Report: Vijay Mallya is $1B in debt
15th November 2011, 9:05 at 9:05 am #130479
This has been rumored for years now, that Mallya is in heavy, heavy debt and has been unable to refinance loans or to raise any money. I heard years ago that he never actually made any money, but that he finances his lifestyle on loans etc. and that lifestyle gives the impression that he is a good businessman.
I spoke to an analyst in the height of the crash who said that there was no way that Kingfisher was profitable. He was leading on both Boeing and Airbus with new plane orders that he would later have to cancel, and none of his routes were profitable.
It seems to be all coming to ahead now. Joe Saward was one of the first to write about this publicly, that Force India will be in trouble because of Mallya, but the Telegraph has now picked up the story as well:15th November 2011, 9:22 at 9:22 am #184593
Last month, Mr Mallya was forced to put on brave smile to announce a deal for a rival tycoon to become an equal partner in Force India in exchange for a £60 million investment on the eve of India’s first ever Grand Prix.
Interesting choice of words.15th November 2011, 18:57 at 6:57 pm #184594
Well you know what they say… ‘The easiest way to become a millionaire is to become a billionaire… and then get into the airline industry’15th November 2011, 19:00 at 7:00 pm #184595
I dont know what to think of it. How could you be able to have an airline and an F1 team when you’re in a lot of debt but in modern times evereything is possible. Those loan must be of a substantional amount of money to keep up the lifestyle16th November 2011, 4:40 at 4:40 am #184596
Is it just me, or does Vijay Mallya come across as quite condescending in latest round of Tweets? He seems particularly critical of the media for not giving him a lunch break. Yes, he spent six hours in front of the media … but surely he should be more worried about the fact that he spent six hours in front of the media. That’s not a good sign. When Qantas’ CEO grounded the airliner recently, he did not spend six hours in front of the media despite successfully becoming the most-hated person in Australia (and if you know anything about Australian politics, then you know just how big an achievement this is). If Michel Mol has any sense, he’ll use his 10% stake in the team to join together with the Sahara Group and squeeze Mallya out.
Do we have any Indian members here? Or anyone who speaks Hindi? Because a thought has occurred to me: the Italian teams use Italian team names (“Scuderia”). The French teams (used to) use French names (“Equipe”). So, maybe an Indian team could use an Indian name. “Grand Prix” is French for “Grand Prize”, so I wonder what the Hindi translation of “Sahara Grand Prix” is. I managed to find an online English-Hindi translator that didn’t translate into Hindi script, and I’ve come up with a few possible ideas – but, not knowing the grammatical rules that govern the language, I can’t be sure if they’re right (and knowing my luck, they’re probably offensive):
– Sahara Vishaal Inaam
– Sahara Vrihat Inaam
– Sahara Badhiya Inaam
– Sahara Mahaan Inaam
Is there anyone here who might be able to offer some insight?16th November 2011, 16:51 at 4:51 pm #184597
What you wrote literally translated –
– Sahara is a big prize
– Sahara is a strong reward (I think .. not sure about the vrihat)
– Sahara is a great prize
– Sahara is a famous prize
Take your pick. I think Mahaan Inaam actually fits the bill16th November 2011, 17:30 at 5:30 pm #184598
Hey all, longtime reader and first time poster from the US here.
If the reports turn out to be true (which I believe they will), it’s a shame for Force India. A perennial backmarker who in the past 3 years has made some considerable strides thanks to the work Mallya, or more likely people under his employ, put in. I’m no expert on the matter, but a few years back I talked to a friend of mine (& fellow F1 fan) about Force India and Mallya, and he indicated that the Indian people don’t think very highly of him.17th November 2011, 0:04 at 12:04 am #184599
I don’t like Vijay Mallya at all (I particularly hate that preened goatee of his), but I’d always take what Joes Saward says about him with a pinch of salt. Saward seems to have built up quite a vendetta towards him17th November 2011, 2:13 at 2:13 am #184600
@ned-flanders – Saward’s vendetta comes from Mallya’s decision to drop Tonio Liuzzi in favour of Paul di Resta. Saward has long been flying the flag for Tonio, and was very upset when Mallya released him from his contract. But I think what really fuelled the fire was the reaction to Saward’s next articles. He suggested that because Liuzzi was under contract, he had a legal claim to the seat, and would challenge for it. Saward also insinuated that Liuzzi’s case was strong enough that a court would surely side with him and Liuzzi would race with Force India this year. The reactions to it were almost overwhelmingly negative.17th November 2011, 9:45 at 9:45 am #184601
Oh yeah, I completely forgot about that! Probably because Saward’s love for Liuzzi seems to have cooled considerably this year17th November 2011, 10:34 at 10:34 am #184602
I think Saward is just playing it careful lest he say something that results in his readers turning on him again (which they already have done when he accused Mallya of “lying” when Mallya denied selling Force India).17th November 2011, 17:31 at 5:31 pm #184603
Who really Saward’s rants seriously anyways? The guys is a Liuzzi fan for Pete’s sake!17th November 2011, 23:28 at 11:28 pm #184604
Well this sounds kinda plausible but just how on Earth does the get hold of loans so easily? Doesn’t add up for me.17th November 2011, 23:53 at 11:53 pm #184605
It’s simple: he convinces the banks that he has a viable business model.18th November 2011, 4:55 at 4:55 am #184606
@andrewtanner what the other guys say about Saward is right, he did have a hard-on for Tonio (they go back a ways, apparently), but the latest round of reports about Mallya is all coming from the financial press, who have probably been tipped off by one of his debtors
It is very easy to become a billionaire using loans. You just have to hide your loanees from one another. For eg. Liverpool Football Club was purchased for a few hundred million pounds by a couple of Americans. They finance the deal using debt and a deposit of 10%, and the remainder of the debt secured against the actual club. It turns out that the 10% deposit itself was also a loan – albeit one with a much higher interest rate. This is how leveraged buyouts work.
They finance their personal lifestyle by paying themselves large salaries and expenses out of the companies they buy or setup. It works until the economy slows down and the growth in revenue can no longer match interest payments on the pyramid of loans. This is why guys like Mallya and the old owners of Liverpool FC go down with the slightest downward move in the economy – they are so leveraged that even a 25 bp spike in interest rates, or lower revenue growth (lower *growth*, not lower revenue) can see them wiped out.
It is easy to buy up assets using other peoples money and some showmanship (banks lend money to people who convince them to lend it). It is much harder to build a sustainable and profitable business.
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