Beneath the cheerful opulence is a seasoned warrior battling to save his debt-ridden empire
Burning 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.
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. The economic slowdown has made his daring bets of the boom period look like risky gambles. 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).
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. 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.
Mallya’s golden goose, of course, is his alcohol business. USL has 52 percent market share. It is this edge that Mallya will try to cash on. A lesser businessman might have caved in under the burden but not Mallya. Those who know him closely say he will pull through, just like he has done on many occasions in the past.
He managed to swing is a marketing agreement with Dutch beer maker Heineken to sell the latter’s brands through the UB network. The deal is expected to fetch UB Rs. 300 crore.
But the levels of debt have spooked bankers. So while Mallya is pushing for a package of about Rs. 2,000 crore to pull his airline out from the brink, negotiations have been hard.
Mallya urgently wants to conclude at least two deals. First, he has set a target to raise $800 million for a 14.9 percent stake in USL. He is also banking on a 49 percent stake sale in Scotch whisky maker Whyte and Mackay with a distribution management deal. If this works out, he’s hoping to make USL debt-free in one fell swoop.
(This story appears in the 04 June, 2010 issue of Forbes India. To visit our Archives, click here.)