FEATURES/Big Bet | May 18, 2009 | 47083 views

Vijay Mallya's Double Life

Beneath the cheerful opulence is a seasoned warrior battling to save his debt-ridden empire


urning tyre at Formula 1 races in Kuala Lumpur, Shanghai and Bahrain, cheering filly Set Alight at the Mumbai Derby, galloping to South Africa to watch Royal Challengers battle at the Indian Premier League (IPL). April was busier than usual for Vijay Mallya. But VT-VJM, his corporate jet that boasts of a Picasso as part of its beige and cream interiors, made it a breeze for the flamboyant booze baron.
May has proved equally busy. As the IPL winds down, the corporate jet touched down in the south of France, the playground of the rich and famous. There, the Cannes film festival that brings together the glitterati and global media provided the perfect setting for Mallya’s big party.
Previously, he had held parties at Cannes on his 312-foot yacht Indian Empress or at plush seven star hotels. But there’s no need for that anymore. Just a 10-minute boat ride away, on the picturesque island of Sainte Marguerite, is a $60-million villa that he owns. The black-tie event was hosted there on May 16.

Yet, in the middle of all this, Mallya has been leading a double life. He has spent the past few months negotiating for the survival of his empire. His debts have zoomed. So have his losses. The economic slowdown has made his daring bets of the boom period look like risky gambles. He must stem the losses, or even the healthier parts of his business will fall prey.
Since April, Forbes India has tried to get in touch with Mallya as well as the senior management of his group companies in Mumbai and Bangalore for this story. But the officials have been consistently travelling or too busy to respond.

Image: Shot on location at barefoot resort, Havelock Island, Andamans for Kingfisher Swimsuit Calendar 2008. Model: Tamara Moss
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Mallya has accumulated about Rs. 14,000 crore worth of debt spread across his liquor and airline businesses through costly acquisitions of global liquor companies like Whyte and Mackay and a bleeding balance sheet courtesy Kingfisher Airlines. In an email to Forbes India just before we went to press, Mallya said the number is “grossly overstated”. Refusing to answer a specific question on the debt he said, “The UB Group comprises several independent public and private companies…. Each independent company has its debt and its cash-flows and there is no case for aggregation.” However, a look at the published results for six listed companies in the group reveals a total debt of Rs. 14,231 crore for Kingfisher Airlines, United Spirits (USL), UB Holding, Mangalore Chemicals, UB Engineering and United Breweries (UB).

Supersonic Loss-making
At the core of this battle is Kingfisher Airlines, losing cash at an alarming rate in the middle of the decade’s biggest fall in passenger turnout. The debt on the airline’s books is over Rs. 5,000 crore, much of it guaranteed by United Breweries Holding Ltd., the group’s holding entity. As the airline’s monthly losses have crossed Rs. 200 crore, Mallya has no option but to push for more corporate guarantees from his other companies. Already, UB Holding is seeking shareholder approval for doubling the limit of its corporate guarantees to Rs. 12,000 crore. Most of these will be to support loans taken for Kingfisher Airlines.
It’s a pressure cooker situation inside the airline, say insiders. Four months ago, aircraft leasing company GE Commercial Aviation (GECAS) wrested back four jets it had leased to Kingfisher after the airline defaulted on lease payments. Since then, dozens of other lenders and suppliers have begun turning the screws. Among them are oil companies who have threatened to stop supplying fuel, unless Mallya settles their dues of nearly Rs. 1,000 crore.
The face of the smiling host at the French Riviera hardly showed it, but panic is spreading within the UB group. At Kingfisher, Mallya’s attempt to stem the cash burn has yielded few results and the cash-burn continues this quarter. Five of the A330 aircraft that Mallya so fondly fitted with bars, bartenders and chefs are either parked at airports or flying with many empty seats. The lease rental for each of the long-haul planes is about $1 million a month (Rs. 5 crore), and they are being used to operate the airline’s two international flights to London and Colombo.
If you took a peek into Mallya’s second life in the past two-three months, you would see him stalking the dusty corridors of the ministries of finance and aviation in Delhi, schmoozing with junior bureaucrats that he would have otherwise never condescended to acknowledge. The purpose? To lobby for soft loans and softer terms for airline repayments plus permission for foreign airlines to invest in Indian carriers. But the policy is in a flux and his bitter rival, Naresh Goyal of Jet Airways, has managed to counter-lobby and delay a decision till now.

