India’s Mallya will not sell ‘family silver’ for Kingfisher
NEW DELHI: Kingfisher’s owner and India’s liquor baron Vijay Mallya does not have to do a deal with UK drinks giant Diageo and will not sell prized assets to rescue his grounded Kingfisher airline, he told Reuters at the weekend.
Speaking in his office at Force India, the Formula One team he co-owns, the UB Group head poured scorn on media reports that he would be forced to sell stakes in profitable businesses to fund Kingfisher.
“That is the media perspective of what I am going to do.
I am not so sure that I lack commercial acumen to the extent that I would sell a hugely thriving, successful business to take the cash and put it into an airline in an environment such as India,” Mallya said at the Indian Grand Prix at the Buddh International Circuit south of New Delhi.
“My group is sufficiently cash-generative to fund the airline as we have done. We have put almost 150 million pounds ($241.47 million) since April 2012 into the airline.
But that has not meant that I have had to sell my family silver to fund the airline.” Mallya has been talking to Diageo Plc, makers of brands including Johnnie Walker whisky and Smirnoff vodka, about selling a stake in his United Spirits Ltd.
Earlier this weekend he said he was unsure whether or not he would agree terms with the London-listed firm.
“I do not have to do a deal with Diageo at all,” said Mallya. “I am under no compulsion whatsoever. But having said that, I will do what is good … for myself, my family wealth and for long-term shareholder value.”
“I must do that for every business because these are public companies and I owe it to the shareholders and stakeholders in these companies,” he said.
“Selling assets to fund the airline? No plans of that nature whatsoever.”
Mallya lost his billionaire ranking in Forbes magazine on Thursday, which ranked him 73rd in India’s rich list with a net worth of $800 million, down from $1.1 billion last year.
His “Force India” Formula One team is set to race this weekend at the Indian Grand Prix in New Delhi and reports said Mallya was expected to attend, after much media speculation over his whereabouts in recent weeks.
Kingfisher Airlines Ltd, which has never made a profit, had its licence suspended by India’s civil aviation authorities last week and has not flown since the start of October after a protest by employees, who had been unpaid since March.
The cash-strapped carrier said on Friday it would use its own money to try and get back in the air. The day before, staff had agreed to return to work after the airline said it would pay three months of overdue salary by Nov. 13. According to the consultancy Centre for Asia Pacific Aviation, Kingfisher has total debt of about $2.5 billion.
Mallya said the airline had to be dealt with professionally, but he wanted it to survive.
“The environment and government policy must also encourage me to do that,” he said, cigar in hand. “So we are going to give it our best shot. We are committed to that.”
The tycoon, who said on Twitter earlier in the week that he was relieved to no longer be a billionaire on the latest Forbes list because it might lessen some of the envy directed at him, defended the management of the company.
He said there were many reasons for Kingfisher’s predicament, but laid much of the blame on taxation and the Indian government. “Very high fuel costs, obscenely high taxation, lack of foreign investment permission, until literally six weeks ago - so many different factors which make the Indian aviation space actually somewhat unattractive other than the potential growth going forward,” he explained. “The government needs to look at taxation very seriously. You can’t have a 25 percent average sales tax on fuel when crude oil prices that used to hover around $60 or $70 a barrel are now well in excess of $100 a barrel.”
Mallya has been looking for partners for the airline and said two investment bankers had been hired as part of the search. “Both an Indian partner or partners or a foreign partner. we are in dialogue with a number of potential investors,” he said.
“Now, you can’t possibly sew up a deal in six weeks. It’s impossible. It takes more like six months. Everything is moving.
There are a lot of moving parts and we are trying to put together a good solid strong package,” he said.
The meeting between regulators and airline officials took place after Kingfisher staff agreed to go back to work on Thursday, ending a strike over not being paid for more than six months.
Kingfisher workers agreed to the management’s new offer that they would receive at least four months’ worth of unpaid salaries by Christmas, sending stocks up 4.59 percent to 11.40 rupees in morning trade on Friday.
But its planes cannot take off again until the firm persuades Indian aviation regulators to restore its flying licence, which was suspended last week.
India last month allowed foreign airlines to purchase stakes of up to 49 percent in domestic carriers, in an effort to help cash-strapped airlines like Kingfisher.
Richard Branson, the boss of the British airline Virgin, defended Mallya but said he had made himself an easy target for criticism.
“Most people would have walked away six months ago and all the jobs would have been lost,” he told India’s NDTV news channel. “At least he is fighting to try to keep the airline going.
“If you do sort of show your wealth too much, I think that’s dangerous for any business person…particularly in somewhere like India, where there are a lot of very poor people, so I think maybe, maybe when he looks back on his life he might regret being so perhaps so overtly flamboyant in sort of showing off his wealth.”