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Force India owner under pressure from banks over debts
Posted By: James Allen  |  14 Feb 2013   |  9:23 am GMT  |  86 comments

Vijay Mallya, the co-owner of Sahara Force India F1 team, has come under intense pressure from 17 creditor banks in India, who have lost patience and announced they are calling loans on his failing Kingfisher Airlines business, which is $1.3 billion in debt.

The airline has been grounded since October last year, the debts mounting up. And according to the Financial Times newspaper today, some of Mallya’s trophy assets are being targetted as banks look to recoup their losses, “Now that his creditors have run out of patience and are calling in loans to Mallya’s Kingfisher Airlines, some of them bearing the billionaire tycoon’s personal guarantee, you’d think a few of these playthings might be about to change hands. Well, maybe just a few,” observes the FT.

Mallya has a prodigious car collection, several super yachts as well as teams in IPL Cricket and F1. Some assets are more easily converted into cash than others, however, with F1 teams notoriously difficult to sell. The FT notes that the creditor banks are only expecting to recover 30% of the debt.

Mallya sold a chunk of his United Spirits business for $1.2 billion at the end of last year, but has not used the money to service the debt on the airline. His unwillingness to invest his own money in saving the airline appears to have been what made the banks act in the last 24 hours.

As for the impact of Mallya’s troubled business life on the Force India F1 team, deputy team principal Bob Fernley told me at the team’s launch two weeks ago that the team is ringfenced from the turbulence of Mallya’s other activities,

“It doesn’t affect the F1 team. There is a disconnect between what happens in Vijay’s business and what Vijay is doing on the F1 team. So it doesn’t matter what happens there. The shares in United Spirits have quadrupled in the last few months, so he did a wonderful deal there.

“But whether Kingfisher or United Spirits is doing well or not doesn’t affect the team. And it’s very difficult for us to get that message across, although we have been trying for several years.

“We get a story every three or four months where we are about to go bankrupt, or someone is selling us or whatever and we’ve had that for five years, so we are used to it,” he added. “Five times a year we are up for sale! But we are still there and the strength of Force India, which so many people seem to have missed, is our shareholders. We don’t have to go to the external market to be able to raise our race budgets.

“We are blessed to have quality shareholders like Vijay and Sahara.”

Force India is the only team which has not yet named its second driver ahead of the new season starting in one month. They are due to do so before next week’s second F1 test in Barcelona, with Jules Bianchi the front runner. However Autosport reported today that Adrian Sutil had a seat fitting at the team’s Silverstone base ahead of a possible test outing next week.

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Force India seem to be running into trouble here…I would rather a talented driver (Sutil or Bianchi) got onto the 2013 grid to fill the Force India vacancy rather than a pay driver like Narain Karthikeyan, that rumour was a joke.


3 car teams?… i was thinking about this the other day… alonso, hamilton, vettel.


Is there a chance that Force India think their best chance of making money is out of the finishing higher in the table, rather than through sponsorship, and so have gone for the best driver they can get?


No, if they wanted to make money they’d fold.


Ah, the old adage, “If you want a million out of F1, start with two* million”

* – of course, that was coined in the 1970s – inflation’s set in since.


the saying goes …if you want to be millonaire in F1 … join it as a billionaire.. 🙂


Mallya is not the only problem facing FI especially if it is ring fenced from his other interests-the biggest problem is if Sahara pulled out its investment which is becoming increasingly more likely.

It would be a really pity to loose a great team and what they have achieved over the last 4-5 years. Im guessing there is a strong likelihood Sahara will be forced to sell off their stake in the team which makes it a very interesting proposition for someone come 2014. I see it as a great opportunity for an engine manufacturer like Cosworth or even a second Mercedes AMG “sister team” – If Mercedes make some gains this year and next year. The end of this year will see which way this is played out.

At this stage I would put Bianci in the car- because I believe he is a rising star who has shown great pace every time he has set foot in a F1 car. Adrian is at par with Di Resta and they already have Di Resta. Sutil should be retained as a test driver – for those unsure of his legal rights-he is free to race in any country ,apparently he has already provided FI the necessary clearances.


If Sutil is testing for the team, and could possibly get the race seat, will he be bringing his own money to the team? Surely he can’t still have personal sponsors?


force india second driver is michael


Is it possible that both Bianchi and Sutil will share the car this year? They seem to be taking a long time to announce this despite them only ever being to candidates in the the frame.

I am not 100% up to date with Sutils legal worries but there might be a few countries that may refuse him entry. Bianchi could drive in those races keeping.