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Comments (14)
Sibi Peeter Oct 11, 2011
mallya sir i am so inspired by you. i to want to be an entrepreneur like you.
Satheesh Lal Mar 20, 2011
Vijay Mallya's success goes to his school, La Martiners, Calcutta. Why people talk abot debts only. After all he is the king of good times. Keep it up Vijay.
Sushil Jan 5, 2010
Dear Mr. Vijay Mallya,

Wish you a Very Very Happy New Year 2010.

Dear Sir,

Everybody knows that you are a “King of Guts€ť . Your Guts would help to organize an €œOlympics€ť in India. I am not making fun, it is not a joke or not a dream.

You do anything, because you have the “Sword of ‘TIPU SULTAN’”.

Sourav Aug 29, 2009
He has spent money and now it is time to pay back, i agree with mallik that the debts are quiet less when compared with reliance's anil company. but it does not make the matter small and the company will face huge problem going ahead.
C Malik Jul 14, 2009
You should take a look at Anil Ambani's businesses. In comparison, Vijay Mallya's debt problems pale in significance.
Response to C Malik:
C L Agrawal Nov 30, 2009
Big Difference between Anil Ambani and Vijay Mallaya. Anil Ambani's father Dhirubhai Ambani built his Empire, by investing Public Money and make them his Partner in his successful Empire. Vijay Mallaya is doing by borrowing money and never paying back!
Vijay Mallya is a corrupt Businessman and a corrupt Politician. This combination is very serious termite eating away at India's treasure. In early 1990s he borrowed from crores of General Public in the name of “McDowell Krest” with full backing from UB Group. He siphoned off all the money. Later he changed the name to “Krest Finlease” and sold it off. Thus all the people who gave their hard earned money even pension amounts to him were left in a lurch losing it all to him. He has been building his EMPIRE with this looted money. He bought all officials from bottom to top. He even made a back door entry to Govt of India.
Who will bell the cat?
ram Jun 26, 2009
vijay mallya has never been a successful businessman. he's been a successful show off, though. am not surprised at these losses. one should look into NPAs with various Banks like Canara Bank, Vijaya Bank etc in Vijay Mallya's name.
atul chopra Jun 4, 2009
some smart airline executive once said about those who are not careful about airline business:
If u want to become a millionaire u should start an airline business.One precondition, u should first be a billionaire .
Karunanithi May 27, 2009
Mallaya is my favourite.The debt problem he is facing is temporary.He will rise from all these because he is confidance oriented guy.
v.mallikarjunan May 22, 2009
vijay mallya "king of good times as he is called" must concentrate on his core business ie., spirits business which is a cash cow rather than airlines.
Response to v.mallikarjunan:
debdip Mar 17, 2010
Dear Mr.Mallikarjunam,

It is just like having two child of a same father. You can't neglect one to give importance to the other.
Nataraj Mar 23, 2010
Mr. Mallya is a fighter, and i am sure he would come out of this financial mess his company is into.
Pawan Oberoi Mar 24, 2010
Its time Mr. Mallaya comes out of 'Alice in wonderland', before being another Ramalinga Raju. We don't want another 'Satyam' to happen.
Response to Pawan Oberoi:
bobby Cherian Mar 24, 2010
How true! Guess what his father built, he's going to pull it down.
There are so many people having money than the 14000 crore debt ridden Mallaya, one wonders what there is so much to flaunt with a debt of 14000 crores.
It's another Ramalinga Raju in the making, no doubt.
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