India: Kingfisher Airlines Assets Auction Failed

No takers for the King of Good Times!!

Attempts by a consortium of banks to recover Rs. 9,000 crore invested in Vijay Mallya's Kingfisher Airlines failed to attract buyers as the auction held on April 20, 2016, ended without attracting any bidders at the reserve price. The auction apparently failed because of the high base price.

Kingfisher stopped flying in October 2012 for want of cash, leaving creditors, suppliers and employees unpaid and owed banks Rs 9,091 crore ($1.4 billion Approx.). But, now comes the latest twist on an ongoing problem of Vijay Mallya's Debt recovery and Financial Dispute when the banks realised that they couldn't recover much from the assets pledged by Mallya. Interestingly, Indian Banks decided to take possession of nine trademarks to recover debt from Mallya and other defaulters.

SBICAP Trustee Company Limited (SBICTCL) a subsidiary of SBI Capital Markets Limited and a Debenture Trustee registered with Securities Exchange Board of India (SEBI) recently on March 10, 2016 disclosed in a notice that the trademarks and brands seized were covered by an assignment deed dated March 18, 2011 that Kingfisher Airlines Ltd - with United Breweries (Holdings) Ltd and Vijay Mallya acting as guarantors - had signed with the banks.

The following are the list of trademarks of Kingfisher Airlines that was auctioned on April 30 –

Sl. No Application No Class Brands/Trademarks Status
1. 1300950 16, 25, 39 Flying Models (word mark) Registered & valid up to 06.08.2024
2. 1300951 16, 39 Fly the Good Times (word mark) Registered & valid up to 06.08.2024
3. 1300952 16, 39 Funliner Registered & valid up to 06.08.2024
4. 1318243 39, 42 Kingfisher (Label Mark) Registered & valid up to 01.11.2024
5. 1319150 39 Flying Bird Device Registered & valid up to 05.11.2024
6. 1519887 39 Fly Kingfisher (Label) Registered & valid up to 10.01.2017
7. 1519888 39 Fly Kingfisher (world) Registered & valid up to 10.01.2017
8. 1519889 39 Fly Kingfisher (world) Registered & valid up to 10.01.2017
9. 1519890 39 Fly Kingfisher (Label) Registered & valid up to 10.01.2017

In the year 2012, a global consultancy firm Grant & Thronton valued Kingfisher trademarks at Rs 4,111 crore or roughly $1 billion, when the airline's license was suspended by India's aviation regulator Director General of Civil Aviation (DGCA). The base price for the trademarks had been set at Rs 366.70 Crore. This subsequently concludes that the individuals/groups who would be interested in the auction must be having or be ready to start/incorporate their own airlines related business. The most relevant question to be raised here is "Who would be ready to invest on trademarks of defunct company?" However, there are precedents existing where Eastern Airlines, a now defunct airline major, went bankrupt and then its intellectual property was picked up by another airline company called New Easter Airlines in USA and commenced operation in mid-2015.

In fact Indian Banks passing loans against intellectual property for reputed and well-known brands is not a new form of practice. IP financing, or the use of IP assets (trademarks, design rights, patents and copyright) to gain access to credit, is gaining increasing attention in IP circles. Multinational corporations as well as small and medium sized enterprise, are leveraging their IP assets in exchange for finance, and lending institutions around the world are increasingly extending their business to provide loans on the basis of IP. Higher asset values may also help in negotiations with a company's bank and facilitate access to credit, or help to negotiate cheaper interest rates on credits. Intellectual property though intangible but are always secured assets.

As far as Kingfisher is concerned, the brand has always been with glamour, vibrancy and lifestyle to the skies. The brand image of the parent Kingfisher brand gave further credibility to its marketing campaigns, featuring India's then top models, but it seems that times have really hit hard 'the King of good times', as it is no longer seen as a positive association.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Bijit Das
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