The Great Bank Robbery: Free Read

VIJAY MALLYA: GROUNDED

‘Don’t you think Vijay Mallya’s hairstyle is quite interesting?’ said
Junior as Senior, Larissa, Krishna and he drove to the beach.
Junior was at the wheel.
‘More than his hair, you should be interested in the kind of
money he made,’ said Krishna. He looked out, watching the sun
begin to kiss the sea at the horizon.
‘Well, most of it was his dad’s money, I guess, and the willful
defaulter that the son was, he threw it all away,’ said Junior.
‘I think you just have a problem with people who earn a lot,’
said the little one, sounding annoyed.
Larissa intervened diplomatically. ‘Mallya may have a lot going
against him, but he also had many things going in his favour.’
Junior understood where she was coming from and kept quiet.
A few minutes later, as they stopped at a red light, he said, ‘By
the way, I understand he robbed 17 banks.’
‘You can’t say he “robbed” them. In a robbery, you take money
behind people’s backs without their consent. Here, he borrowed
money for his business. It was not his fault his business failed.
And if no one went behind the owners of failed businesses or
those who ground their businesses to dust, why pick on Mallya?’
Krishna was clearly a Mallya fan.
Looking into the rear mirror, Junior remarked, ‘You are right
in saying you cannot hold it against him if his business failed.
By law, a company is a separate legal entity, distinct from the
people who hold its shares. A shareholder cannot be asked to
pay the company’s debts.’

‘Okay, okay, cut to the chase,’ said Krishna impatiently.
‘I will tell you what’s not okay with that line of argument.
In 2010, when Kingfisher was haemorrhaging, Mallya wanted
more money from the bank. They refused to play ball, and when
it became difficult to stand up to the pressure, the banks said,
“Give us your personal guarantee”, and Mallya fell right into the
trap. He provided them with a personal guarantee, which was
how the cookie crumbled. The bank was lending to an airline
falling into an inferno, but it was their way of trying to get back
the money lent!’ said Junior.
‘So, why did Mallya do what he did?’ asked Krishna, slowly
beginning to understand what had unfurled.
Larissa chipped in. ‘The personal guarantee was an indication
that Mallya was optimistic. However, the flames consumed India’s
second-largest private airline that never made profit in its lifetime.’
‘The banks, the regulators and the judiciary were after him.
Why should he cough up when his company takes loans, a limited
liability entity?’ asked Krishna.
‘By the way, who faced the maximum losses?’ asked Junior.
‘The consortium leader, SBI. The others were mostly
government-owned banks. ICICI had parachuted out of the
crashing airline just in time by selling its entire Kingfisher loan
to a debt fund of SREI Infrastructure Finance in mid-2012!’ said
Larissa.
‘Smarter than State Bank,’ said Krishna. The others couldn’t
tell if he was being sarcastic.
‘Krishna, you must read the story of Vijay Mallya. A printed
copy of it is in my study room. Hunt it out tonight,’ said Senior.
‘Yes, Sir,’ said Krishna in a mock salute and ran towards the
water.

THE KING IS DEAD! LONG LIVE THE KING
Never had the street fighter Vijay Mallya boxed himself into such a
tight corner. Nor had he ever looked so vulnerable.
The ‘King of Good Times’ had tied himself into such knots that
extricating him would need a Houdini’s act. That was sad, because
there was a time when Mallya, his smart looks and flamboyant lifestyle
notwithstanding, had everything going his way. Not for nothing did he
earn the moniker ‘Playboy of the East’.
An alumnus of the renowned St Xavier’s College in Calcutta, he
inherited his dad Vittal Mallya’s business, the United Breweries Group,
in 1983, when he was barely 30. At one point, the group controlled a
majority of the liquor business in India. Today, Kingfisher beer has a
50 per cent market share in India.30
Over time, the liquor baron began acquiring companies with
the speed of a cheetah. He built on some, stripped others and made
enemies, including Manu Chhabria, from whom he bought the liquor
manufacturer Shaw Wallace. Mallya was known for his bluff and bluster.
Many years ago, when questioned how the profitable company of Best
& Crompton (B&C) turned sick, Mallya explained: ‘When I took over, I
had no idea of the company’s liabilities as no due diligence audit was
made. The company had an `30 crores hidden liability which was shown
as assets. Moreover, the company included revenue pertaining to the
next financial year to show profits in the current year.’31
So, the eventual corporate predator was a babe in the woods when
he embarked on his business career.
Delivering on Kingfisher
If you thought Mallya would stick to the business he knew best, booze,
you are wrong.

