New Delhi - Vittal Mallya was very careful with money. The business tycoon, whose son Vijay has been hogging headlines across newspapers this week for alleged money laundering, failure to repay bank loans and other misdemeanors, was mindful of the fact that money with him was shareholders’ wealth and he had no business wasting any of it.
In his book The Vijay Mallya Story, senior journalist K Giriprakash has devoted an entire chapter to the father. It was after all, the elder who laid the foundations of the Mallya empire and after whose death the son went about creating an enormous corporation before one company in this empire, Kingfisher Airlines, caused that fortune to crash and burn.
In Vijay Mallya’s case at least, the adage ‘Like Father, Like Son’ does not quite apply. Mallya senior was diligent about spending even small amounts of money as this incident from the book shows: On one occasion, a manager who had accompanied Mallya senior to Bombay, saw him spending several minutes examining a bill after checking out of the 5-star Taj Mahal Hotel and punching some numbers into his watch which had an in-built calculator. This happened again when both of them checked out of another five-star hotel in Panaji in Goa some time later. The manager was extremely puzzled. On the way back to the airport, he mustered up enough courage to ask his boss why he was checking every bill.
“Sir, do you think a five-star hotel would cheat us,” he asked. Mallya replied that the money he was spending belonged to the shareholders and as he was the custodian of their company, he had to be doubly careful while using their resources.
Compare this with the son who has been allegedly splurging money, which should rightfully belong to shareholders, in buying expensive yachts, holding larger-than-life birthday bashes and gifting an airline company to his son on his birthday. According to this report in the Times of India, there have been several allegations about possible fund diversions from Mallya's one-time flagship United Spirits (USL) to the grounded Kingfisher Airlines as well as overseas entities.
This was first alleged by unsecured creditors of Kingfisher in a case filed at the Karnataka high court, and then last year an international investigation ordered by USL's new owner Diageo also came up with charges of fund transfers from India's largest distiller to other UB group companies.
Now, a consortium of 13 banks are after Vijay Mallya to recover loans over Rs 7,000 crore, the CBI is examining charges of money laundering whereas former Kingfisher Airlines employees are planning to take the tycoon to court over non-payment of salaries and arrears.
In the chapter ‘A Magnate in the Making’, Giriprakash says no employee, even those who came on board after an acquisition, ever went without salary under Mallya senior, no matter how bad the situation in some of the companies was. Known to be scrupulous, Vittal Mallya actually remitted any unspent foreign exchange after his trips abroad!
Vittal’s son and sole heir Vijay Mallya started Kingfisher Airlines almost on a whim in 2005, with a sudden announcement at a board meeting, disregarding warnings by his trusted lieutenants about a business which required insane amounts of cash and gave little or no returns. But once the airline was set up, anyone who travelled on it sang its praises due to excellent service standards, set by Mallya himself. However, never in all of its existence did Kingfisher Airlines turn in a profit though.
Also, it must be noted that had the Indian government allowed airlines to fly overseas without restrictions (the 5/20 rule for example), perhaps the downfall of Kingfisher Airlines may not have been so steep. The 5/20 rule bars Indian airlines from flying on foreign skies unless they have completed five years of Indian operations and have a fleet of 20 aircraft.
Mallya wanted his airline to fly abroad not just to create a favourable impression at home but also perhaps because this would allow better fleet utilisation (using same aircraft for longer hours) and allow the airline to lift fuel at rates cheaper than in India (India taxes jet fuel highest in the world).
But since the government rules barred overseas flying, Mallya compounded his commercial short-sightedness by acquiring Air Deccan to fulfill his overseas dreams. Air Deccan, the brainchild of Captain G R Gopinath, was an airline which introduced Indians to ‘one rupee’ tickets and drove almost every airline company nuts with its rock-bottom ticket pricing before itself drowning in red ink.
In the book quoted above, the author virtually says that Vijay Mallya bought Air Deccan with his eyes closed. His team never went through the books of the loss making Air Deccan before Mallya agreed to buy it for a total consideration of Rs 1,000 crore in 2007.
This is what the book says: Gopinath told a reporter later that what impressed him about Mallya was how badly he wanted the airline and how swiftly he had moved to bag the deal. When a reporter asked him whether that meant the deal had been made without any due diligence or checking the balance sheet, Captain Gopinath replied that it was true that during the negotiations, neither Mallya nor his officials ever asked to examine the books. They took Captain Gopinath's assurances at face value because they were eager to go through with the deal.
It is interesting to note that Gopinath himself mentioned this since the ToI report says that along with key officials of Mallya’s liquor business and Mallya himself, the Serious Frauds Investigation Office (SFIO) has now also summoned Gopinath over the Kingfisher Airlines saga. Despite several attempts, Captain Gopinath remained unavailable for comments today.
After his father’s death, young Vijay Mallya had said “I suddenly realised that the buck stops with me,” according to the book. Perhaps time has come for someone to once again show this man that the buck still stops with him.