GoFirst Airlines owes Rs 6,521 crore to banks
GoFirst Airlines owes Rs 6,521 crore to its financial creditors, according to insolvency filings made by the airline in the NCLT. These lender include Central Bank of India, Bank of Baroda, Axis Bank, IDBI Bank, and Deutsche Bank. Recovering these loans will prove difficult for the lenders given the severe financial distress faced by the company.
The highest exposure to the airline is held by Central Bank of India, with nearly Rs2,000 crore, followed by Bank of Baroda with around Rs1,430 crore, and Deutsche Bank with around Rs1,320 crore. IDBI Bank has a much smaller exposure of Rs50 crore.
The lenders are set to meet on 4 May 2023 to discuss their future course of action regarding their exposure to the cash-strapped airline.
In an exchange filing the Central Bank of India said: “Central Bank of India’s outstanding exposure to Go First Airlines as on 31st March 2023 is Rs1,305 crore and an additional amount of Rs682 crore sanctioned under emergency line of credit guaranteed by Government of India. Our exposure to the Company is only 0.91 percent of our total advances as of 31.3.2023 and interest charged up to 30 April, 2023, is serviced by the company.”
The bank has also made contingency provisions of more than Rs1,500 crore in the books to strengthen the balance sheet.
Axis Bank has clarified that it has no outstanding exposure to the airline, stating, “We would like to inform that as on date Axis Bank has Nil (fund-based and non-fund based) outstanding from Go Airlines.”
The impact of banks’ exposure to the GoFirst Airlines was visible in the stock market, with shares of Central Bank of India declining 5 percent to Rs28.65 apiece, Bank of Baroda shares falling 2 percent to Rs184 apiece, while Axis Bank shares closed 1 percent to Rs860 apiece on the BSE.
Lenders are not optimistic about the recovery of loans, with many claiming that the process becomes time-consuming due to many claims and counterclaims once a company files for bankruptcy. Recovery from such cases typically only reaches 20-30 percent of total loans. The airline’s total liabilities to all creditors stand at Rs11,463 crore, including dues to banks, financial institutions, vendors, and aircraft lessors.
Wadia Group-owned GoFirst Airlines on 2 May 2023 filed for insolvency under Section 10 of the IBC Act.