In 2003, he set up Kingfisher Airlines on a whim, disregarding
well-meaning warnings that the airline industry was a cash-guzzler.
He hired people at fat salaries and won the air-travelers’ kudos for the
quality of service.
To give the devil his due, he initially did deliver on what he
promised—to make flying entertaining. His airline provided excellent
facilities. Each seat had a TV screen where guests could surf channels
according to their choice. For a domestic aircraft, it was first of its kind.
He appeared on those screens welcoming guests, asking them to get
in touch with him directly if they faced any issue with the service.
Customers lapped it up. At the airports, you were welcomed right at the
baggage-screening machine, where staff would help you get everything
done smoothly.
Having a set customer service in place, Mallya decided to expand.
After all, profit can come only from traffic. At some level, he must have
been taken in by C.K. Prahalad’s idea of ‘fortune at the bottom of the
pyramid’. Prahalad coined this phrase to suggest that marketers can
strike gold if they target their efforts at those who are near the lower
end of the income pyramid. This means that they should sell specific
brands to these customers who were hitherto served by less efficient
alternative products.
Mallya decided to buy Air Deccan. Captain G.R. Gopinath, the man
who changed the face of air travel in Indian skies, was looking to cash out,
as his low-cost carrier model was a failing proposition. Mallya hopped
onto the bandwagon as a knight in shining armour.
The Failed Acquisition: Culture Clash
In one way, the acquisition made sense. It gave Kingfisher access
to the Air Deccan market. It gave it a listing since Air Deccan was a
listed company. It allowed Kingfisher to fly on international routes as
Air Deccan met the regulatory requirement. But it also brought in its
wake the latter’s baggage of losses.
Mallya merged Kingfisher Airlines with Air Deccan. That done, and with all civil aviation, corporate and other tax regulations met, he
renamed Air Deccan Kingfisher Red. Bravo! As Shakespeare popularly
said, ‘What’s in a name?’
However, looked at in another way, the acquisition made no sense.
First, was the low-cost model viable? Remember, Kingfisher Red (Air
Deccan renamed) was just that. Two, even if it was viable, would it work
in an outfit with Mallya’s signature on it? This was the same man who
had once purportedly said that there cannot be low-cost carriers; there
can be only low-cost fares.32 With such a mindset, was cost control ever
possible? Three, if Mallya had global ambitions, would it not have been
wiser for him to first crack the Indian market, consolidate its position
and become profitable before going global? After all, there is a difference
between Test cricket and Club cricket. To battle the big daddies of the
world, you first need to become the big daddy at home.
Used as Mallya was to the high-margin liquor business, the costcutting culture of the low-margin airline business didn’t suit him. He
predictably lost, but not before borrowing tonnes of money from PSU
banks.
In 2006, he got Kingfisher listed.33 By 2011, he had nothing to show
for it. The fact that he persisted is an indication that he looked to turning
it around and believed that the initial losses were a part of acquiring
any business. He may have deluded himself into believing that the loss
was the cost of learning.
He got the Kingfisher brand valued and took loans against that. A
brand is an intangible asset, and banks aren’t supposed to lend on its
basis. A consortium of 17 banks led by the SBI lent money to Mallya
and the silver-haired business tycoon diverted crores of it to offshore
tax havens.34 As per his disclosure to the Rajya Sabha, where he was amember, he owned no houses. The lavish homes where he entertained
people are in the balance sheets of his company.
Many believe that Mallya’s work style killed Kingfisher. He was
known to micromanage, ranging from the choice of cutlery onboard
Kingfisher planes to hand-picking the stewardesses and their short red
skirts. But, according to the jet-setting czar, the culprit was aviation
turbine fuel, whose price has moved only upwards.
He may be right, but historically flying has never been for the
common man.
Scattered Investments
Mallya should have perhaps stuck to liquor, as running a low-cost airlines
is a serious and intricate business, and does not match the mindset of
someone who holidays in yachts and spends personal time headhunting
models for calendars. Worse still, he bought media companies (including
Asian Age and NDTV Good Times), a football team (East Bengal) and
a cricket franchisee (Royal Challengers Bangalore). In a country where
cricket is religion, Mallya would surely have been attracted by the
glamour of owning a team.
Since 2006, Mallya acquired the Scotland-based Whyte & Mackay
Ltd for $1.2 billion and paid $109 million for the Dutch auto racing team,
Spyker Formula One. He owned Indian Empress, a 311-foot yacht that he
used in photo shoots for the annual Kingfisher calendar. He is alleged
to have a fully loaded casino floating on Mondovi River in Panjim. In
short, the man was here, there, and everywhere.
Sometimes, it pays to get out and move on. Mallya failed to do that.
Vijay Mallya’s attire, his passion for costly yachts and swanky cars,
his stays in fancy locales, and his penchant for acquiring world-heritage
articles would mark him as a man of commerce. For all that, he prays
every day, was a regular to Sabarimala and ensured that every jet
inducted in the Kingfisher network made its maiden touchdown at the
Tirupati Airport, the abode of Lord Venkateswara. Nevertheless, the
gods haven’t been kind to him.

