The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Palash Sinha, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
Vijay Mallya’s conglomerate UB Group is in danger of falling apart. The man who likes to be called the ‘King of good times’ runs the risk of being left without an empire.
Over the past 10 years the Indian economy has surged high, and with it enterprises such as Vijay Mallya’s Kingfisher Airlines. But now that the super-rich tycoon’s fleet is grounded and debt-ridden.
His seven-year-old airline has been grounded after authorities suspended its license to fly on safety concerns. There were even reports, denied by Mallya, that the tycoon’s own private jet might be impounded by Indian airport authorities, which say Kingfisher owes them huge sums. Some suggested that the man described as India’s Richard Branson might choose not to come back at all. Crippled by debts which may exceed INR 7000 crore, Kingfisher had difficulty paying employees’ salaries.
On 1st September, the United Bank of India (UBI), itself in no great financial shape, declared Vijay Mallya a “willful defaulter” on a Rs 7.5 crore overdraft. And the man, who actually owes around 17 banks over Rs 7,000 crore on account of bad loans to his now-defunct Kingfisher Airlines, claimed this was being done “without a hearing”. But this is where the script changes. Once you are declared a “willful” defaulter, it sets in motion a downward track of financial credibility and creditworthiness. Your assets become caged assets, your ability to leverage your reputation reduces, and your presence on your own company boards becomes untenable.
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 troubles keep on coming for Mr. Mallya and it will be interesting to see how the kings of good times cope up with this adverse situation.