How Vijay Mallya Inherited an Empire and Made It Bigger

Tanisha Achrekar — Thu, 18 Mar 2021 02:35:04 +0000

We live in a country where people are always afraid and hesitant to talk about their successes and achievements. While most millionaires and billionaires like to stay away from the limelight, one was not afraid to shine as bright as possible. The king of good times, Vijay Mallya. He was not hesitant to show his exuberant and extravagant lifestyle by throwing the biggest parties of the country, calendar girls, owning a formula-one team or having an IPL team, the Royal Challengers Bangalore. He was an entrepreneur whose persona was much larger than his empire.

The inheritance of an empire

Vijay Mallya was the son of the chairman of United Breweries, Vittal Mallya. During his 20s, Mallya enjoyed taking part in formula one. Around 1982-83, he also won Indian Grand Prix. However, he could not continue that further as life took an unexpected turn. In 1983, Mallya’s father collapsed due to a sudden heart attack. At only 28, Mallya had to step in his father’s shoes and become the chairman of the United Breweries.

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At only 28, Mallya stepped into his father’s shoes.

Expansion like never before!

Back in those days, there was a lot of taboo associated with alcohol. Mallya wanted to introduce the culture of cherishing liquor. In 1986, India was becoming a more consumer-centric economy. He used this opportunity to introduce Kingfisher draft beer to the youthful crowd of Banglore. Although there were some political backlashes he faced, he was determined to get what he wants. The plan worked! The popularity of Kingfisher grew phenomenally. So much so that people asked for a Kingfisher instead of a beer. He was associated more closely with Kingfisher compared to all the other liquor of the United Breweries. During those times, Mallya’s success in the liquor industry grew to such an extent that he was popularly known as the ‘Liquor Baron’. In 1999, he introduced India to strong beer consumption with Kingfisher Strong, which to date happens to be one of the highest-selling beers.

Along with the liquor industry, Mallya also was a keen investor. He bought a major stake of Berger Paints in 1988 and sold a majority of his stake in 1991 with an enormous profit. After the Mangalore Chemicals and Fertilizers was declared as a sick unit by the Karnataka government, the billionaire took control of it as well. He further bought Rifa Publications, Herberstones and Shaw Wallace & Co. Ltd. Herberstones were the makers of bagpipers, the most sold whiskey in the country and Shaw Wallace & Co. Ltd. were the biggest competitors of United Breweries.

In 2005, Vijay Mallya entered the aviation industry by launching Kingfisher Airlines. Kingfisher Airlines was closest to his heart and he was emotionally quite invested in it. With no time, Kingfisher Airlines became the second-best domestic airline by market share. He offered the most luxurious experience in his airline which was never seen before in India. Alongside, he also invested in things he was passionate about. In 2007, Mallya bought a large stake in the Formula One team, Spykar and rebranded it as Force India. He also bought the franchise of Royal Challengers Bangalore in 2008 and became a part of the Indian Premier League (IPL). His passion and his personality always kept him in the limelight and soon he became internationally known as ‘India’s Richard Branson’.

The post How Vijay Mallya Inherited an Empire and Made It Bigger appeared first on Dutch Uncles.

5 Important Business Lessons from Vijay Mallya

Aakash Sharma — Fri, 12 Mar 2021 06:35:04 +0000

Vijay Mallya, the son of former the Chairman of United Breweries Group Vittal Mallya, is an Indian businessman and late Member of Parliament (Rajya Sabha). Mallya is the former owner of the IPL team Royal Challengers Bangalore.

Born with a silver spoon in a business family, he followed his father and became the chairman of United Spirits, the largest spirits company in India, and continues to serve as chairman of United Breweries Group. This Indian conglomerate has interests in beverage alcohol, aviation infrastructure, real estate and fertilizer industries.

Dubbed as ‘the King of Good Times’ by tabloids and media globally, Mallya led (and continues to lead) a lavish life. He introduced the ‘beer and bar culture’ in India in the 2000s with his brand of Kingfisher. Kingfisher was created with much higher expectations and was aimed at the swish set of the Indian population.

Vijay Mallya – the King of Good Times

The liquor baron that Mallya became in the years following Kingfisher’s introduction in the Indian markets led many to view him as India’s Richard Branson. He branded and marketed a hitherto tabooed issue of liquor with ‘models and calendar girls’. The message of drinking for having a good time made him into that of a colourful billionaire. And colourful he was as his pompous parties gathered A-list celebrities in his Bombay and Goa penthouses.

As his liquor brand gained massive success, he widened his portfolio. And in 2005, he ventured into the airline industry with Kingfisher Airlines. He brought the experience of Kingfisher beer to the airlines, as his video message welcomed passengers over the aircraft’s in-flight entertainment system.

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Putting money just on the face of a glamorous mogul and their air castles lead to the avalanche that Vijay Mallya's Kingfisher Airlines suffered.

But what happened to Vijay Mallya and his brand is hidden from no one.

Yet, even as Kingfisher Airlines proved to be Vijay Mallya’s failure, there are some key economics lessons to be absorbed from the stumbles of this once high profile liquor baron.

Don’t venture into uncharted territory without experts on board

Vijay Mallya ran a successful group of companies before founding Kingfisher Airlines. But he had no experience in the extremely tricky airline industry. Because of poor strategy, Kingfisher’s lenders and shareholders paid for the heavy losses. The lesson here is that investors should not be tempted by attractive assets, core holdings, new derivatives and other foreign financial products alone. They should invest in tangible projects rather than in speculative “dream” projects.

The vicious cycle of the debt trap

While Kingfisher Airlines was severely underperforming, Mallya continued to spend a lot of money in efforts to maintain the high-end airlines’ operations. He took a bunch of money from the banks to help the sinking airline. The banks also ignored Kingfisher’s growing losses and continued to sanction loans. This overleveraging took Mallya down in a significant blow. Kingfisher accumulated losses of Rs 4,301 crore and, as of March 2021, owes over Rs 9,000 crore to a string of Indian banks.

Check performance and change the trajectory

Even though everyone comprehended it, Mallya denied acknowledging the obvious, let alone made any efforts to make amends. He continued to deny Kingfisher Airlines’s critical situations and portrayed a false image to investors. To avoid being prey to such mega-scandals, investors should regularly review the services of the businesses they have invested in and take corrective action if necessary.

Financial investments should be strategic rather than heartfelt

Any new industry is hazardous and often a weapon of large-scale destruction of wealth if it is explored unguided. Ordinary investors should stick to investment options like PPFs, time deposits, and mutual funds. Putting money just on the face of a glamorous mogul and their air castles lead to the avalanche that Mallya’s Kingfisher suffered.

Unmerited pride harms a business’ future

Pride played a crucial role in Mallya’s downfall. It was only because of his other ventures’ good performance that Mallya was convinced his Kingfisher Airlines would also be successful. Investors and stockholders should not rely too much on pride-driven revenue streams and weigh their options before putting in the money. Overconfidence and too starry of an image lead people to invest in capital directly rather than participating in a business’s services, and that is precisely what should be avoided.

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King of Good Times – Dutch Uncles