In a major clampdown for non-compliance of Listing Agreement, top exchanges BSE and NSE announced suspension of trading in shares of Kingfisher Airlines and another group firm, UB Engineering, from next month.
Besides, the entire promoter shareholdings of these companies have been frozen with effect from Friday itself.
The action follows non-compliance to a Listing Agreement clause relating to timely preparation and disclosure of financial results by a listed company for two consecutive quarters. The results are required to be disclosed by listed companies on stock exchange platform for benefit of investors.
In separate circulars, BSE and NSE said that the trading would be suspended in securities of Kingfisher and UB Engineering - both parts of crisis-hit UB group headed by Vijay Mallya - with effect from December 1.
The suspension follows Sebi guidelines with respect to Standard Operating Procedure (SOP) for suspension and revocation of trading of shares of listed entities for noncompliance of the Listing Agreement that a listed company needs to follow pursuant to its shares getting listed and traded on a stock exchange.
Shares of Kingfisher, once touted as most luxurious airline in India, are currently trading below Rs 2 apiece and its market capitalisation now stands at just about Rs 150 crore (Rs 1.5 billion). At one point of time, before financial troubles began and led to its grounding in October 2012, the company carried a market valuation of close to Rs 10,000 crore (Rs 100 billion).
For the year ended March 2013, the carrier saw its net loss widen to Rs 4,301.12 crore. During that period, the gross income stood at Rs 683.46 crore (Rs 6.83 billion). A consortium of 17 banks has an outstanding debt of about Rs 6,521 crore (Rs 65.21 billion) from the now-grounded carrier and outside the consortium, there are some other loans also.
In Kingfisher, promoters have just 8.54 per cent stake, while public holding stands very high at 91.46 per cent.
The non-promoter shareholders include more than two lakh small investors, over 6,000 HNIs, over 2000 NRIs and 13 FIIs, among others.
Along with Kingfisher and UB Engineering, NSE has also announced trading suspension for securities of Varun Industries Limited on account of non-compliance with Clause 41 of the Listing Agreement for two consecutive quarters, that is quarter ended March, 2014 and June, 2014.
"Accordingly, the entire promoter shareholding of Varun Industries Limited, UB Engineering Limited and Kingfisher Airlines Limited shall be freezed with effect from November 7, 2014 till further notice."
"In case, Varun Industries, UB Engineering and Kingfisher Airlines complies with respective requirement/s including payment of fines on or before November 25, 2014 (five days before the proposed date of suspension), the trading in securities of the said companies will not be suspended," NSE said.
In UB Engineering, which has a market cap of about Rs 14 crore (140 million), public holds 59.26 per cent stake while promoter group controls 40.74 per cent.
In case these companies fail to comply with the provisions of the Listing Agreement on or before November 25, 2014, then trading in their shares would be suspended from December 1 and the suspension will continue till such time the company complies including the payment of fine.
After 15 days of suspension, trading in the shares of non-compliant companies would be allowed on Trade for Trade basis in on the first trading day of every week for six months, NSE said.
BSE has taken similar action against 21 companies, including Kingfisher and UB Engineering.
Others include Nilachal Refractories, Linkson International, Secure Earth Technologies, Ratan Glitter Industries, Bheema Cements, Arvind International, Elegant Floriculture & Agrotech India, Pretto Leather Industries, UT Ltd, Arihants Securities Ltd, Raghava Estates and Properties, Tutis Technologies, Valuemart Info Technologies, Ontrack Systems, Avon Corporation, Birla Pacific Medspa, Best & Crompton Engineering, Varun Industries and Maestros Mediline Systems.
Kingfisher Airlines is already facing a close regulatory scrutiny over suspected lapses in its accounting practices and the Corporate Affairs Ministry is looking into possible violations of Companies Act.
The airline, part of Vijay Mallya-led UB Group, has been grounded for over two years now after being bogged down by huge and mounting losses.
The carrier is yet to submit its annual financial results for the 2013-14 period to the stock exchanges.
In a filing to the BSE on August 26, the carrier had said that steps were being taken to appoint directors in order to comply with provisions of the Companies Act, 2013 and listing agreement with the stock exchanges.
"Thereafter, steps will be taken towards publishing the audited results for the year ended March 31, 2014 and for the quarter ended June 30, 2014," it had said.
Back in May, Kingfisher had informed stock exchanges that "there are hardly any employees attending office and the company is currently operating with skeletal staff making it difficult to audit and publish the results in time."
As part of the recovery process, banks in February last year decided to sell a portion of the collateral with them, including shares of its group companies United Spirits Ltd and Mangalore Chemicals & Fertilizers Ltd, Mallya's Goa villa, Kingfisher House in Mumbai and the Kingfisher brand, which was valued at over Rs 4,000 crore (Rs 40 billion) at the time it was pledged.