The problems of Sahara Force India boss Vijay Mallya seem to be mounting up at the moment.
This weekend he was hit with a non-bailable arrest warrant in Hyderabad, India for non payments, due to bounced cheques for use of the city’s airport, relating to his failing airline Kingfisher. While debts in his drinks business could force him to sell a controlling interest to one of his biggest rivals.
The airline, once the second largest in India, has net debts of $1.7 billion and its sales have fallen 87% from a year ago to $222m.
According to The Economist, the mistake made by the creditor banks in India was to allow it to stagger on rather than force it into bankruptcy, compounding the problems.
The paper claims that the banks in India have the power to bring him down, but are generally reluctant to confront the well known tycoons in the country.
This and the issue of the warrant, will certainly provide a notable side show at the Indian Grand Prix in Delhi in two weeks time.
Mallya’s airline crisis comes on top of problems with his core drinks business; there are concerns about his unlisted companies, while of the drinks companies that are stock market listed, United Spirits has $1.6 billion of net debt and drinks giant Diageo (a McLaren sponsor via its Johnnie Walker brand) is circling the company with a view to coming in to take control if Mallya is forced to sell to stay afloat.
The Economist notes that there is also a threat of collateral damage from the probable failure of the airline, “Mallya’s main listed holding vehicle has $1.8 billion of guarantees to the airline’s banks and to aircraft leasing firms. Its latest annual report says it is ‘reasonably confident’ that these will not be invoked.
“If they were, it might be bust too,” concludes the paper.