Mallya, Kingfisher, and the limits of 'vanity business'

In a fair world, Vijay Mallya’s flamboyant lifestyle, and his fondness for the good things in life, won’t come up for discussion every time the business prospects of his empire are critiqued. If a man has a glad eye and is a chick-magnet because he throws fabulous parties and, in the narrative of his spinmeisters, “takes good care of his women”, that ought not to be a matter of critical consideration to anyone other than celebrity-watchers.

But in Mallya’s case, the intensely personal injects itself forcefully into the debate over his business only because the man himself has willfully blurred the line that divides the two worlds. Perhaps it was because his businesses were, in the main, about living the good life, he became his own brand ambassador and thrust his party persona into the public domain.

For the most part, when times were good, and the cash-rich liquor empire that he inherited was subsidising his lifestyle, it didn’t matter to anyone. Of course, shareholders in the erstwhile UB had cause to reflect with disquiet at the financial engineering that was going on with the company’s balance-sheet , and the fact that the group head appeared to be a trifle distracted on the job.

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Insiders in the world of finance, who sit in on meetings at which credit requests from the Mallya group were considered, point to Mallya’s string of failed businesses (other than the crown jewel, which his father had bequeathed him) as arising from his “reckless decision-making " and “an appalling choice of managers.”

Having been enthroned in the family business at a relatively young age, Mallya was forever the Peter Pan of the corporate world, the boy who never grew up.

That recklessness manifested itself also in the cavalier manner in which Mallya secured debt - at interest rates that were several multiples of prevailing borrowing costs - on ‘vanity purchases’ such as Richard Burton’s yacht and the Sword of Tipu Sultan (which was feted as a restoration of India’s pride).

That pattern of behaviour - both in the personal and the professional domains - has been repeated over several years, and it turns out that the man has been doing to his businesses what we presumed he was doing to the arm-candies that were eternally draped around him.

Mallya’s mistake lay in an excessive preoccupation with building brands - and there’s no doubt that he did that in style - rather than on building robust businesses.

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But whereas his earlier failed ventures were relatively small enough to mask his core incompetence, his entry into the world of civil aviation - a stern test of business mettle in an admittedly challenging policy ecosystem - exposed his limitations.

In September 2011, a research report from a brokerage firm stated the blindingly obvious when it observed that Mallya’s foray into the airline business was “ill-conceived - and has already cost UB shareholders dearly.”

Their ownership in UB, it added, had been “sacrificed at the altar of egoistic ambitions.”

Seldom do investment research reports resort to such searing - and personal - comments about business leaders. In Mallya’s case, though, it was entirely merited.

What’s worse, now that he has effectively run his airline to the ground (of course, with help from the government’s flawed policies), he is on the threshold of securing a “back door bailout” from the government , routed through the public sector lender SBI and other banks.

Which effectively means that virtually every taxpayer now effectively ends up subsidising Mallya’s famed lifestyle.

The least the man owes us is a heck of a party.