Mr Mallya was broke 20 years ago. Can he again work his way out of trouble by selling assets?
“After vintage cars and race horses, the flamboyant UB Group chairman has collected a clutch of sick companies. To pull through, he is selling assets.” No, this is not the latest report on the flamboyant Vijay Mallya’s clutch of sick assets like his airline, his Formula 1 venture or his Indian Premier League team. This was the headline of a January 1992 cover story of a magazine outlining how Mr Mallya, then 36, heading a Rs1,865 crore group, had come to a near standstill after some ill-conceived acquisitions.
His losses then, even adjusted for inflation, were significantly lower and Mr Mallya got out of the sticky situation by selling real estate, Berger Paints, Best & Crompton and Kissan Products. Then, too, Mr Mallya had tried to diversify out of liquor business into a set of core sector activities including engineering, fertilisers and telecom. He was financially overstretched and had borrowed beyond his repayment capacity. However, the booming liquor business (and the fact that global liquor brands decided to seek entry into India by buying into his companies) and soaring realty values helped him out of the mess.
But Mr Mallya has done it again. This time, his debts are bigger and, given a chance, he would like to dump his losses on to banks which have deliberately chosen to ignore the history of his reckless borrowing and furious acquisitions (a big part of Kingfisher’s problems is Air Deccan). Banks not only allowed him to borrow beyond prudential limits, but did not object to his pocketing a guarantee fee running into crores of rupees at a cost to his shareholders which he is trying to wiggle out of.
Bees Saal Baad, will Mr Mallya again work his way out of trouble by selling assets? He still has plenty of them and, despite a global financial crunch, there will still be a lot of foreign interest in acquiring his money-spinning liquor business. The difference, if any, is that people are tired of national assets being siphoned off by netas, babus and businessmen. Arm-twisting the lenders by using political clout may be a tad more difficult this time.