There was a time when he owned India’s biggest liquor company and also launched Kingfisher Airlines in 2005 known for its stylish and premium experience which during his golden days matched his styles. It was then. Now, he is no longer talked about in this context.
The problem we see now started almost a decade ago. In 2006, IDBI bank got a proposal from Kingfisher Airlines seeking funds to acquire additional aircrafts. Rising crude oil price were making up half the operating cost of airlines, airline industry was highly competitive and Kingfisher was the new-kid-on-the-block. But Mallya was clear in his ambitions. He had announced that Kingfisher would be a world class airline. The feedback from the travellers was matching his ambition. Although Kingfisher failed to convince the credit committee of IDBI in 2006, he finally got the loan in 2009.
While Airline Industry’s blood bath continued, Mallya ambitions did not correct. In December 2007, it was clear that he shall acquire DECCAN Aviations, India’s first low cost airline, taking into his fold a player which had a loss of INR 3400 Mn in the previous year. With this acquisition, Kingfisher became India’s second largest airline in terms of the number of passengers carried. But the fortunes did not change much. As the oil prices still soared, company struggled to run a business, its finances floundered and its debt burdened and loses surged. By the end of 2008, debt accumulated to INR 934 crores which compounded to INR 5,665 crores as time progressed. In 2009-2010 the Kingfisher has accumulated a debt of over INR 7,000 crores turning Kingfisher into NPA for its lenders.
But hopes were still galore. In 2010 banks reconstructed Kingfisher’s debt. Period of repayment were stretched to nine years with two year moratorium but this was not enough to revive Kingfisher airlines which continued to bleed with every passing years. His membership in the upper house of the country, Rajya Sabha, was enough to prompt questions in parliament on the airline’s bad loans. It is noteworthy that Mallya still continued to withdraw huge pay packages for himself. In 2012, Airlines was not able to pay salaries to its employees and for 2012-13 its accumulated losses on its balance sheet turned into INR 16,023 crores.
In April 2015, Mumbai International Airport sold Mallya’s personal aircraft for INR 22 lakhs to recover airport dues. The Board of Directors of United Spirits asked him to resign as chairman after internal problems alleged finical irregularities. He is publically denying his ‘defaulter status’ and blaming media for the same.
The Kingfisher case is an example of collective failure of system. The bank should have declared it an NPA much earlier, may be it should not have been reconstructed then.
Hindsight wisdom is always correct. While leaving the country he promised to return but only time can tell.
Written by Roushan Choubey, MBA FA 2015-17 student.