08 Jul 2015 22:12 IST

Why the going’s bad for the King of Good Times

Vijay Mallya has steadily ceded ground in all his key companies. Will he be left with nothing but his crown?

Ten years ago, in May 2005, Vijay Mallya launched Kingfisher Airlines. With pretty air-hostesses flanking him and an adoring media lapping up his every word, the entrepreneur’s new business seemed to be an extension of his personality – glamorous and high-flying.

Initially, it seemed like the flamboyant businessman’s rollicking life was only getting better. But now, ten years later, one knows it was the beginning of the endgame.

After the grounding of Kingfisher Airlines, ceding control of United Spirits Ltd (USL) and giving up sole ownership of Mangalore Chemicals and Fertilisers, Mallya will now play second fiddle to partner Heineken at United Breweries (UB).

The Dutch company has bought out the stake of the now Diageo-controlled USL in UB, making it the new promoter of the Indian brewer.

What went wrong?

Good times…

Mallya was a successful second-generation entrepreneur. He transformed the business he had inherited at the age of 28 into India’s biggest companies in the spirits (USL) and beer (UB) sectors. He fought many a battle and his run-in with fellow spirits entrepreneur Kishore Chhabria is part of industry lore.

The Bengaluru-based businessman was different from his peers. Unlike other frontline promoters of his generation, Mallya didn’t baulk at making public his lavish lifestyle. An American magazine had once published a picture of Mallya, wearing sun glasses, floating in a swimming pool with a beer mug in hand. Often in colourful suits, shirt with top buttons undone and sporting a beard and designer diamond studs, Mallya was living the tagline he was selling – King of Good Times.

In the years after the Kingfisher Airlines launch, the good times continued to roll. 2007 was a remarkable year for him. Kingfisher Airlines acquired Air Deccan. Mallya also bought Whyte and Mackay, the 1844-founded maker of premium Scotch whisky. And then in the sports arena, he and Dutch businessman Michiel Mol bought the Spyker F1 team and renamed it Force India.

In 2008, Mallya won the Bengaluru franchisee of Indian Premier League (IPL), and named it Royal Challengers Bangalore after the best-selling whisky in the USL portfolio. Along with his ownership of the Mohan Bagan and East Bengal football clubs and the Kingfisher Derby team, Mallya was at the time hailed as one of the biggest promoters of sports in the country.

The billionaire businessman also ventured into TV and launched a lifestyle channel with NDTV. In 2010, he became a Member of Parliament for the second time.

… turn bad

But the cigar-smoking Mallya, who was living the high life and getting clicked with Kingfisher Calendar models, hadn’t wagered for the economy to slowdown.

Like many of his peers who had made expensive acquisition in the boom-time preceding the 2008 slowdown, Mallya was also caught off-guard.

Even as he was hosting parties on his luxury yacht Indian Empress, Mallya was worried about the mounting debts in his companies. By 2009, his six listed companies had a total debt of ₹14,000 crore. Kingfisher Airlines was losing ₹200 crore every month as the aviation industry took a severe hit from the slowdown. With fewer passengers taking to the skies and costs mounting, the airlines started defaulting on salaries, interest payments to banks and fees to airports and airlines.

Mallya had pledged his stake in UB and USL as collateral. To raise money, he sold stake in USL to Diageo and brought in Heineken in UB. But soon, none of these efforts was enough to pay back Kingfisher’s debtors, who still have over ₹7,500 crore to recover from the airline. The banks have declared Mallya a wilful defaulter.

While reports say that Mallya is trying to wrest back control in RCB, which is owned by USL, the IPL team is most likely to end up with Sajjan Jindal. The owner of JSW Group is said to be among the frontrunners in the bid to buy RCB. And now with Heineken taking control of UB, Mallya will soon lose control over the football clubs too.

Not surprisingly, Mallya still might have some flight left in him. Not long ago a peer had called him ‘someone who has nine lives.’ At Mangalore Chemicals, Mallya is in talks with fellow promoter Saroj Poddar to hike his stake. But Mangalore Chemicals is a small part of the Vijay Mallya-empire. It is unlikely that the fallen king will see a repeat of the really good times.