India Insight

Selling stake in alcohol business – Mallya’s last roll of dice?

March 29, 2012

It’s always spectacular when things go horribly wrong for the rich and famous.

When Vijay Mallya — the king of good times — launched a high-profile airline in 2005, his primary motive was to use the platform to promote his best-selling Kingfisher beer.

“I can’t advertise my brand. I have to live my brand,” he said then.

Owning an airline was probably far more glamorous than being a liquor baron, particularly in India, where drinking still is a taboo. On top of that, a premium airline in one of the fastest growing economies with business travel growing at an even faster speed would ensure additional revenue and add another feather to Mallya’s cap.

It was a perfect plan. It indeed was moving swiftly as Kingfisher soon occupied over a fifth of India’s traffic and Mallya’s kingdom expanded.

But not all good things stay forever.

After his airline nosedived, he is now said to be  mulling selling a stake in his alcohol business to pocket some much-need cash for his ailing carrier.

This is irony at its best. And sad for business in general.

The airline he wished would become his way of promoting his alcohol brands, has now forced Mallya to potentially lose control of his prized company.

He tried everything else he could to save the airline, to arrange for half a billion dollars at least to pay its creditors, airports, lessors and tax authorities.

Mallya, a lawmaker himself, lobbied hard to convince the government to allow foreign carriers to invest in local airlines, but that could still take some time to materialise.

His promises of coming up with investors and a recovery plan are now taken with a pinch of salt, and industry watchers agree nothing short of a miracle can save Kingfisher Airline from an imminent demise.

In a slowing economy, raising funds is a tough job, even for healthy companies.

Mallya’s clout with top politicians in New Delhi surely has helped him delay the inevitable till now, but with no investor in sight and a debt burden of $1.3 billion, selling his alcohol assets could be his last and arguably the best bet.

There is business logic in that too.

Kingfisher’s loans are secured in part by a combination of guarantees by the UB group, as well as Kingfisher shares, Mallya’s personal guarantees, Mumbai real estate assets and the Kingfisher brand itself.

If Kingfisher fails, all UB Group companies will be in trouble too. Debtors will go after the alcohol giant to recover their money, further diminishing Mallya’s sheen.

Somehow saving the airline, if need be by selling his alcohol assets, can still save some pride for Mallya.

This will be a hard decision for the man, but it will at least answer skeptics who fail to understand how Mallya, who owns one of the costliest yachts in the world, apart from  cricket, soccer and Forumla One teams, does not have the money to pay Kingfisher’s pilots or crew.

Comments
3 comments so far | RSS Comments RSS

mallaya could have made it better..but he was so consumed by the mega tycoon image that he made a lot of blunders…kfa’s loss hadn’t started yesterday or last week or last month…the fact is it was never in the green…and yet mallaya bought an IPL team..invested 500 million us dollars in formula 1 races…bought several foreign liquor/beer companies….financial mismanagement and larger than life image building exercise has done him in…even now instead of trying to revive his airlines.it is wiser to windup the biz..pay his creditors..and concentrate on what he know best…to keep india,especially kerala drunk.

Posted by worldtraveller | Report as abusive
 

Tough times for the Liquor barren! Best would be to focus on core business and sell the airline. It’s fire time for the airline business and its not wise to add liquor! I would still prefer King Fisher to any other bear in the world.

Posted by sandeshonline | Report as abusive
 

King Fisher probably the worst beer in the world.

Posted by pokapipe | Report as abusive
 

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