Person of the week
Flying Low
Madhavankutty Pillai
Madhavankutty Pillai
04 Sep, 2014
How one bad venture can bring down a man who was once on top of the world
How do you become a millionaire? Start off as a billionaire and then launch an airline. The copyright to this joke is with Richard Branson and he actually knew a thing or two about the aviation business. When he started Virgin Airlines, Branson had a highly profitable music business in Virgin Records. But then the airline bug bit him and he was forced to sell off the label for £500 million. Branson actually put that money to good use in turning Virgin around. Vijay Mallya has not been so fortunate.
This week, United Bank of India (UBI), one of the banks in the consortium to which Kingfisher Airlines owes Rs 4,022 crore,named Mallya a ‘wilful defaulter’. That makes it difficult for him to raise any more loans for any business. It also means that he might not be able to sit on the board of directors of any company. Thanks to the Kingfisher debacle, Mallya has already had to sell his stakes and hand over control of his most profitable company United Spirits. He had continued to be chairman in it and that position is also under threat now. It is said that he might have to sell his stakes in United Breweries, the other major company of which he holds over Rs 3,000 crore in equity.
Mallya might manage to get a court stay to avert the immediate impact of being labelled a wilful defaulter, but the future doesn’t look promising. A man like Branson can survive near bankruptcy and bounce back because he is a serial entrepreneur. Mallya is a second-generation businessman who was handed over a thriving alcohol business as an inheritance. He did scale it up, but that called for a different set of skills. Scraping the bottom and then clambering up with one’s fingernails is not something that he has experience in. It is peculiar that when he ventured into the airline industry, no one considered it a misfit even though there was no synergy with his existing businesses. But the glamour associated with running an airline seemed to gel very well with his personal image and flamboyance. Kingfisher Airlines, in the beginning, mirrored him in style and delivered more luxury than its competitors. There were, for example, monitors on every seat in which beautiful models showed safety instructions. But Kingfisher just didn’t make enough money because every airline was undercutting each other on fares and it had to keep prices competitive. As the airline sank, so did Mallya as he hocked his shares in profitable companies to keep Kingfisher afloat.
After UBI, other banks might also now declare him a wilful defaulter, staking claim on his other assets. It is interesting to imagine what could Mallya have done differently. How could he have made Kingfisher a viable business? He would have had to be like a Marwari businessman and watch the pennies ultra carefully but it would have meant taking all the glamour out of the business. And then why would he get into it in the first place? Mallya was in trouble the minute he decided to enter a business where it takes extreme cost-control to stay afloat. He is now muted in the public sphere where he so lavishly exhibited himself as a patron of the high life. If the idea of an airline had never struck him, he would still be on top of life and business. But the idea did come, the airline did launch; it is dead now and its ghost will haunt him for many years to come.
About The Author
Madhavankutty Pillai has no specialisations whatsoever. He is among the last of the generalists. And also Open chief of bureau, Mumbai
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