63 -558.88
Other Direct Taxes 0.00 0.00 0.03 64.63 12.50
Total Tax Expenses 0.00 -1,118.08 -493.38 -700.00 -546.38
Profit/Loss After Tax And -
-2,328.01 -1,027.40 -1,418.11 -1,371.29
Before ExtraOrdinary Items 4,301.12
Prior Period Items 0.00 0.00 0.00 31.28 0.00
Extraordinary Items 0.00 0.00 0.00 -357.65 -237.54
Profit/Loss From Continuing -
-2,328.01 -1,027.40 -1,744.49 -1,608.83
Operations 4,301.12
-
Profit/Loss For The Period -2,328.01 -1,027.40 -1,744.49 -1,608.83
4,301.12
Mar 13 Mar 12 Mar 11 Mar 10 Mar 09

12 mths 12 mths 12 mths 12 mths 12 mths

OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) -56.27 -46.92 -40.16 -65.60 -60.50
Diluted EPS (Rs.) -56.27 -46.92 -40.16 -65.60 -60.50
VALUE OF IMPORTED AND
INDIGENIOUS RAW MATERIALS
Imported Raw Materials 44.20 46.51 14.63 0.00 0.00
Indigenous Raw Materials 6.12 13.12 42.06 0.00 0.00
STORES, SPARES AND LOOSE
TOOLS
Imported Stores And Spares 0.00 0.00 0.00 23.32 34.49
Indigenous Stores And Spares 0.00 0.00 0.00 17.57 16.70
DIVIDEND AND DIVIDEND
PERCENTAGE
Kingfisher Airlines Previous Years »
Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
Mar 13 Mar 12 Mar 11 Mar 10 Mar 09

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES


SHAREHOLDER'S FUNDS
Equity Share Capital 808.72 577.65 497.78 265.91 265.91
Preference Share Capital 553.10 553.10 553.10 97.00 97.00
Total Share Capital 1,361.82 1,130.75 1,050.88 362.91 362.91
-
Reserves and Surplus -6,213.15 -4,002.07 -4,268.84 -2,496.36
14,281.64
-
Total Reserves and Surplus -6,213.15 -4,002.07 -4,268.84 -2,496.36
14,281.64
-
Total Shareholders Funds -5,082.40 -2,951.19 -3,905.93 -2,133.45
12,919.82
Equity Share Application Money 0.00 0.00 0.00 7.48 8.11
NON-CURRENT LIABILITIES
Long Term Borrowings 6,898.54 5,695.40 6,305.84 6,100.73 3,781.71
Deferred Tax Liabilities [Net] 0.00 0.00 0.00 406.67 364.35
Other Long Term Liabilities 4.08 11.50 7.25 0.00 0.00
Long Term Provisions 15.60 19.59 25.94 0.00 0.00
Total Non-Current Liabilities 6,918.23 5,726.49 6,339.02 6,507.39 4,146.06
CURRENT LIABILITIES
Short Term Borrowings 1,759.10 2,334.60 604.14 1,821.87 1,883.85
Trade Payables 2,643.17 2,816.52 2,199.06 2,602.66 2,836.87
Other Current Liabilities 4,346.24 3,218.64 2,026.00 898.70 613.40
Short Term Provisions 64.13 66.18 36.17 46.77 45.55
Total Current Liabilities 8,812.63 8,435.94 4,865.37 5,370.00 5,379.67
Total Capital And Liabilities 2,811.04 9,080.03 8,253.20 7,978.95 7,400.39
ASSETS
NON-CURRENT ASSETS
Tangible Assets 709.13 1,431.55 1,551.76 1,506.21 1,532.09
Intangible Assets 2.80 11.47 20.13 48.31 43.43
Capital Work-In-Progress 0.00 0.00 0.00 980.61 1,630.95
Fixed Assets 711.93 1,443.03 1,571.89 2,535.12 3,206.46
Non-Current Investments 0.03 0.03 0.05 0.05 0.05
Deferred Tax Assets [Net] 0.00 4,045.87 2,927.78 2,841.03 2,034.08
Long Term Loans And Advances 1,106.40 1,922.06 1,898.11 0.00 0.00
Other Non-Current Assets 127.41 50.22 103.28 145.64 4.51
Total Non-Current Assets 1,945.76 7,461.19 6,501.10 5,521.84 5,245.11
CURRENT ASSETS
Inventories 166.07 204.79 187.65 164.88 147.25
Trade Receivables 20.05 187.59 440.53 322.49 229.84
Cash And Cash Equivalents 19.05 182.27 252.36 206.47 171.87
Short Term Loans And Advances 619.85 1,032.10 849.00 1,763.27 1,439.89
OtherCurrentAssets 40.26 12.09 22.56 0.00 166.45
Total Current Assets 865.29 1,618.84 1,752.10 2,457.10 2,155.28
Total Assets 2,811.04 9,080.03 8,253.20 7,978.95 7,400.39
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS
Contingent Liabilities 25,229.58 27,501.22 24,446.60 23,135.77 27,468.70
CIF VALUE OF IMPORTS
Raw Materials 0.00 0.00 0.00 31.43 85.41
Stores, Spares And Loose Tools 15.02 100.77 70.89 0.00 0.00
Capital Goods 0.00 0.01 73.37 6.26 4.99
EXPENDITURE IN FOREIGN
EXCHANGE
Expenditure In Foreign Currency 1,996.29 3,427.41 2,499.91 2,749.17 2,260.93
REMITTANCES IN FOREIGN
CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign
- - - - -
Currency
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods - - - - -
Other Earnings 12.25 1,363.23 832.49 698.89 239.54
BONUS DETAILS
Bonus Equity Share Capital 27.28 27.28 27.28 27.28 27.28
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted
- - - - -
Market Value
Non-Current Investments
0.05 0.05 0.05 0.05 0.05
Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted
- - - - -
Market Value
Current Investments Unquoted
- - - - -
Book Value

Source : Dion Global Solutions Limited


By using this information, you are supposed to prepare
1. An Excel file that shows Horizontal and Vertical analysis of Financial statements.
2. A presentation showing the interpretation and analysis of the Analysis done.
By doing this analysis, you can try to find the points which gives indications of wrong
happenings into the organization during the period.

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