Vijay Mallya Story: What went wrong?
The “Richard Branson” of India, Business tycoon of Indian Vijay Mallya has been declared as a wilful defaulter in the eyes of Indian Banks. He is not the only one in the list but he is number one in the list for sure! The empire of Vijay Mallya has been shattered and now he is in exile in London, seeking to escape and refusing to come back to India and appear before the Supreme Court. So what went wrong in the glamour story of Mr. Mallya – the king of the empire given to him after the demise of his father.
Vijay Mallya became the chairman of UB group after his father’s demise in 1983. He came to limelight, when he launched Kingfisher, which became the largest selling brand. All was going great and Vijay Mallya was recognised as one of the biggest business tycoons of India. He was also nominated as a member in Rajya Sabha. The downfall of Vijay Mallya was attributed to his one single business of which he was personally very ambitious about – “Kingfisher Airlines” which he launched in 2003 (and started operations in 2005).
He positioned the brand in the premium segment, but even before the airlines was launched, the aviation industry started bleeding due to sky rocketing oil prices and also the government service tax and various excise duties. However, it was a regime and time of easy credit in the Indian Banking Industry and the banks had loosened the screws of tight credit to curb liquidity crisis. In 2009, he received a loan of around Rs. 900 crore for Kingfisher from IDBI bank. The airlines, in no time, became the second largest domestic airline carrier by then and was soaring high. In 2006, he bought Herbertsons, makers of Bagpiper whisky and Romanov vodka. In 2007, he tookover F1 team Spyker and renamed it to Force India. He then bought British whisky maker Whyte and Mackay for £595 m. In 2008, Mr. Mallya acquired the bleeding Air Deccan for INR 550 crore to buy 26% stake which allowed Kingfisher to operate its flights internationally. He was on a shopping spree.
But as oil prices started to climb (an average of $72.68 per barrel between 2005 and 2010) and the company struggled to run a business that included a full-service airline and a low-cost carrier. Its finances floundered and its debt burden and losses surged. By the end of March 2008, Kingfisher’s debt had mounted to Rs 934 crore. And as crude prices touched a high of $140 per barrel, the aviation industry started bleeding the government made several attempts and gave bailout packages to the company and the industry as a whole but it helped little.
By 2009-10, Kingfisher Airlines had accumulated a debt of over Rs 7,000 crore. It continued to pile up losses and had already turned net-worth negative. That was also the year Kingfisher Airlines turned into a non-performing asset (NPA) or a bad loan for banks. In November 2010, banks for the first time restructured Kingfisher’s debt.
Banks gave numerous loans to the already debt ridden Kingfisher airlines. Mallya was forced to cut down the salaries of his employees and also didn’t paid the employee provident fund (EPF) to the government. He literally pledged all the kingfisher’s movable assets to the banks equipment (Rs 101.58 crore), computers (Rs 22.43 crore), office equipment (Rs 13.39 crore), furniture and fixtures (Rs 33.35 crore) and an aircraft (Rs 107.77 crore).
In 2014, United bank of India became the first bank to declare Mallya, a wilful defaulter. Other banks like SBI and PNB followed it and now 17 different banks have declared him, a wilful defaulter. Being a wilful defaulter not only hurt his own image, but also of our country as a whole – as his story has become an international story.
This is what Mallya owes to various banks:
Meanwhile, Mallya’s troubles have only been growing. In February this year, the board of United Spirits Limited (the company his father set up) asked him to resign as chairman after an internal probe alleged financial irregularities. The man himself meanwhile, is supposed to be escaping in London and is not willing to come back at any cost.
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