The Plume of Feathers pub in rural Hertfordshire, 40 miles north of London, has become a target for the Indian media this week because Vijay Mallya, the high profile Kingfisher beer and airline businessman, is rumored to be hiding out nearby.
Mallya left India last week, just as the courts were closing in on him for massive loan defaults totaling the equivalent of US$1.3b illion plus alleged money laundering and other offences, at a time when concern is growing about India’s mountain of bad corporate debt.
Mallya, who likes to be regarded as the “king of good times” and has seen himself as India’s answer to Richard Branson, has been told by the supreme court in Delhi to return and appear by March 30 – with his passport, which the government wants impounded. He is believed to be either at his country house in the Hertfordshire village of Tewin (where, reports say, he pops into the Feathers pub with friends) or in London.
Meanwhile his motor racing partner, Subrata Roy of the controversial Sahara real estate and personal savings group, has been living for two years this month in Delhi’s Tihar Jail, trying to generate enough funds from asset sales for the courts to let him out on bail.
That is a fate which Mallya presumably fears he could suffer if and when he returns to India and does not show more willingness to correct the mismatch between his public debt and private wealth and answer other charges. Today he has been on Twitter saying he frequently travels abroad and that “I did not flee from India, neither am I an absconder.”
The foundering tycoon has reminded the media, which is hounding him, of the “help, favors, accommodation I have provided over several years which are documented.”
Both these men have been regarded for many years as India’s most colorful tycoons. They were clearly crisis-prone, but that didn’t stop politicians, film stars, media people, and other public figures and hangers-on flocking round them and their lavish life-styles. Roy has shared a Formula 1 motor racing team with Mallya since he bailed him out with an injection of funds in 2011.
Their stories demonstrate the importance – and uncertainty – of political patronage, which is a vital business asset in India for many companies, and especially for those that operate on the fringes of business ethics and the law.
As the power of social media and round-the-clock television news coverage increases however, those who have thrived for years on crony relationships are more likely to be pursued and pilloried than they were in the past when they come unstuck – Mallya has been hit by a media frenzy that is shaming him for having fled (which he has denied) with his millions, leaving behind not only massive debts but also his airline staff who have not been paid for three years.
Political clout can wane and even collapse, as it did for Roy two years ago and is now beginning to do for Mallya. Roy thrived on powerful political links in his home state of Uttar Pradesh as well in Delhi. Mallya blossomed with backing from almost all political parties across the country – he is an MP and secured sponsorship for his membership of the Rajya Sabha (the upper house) both from the Bharatiya Janata Party and a regional party in his home state of Karnataka.
It is difficult to pinpoint exactly when and why political backing falls away, but it seems to have begun to happen to both Roy and Mallya when they became exasperatingly intransigent and unhelpful in meeting the demands from authorities to clear up debts and other alleged financial misdeeds.
Impatience with Mallya grew when he appeared to be defying the authorities by throwing an extravagant three-day 60th birthday party in Goa last December, just a month after the State Bank of India had declared him a “willful defaulter”.
Then he announced on Feb. 25 that he was planning to spend more time in the UK with his family. There was nothing wrong with that – he has a home there. But he said it at the same time as it was announced that he was receiving the equivalent of a US$75 million personal payment as a final settlement with Diageo, the liquor group that has built a controlling stake in his United Distilleries business. He said that the payment “secures my family legacy.”
It looked therefore as if he was disappearing to London with his millions just as, unfortunately for him, India’s central bank, the Reserve Bank of India (RBI), and the government are beginning to tackle the country’s mountain of bad corporate debt with state-owned banks that has reached near-crisis proportions.
Source: First Post, RBI
On Feb.12, Raghuram Rajan, the RBI governor, set Indian banks a one-year deadline to sort out their non-performing loans, and warned them at a meeting in Mumbai that this “may require deep surgery” not “bandaids.” The escalating scale of the problem became clear when the RBI said that bad debts had more than tripled from the financial year ending March 2012 to March 2015. The Financial Times has reported that India’s stressed loan pile is now estimated to have hit about US$117 billion.
It has also been estimated by The Wire news analysis that India’s 10 most indebted business groups have about US$110 billion of loans in their books and are struggling to meet their interest payment obligations. Most of these companies are heavily invested in power, roads and telecom infrastructure projects or have been hit by falling world prices for commodities like steel.
Mallya was just 28 when he inherited the United Breweries (UB) group with its Kingfisher beer and spirits business on the death of his father in 1983. When I interviewed him for The Economist in 2005, he told me he had “lived my age” – driving fast cars, breeding and racing horses, and partying. By 2005, he had a fleet of private jets, five homes in India and others abroad.
Opposition in 2011 to government help for Kingfisher Airlines