Mallya’s personal fortune was at one point estimated by Forbes
magazine to be $1.1 billion.
The High and the Low
At its peak, Kingfisher Airlines was the second-largest airline in India
with regards to the number of passengers. Over time, the employees’
salaries fell overdue, there were mounting tax liabilities and creditors.
Bankers moved the Supreme Court to stop Mallya while he owed money
to them, but the man had already left with myriad suitcases in public
glare.
He was accused of concealing facts about receiving $40 million
from Diageo that he later transferred to his three children so as to put
it beyond the reach of the courts. Mallya reportedly owed `9,000 crore
to 17 Indian banks and was accused of fraud. He was also alleged to
have routed this money to gain stakes in about 40 companies across
the world.
Asylum in the UK
A two-time Rajya Sabha MP, he resigned a day before the Ethics
Committee of the Upper House was to recommend his expulsion.
Facing pressure, Mallya fled to the UK on 2 March 2016, the day
a few public sector banks moved the Debt Recovery Tribunal against
him. Mallya has said he has been offering to make good his debts since
2016. In June 2016, a court declared Mallya a ‘proclaimed offender’ in
connection with a money-laundering probe.35 In January 2019, he was
declared a fugitive economic offender.
By December 2016, the Enforcement Directorate (ED) attached a
total of $1.8 billion worth of assets of Mallya and Kingfisher in India.36 The
ED sent letters rogatory (LR) to the US, the UK and Europe, requesting them to assist in the attachment of Mallya’s over 10 foreign assets. On
3 October 2017, Mallya was arrested as part of a money-laundering
case in London and released on bail. After a prolonged battle, he was
declared bankrupt in a UK court, which now allowed Indian banks to
carry out a worldwide freezing on Mallya’s assets.
Mallya also lost his final appeal against extradition. He had
filed an appeal in the UK Supreme Court in May 2020 against an
extradition order to India on alleged charges of fraud and money
laundering related to Kingfisher Airlines. In July 2020, Indian
media reported that Mallya had offered a settlement package of
`139.60 billion as against a total principal amount of `90 billion to the
consortium of Indian bankers, and that this settlement was rejected.37
In October 2020, the Indian government was told that Mallya could not
be extradited due to an unspecified confidential legal matter.38
The Vijay Mallya case is a classic example of the collective failure of
the banking system. The banks should have called him out an NPA long
back. Interestingly, amidst all this, the RBI permitted the restructuring
of Kingfisher.
In 2022, Mallya’s attorney told the Supreme Court that he had yet
to hear from his client and asked to be discharged from the case as
counsel. The court agreed.
Below are the details of loans, which amount to `6,963 crore.39
Bank Name Amount (`Crore)
State Bank of India 1,600
Punjab National Bank 800
IDBI Bank 80

Bank of India 650
Bank of Baroda 550
United Bank of India 430
Central Bank 410
UCO Bank 320
Corporation Bank 310
State Bank of Mysore 150
Indian Overseas Bank 140
Federal Bank 90
Punjab & Sind Bank 60
Axis Bank 50
Other banks 603