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Showing posts with label From Booze to Boos. Show all posts
Showing posts with label From Booze to Boos. Show all posts

Thursday 18 October 2012

From Booze to Boos, may sell out to Diageo Kingfisher Airlines's Dr Vijay Mallya

Once upon a time, Dr Vijay Mallya, the CEO of United Breweries and the owner of India's flagship Kingfisher beer, styled himself as "the king of good times" -- a sort of Hugh Hefner meets Richard Branson, with a swimsuit calendar, an airline, and more gold chains on his hairy exposed chest than the 1980s version of Mr. T.

Oh how the mighty have fallen.

Last month, the liquor baron who (if truth be told) made most of his fortune when he enjoyed a near-monopoly in the beer- and whisky-business of so-called "Indian Made Foreign Liquor" (IMFL) was dubbed "India's worst businessman" by And as his ego-driven Kingfisher Airlines continues to bleed cash, and employees threaten to sue him for back pay, now it appears that the one-time monarch will only be able to keep his (unbuttoned to the navel) shirt by selling a controlling interest in the crown jewel of his liquor business to Diageo, as the Times of India reports Wednesday.

According to the paper, Mallya is close to inking a deal to sell his 25 percent controling interest in the UB Group's United Spirits unit to the British liquor giant, giving a major leg up to a foreign competitor that's thirsty to drink up the fast growing Indian booze market. After the deal, Diageo will own 25 percent in the company to Mallya's 15 percent -- which will no doubt be a great thing for investors.

Meanwhile, India's Mail Today newspaper wonders if this is only the beginning. India has no bankruptcy laws, so Mallya has no way out of his plunging airline business.  Or, as the paper writes: "The question is how many Vijay Mallya group balance sheets can be de-leveraged through this modus operandi."

How did we get here from the days of parties on the Kingfisher yacht, dreams of hawking microbrews in the US, the Formula One team, and so on?

In a stellar long read on how the liquor business built the city of Bangalore -- long before the IT industry came to town -- the Caravan's Raghu Karnad recounts "how beer, arrack, rum and whiskey—and the companies that made them—irrigated the growth of Bangalore from a quaint colonial outpost to a regional capital, and onwards to the promised land of the globalisation era."

Telling of the King of Good Times' savvy father, he offers a subtle critique of his devil-may-care style of doing business.

In 1947, Vittal Mallya had been the young director of United Breweries Limited, in Madras. He bought up company shares from departing Englishmen, so that in the year that India became independent, UB moved from British to Indian hands, too. After that, the corporate history of UB developed in step with the history of Bangalore. In 1952, the year Bangalore became the legislative capital of Mysore State, UB’s headquarters were moved here, to the grounds of the Bangalore Brewery. In 1956, the year Karnataka was born, so was its best recognised export: Kingfisher.

Vittal Mallya was “like a quiet chartered accountant”, said one senior state bureaucrat, a numbers man with a receding hairline and a demure personality. It is a piece of UB lore that when his son Vijay lost a one paisa coin while playing, his father made sure to make a note against his account. After Vittal Mallya’s death, Grant Road, the street where his brewery sits, was renamed in his honor. But it was appropriate for other reasons too: Vittal Mallya Road was a wealthy area, as central as could be, yet it was quiet, low-profile and of a piece with an earlier Bangalore.

Contrast that to's send-up of the modern liquor baron.

Point 1: There's a reason that Jack Welch wears a suit, not a bunch of gold chains.

Hubris: Mallya’s Kingfisher foray had all the wrong reasons for entry and staying the course to disaster. He entered the business for the glamour it brought to his portfolio (which is why, in any Kingfisher flight, Mallya talks to you directly on the video), rather from any special understanding of competitive advantage. He wanted to be India’s Richard Branson, forgetting the success is not easily copied.

Point 2: Just because you can run a near-monopoly, selling a recession-proof product, doesn't make you a business genius.

[Mallya] failed to understand the difference between running a business with 25-35 percent margins (booze) and one with 1-2 percent margins, or even losses for long periods of time (aviation). He failed to see his managerial limitations in this newbusiness where he didn’t have a clue on how to run it.

Point 3: When everybody thinks you're crazy, it doesn't necessarily mean you're "thinking out of the box."

Denial of risk: It is one thing to blunder into an unprofitable business, quite another to bet the farm on it. But this is precisely what Mallya has done. He has staked almost his entire liquor business to save a sinking airline. Today, if Mallya is talking to Diageo to sell a stake in United Spirits, it is largely because he has pledged too much of his liquor business and his personal assets to keep Kingfisher afloat. He threw away his good business to rescue the bad. Did Mallya not understand, at least as late as 2010-11, when everyone knew how the aviation business was going down hill?

Kingfisher extends lockout; to meet staff on Monday again
Daily News & Analysis
The management of Kingfisher Airlines (KFA), grounded since September 29, will be meeting striking pilots and engineers again on Monday in a bid to end the three-week imbroglio, senior pilots said on Wednesday , indicating the crippled airline will ...
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India: Kingfisher's Vijay Mallya, from booze to boos, may sell out to Diageo
GlobalPost (blog)
Once upon a time, Vijay Mallya, the CEO of United Breweries and the owner of India's flagshipKingfisher beer, styled himself as "the king of good times" -- a sort of Hugh Hefner meets Richard Branson, with a swimsuit calendar, an airline, and more ...
See all stories on this topic »
India's Kingfisher to extend grounding of flights: CEO
Oct 17 (Reuters) - India's Kingfisher Airlines will extend the date to restart the carrier's operations, its chief executive Sanjay Aggarwal told reporters, after a meeting with employees. Kingfisher said last week that its planes, grounded since Oct ...
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Kingfisher Airlines gets no 'boarding pass' this winter
Deccan Herald
Cash-strapped Kingfisher drew a blank as the aviation regulator approved the winter schedule on Wednesday, allotting more flights to low-cost carriers IndiGo, SpiceJet and GoAir this season than what they operated last year. Kinfisher's flight schedule ...
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Kingfisher brings in former AI boss to negotiate with staff
Mumbai: Cash-strapped Kingfisher Airlines Ltd has brought in former chairman and managing director of Air India Ltd and current vice-chairman of UB Group, Subhash R. Gupte, to pacify its striking employees, said two people aware of the developments ...
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DGCA rejects Kingfisher's winter schedule
Peninsula On-line
New Delhi: India's civil aviation regulator yesterday rejected the winter schedule of the troubledKingfisher Airlines. According to the Directorate General of Civil Aviation (DGCA), the passenger carrier's winter schedules for flight arrivals and ...
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Kingfisher lockout to continue as talk fail
India Today
Liquor baron Vijay Mallya-owned Kingfisher Airlines, which has been grounded since September 29, on Wednesday said it would have to extend the October 20 deadline it had set for itself to resume operations. A meeting with the striking employees has ...
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