With two solid points scorers such as Di Resta and Sutil Force India could really potientially cash in on their rivals having rookies in the car. Bianchi as a 3rd driver and picking odd race would keep Ferrari sweet for an engine deal in 2014.


The times are reporting that the number for the personal guarantees are $1 billion.

I am amazed that the banks loaned that much against a personal guarantee in the first place.

Anyway, this process will carry on for a while – personal guarantees in a corporate sense are difficult to enforce. It will be much more likely that the loans are restructured as the banks would much prefer the outcome (as they will likely get more money back). There is a good chance that Mallya is simply going through a process of negotiation as to how much he will need to personally contribute to get it back off the ground.

We know to worry when hedge funds go in and buy the loans from the banks – that is usually a signal that the banks really want out


I heard Narian Karthikeyan is going to join Force India.

Is it true James?


I also read reports about it. Apparently they are or were in negotiation. And Karthikeyan would bring an important amount of money from Tata. It is true that there something is going on. But we don´t know the whole story yet, much less the outcome


As far as I know Karthikeyan doesn´t want to be a third driver or just a test driver. He wants the seat. That was the complicated issue in the negotiations. If Force India says no then Karthikeyan takes his money elsewhere, meaning IndyCar or something like it.


Well I don´t know if that is the only sticking point. And also Narain has experience as an F1 driver. Keep in mind that nothing is for sure yet


If that’s the sticking point, then I’m confused as to why Narain bothered. After all, the position in 2009 (last time he asked) was that he would need to do a year in the reserve seat before racing, to be properly integrated with the team. Force India has had considerable success with that strategy, so why would they break the policy for Narain, especially when there are other drivers with sponsors who are not direct rivals with Mallya’s “king of Indian motorsport” status available?


Thanks mate!


I would welcome Karthikeyan but only as a third driver! bring in the money from Tata but may be drive in india.

they only problem is Mallya and Tata don’t get along…

Tornillo Amarillo

It is said that the creditors can get only 30%, I understand of the capital. How about the interests during these years? 😉


There is a “disconnect” for sure!

When you sell off some stock and then it has “quadrupled in the last few months”, that is NOT “a wonderful deal.”

I’m getting a glimmer of exactly what is wrong with Mallya’s empire: basic arithmetic!


HAve you guys ever studied stocks and stocks market…

the news that UB group is selling its stock to a foreign player was a positive news for the company and in the market people knew now that they should buy asap… cuz the day the deal takes place the share price will go exceedingly ihgh….. i saw the stock increase 40% and 30 $ in a day each in front of my eyes after the deal… so its a good deal… cuz even though mallaya sold his stake bt the value of his remaining stake doubhled in jst a couple of weeks….


I think the shares quadrupled in the last few months Prior Malya selling- hence the ” really good deal there”.. Not the way you read it.



But that raises a question I overlooked: how does a stock quadruple in just a “few months”?

If that happened in NY or London there’d be an investigation launched by sundown!


Kingfisher is not a start-up, though speculation that a sale is about to happen has been known to produce odd increases in share price, especially when the rumoured buyer has a good reputation and/or the product is considered very strong (the former definitely applies here, I don’t know enough about alcohol to answer the latter).


Not really start ups can increase 10 fold in that time, it can be a number of things -possible news of expansion,joint ventures or acquisitions but yeah it would be interesting to know – maybe it’s a bit of show boating also more than a few months..


My thoughts exactly, immediately after reading that statement!


I just read on Sky website that Andrian Sutil will be a test driver next week in Barcelona.

Maybe it´s just me but I think FIA should change rules and demand teams to start testing with 2 confirmed and signed drivers.


They still have 8 days of testing the last 4 were shakedown. Quite frankly I couldn’t care if they named a second driver on Friday am at Melbourne. All teams have difficult situations and not least so many driver options at the moment. If we followed this line of thinking there would be no Kimi Raikkonen in F1.


If Force India literally announces their second driver on Friday of Melbourne, they’ll have a problem. The closing date for entries for a given race is the end of business hours on the Monday preceding a race, and F1 is not exactly a great place to try keeping a secret. However, I don’t think it will come to that. We’ll probably find out a few days after the final test… …or considerably earlier, depending on whether someone does something decisive.

Anne, the 2nd driver/unready car thing tells nothing because many teams have done that in the past, including the occasional team that ended up taking that year’s title (Brawn did both in 2009, for a recent example). Also, teams can’t afford to enter F1 now because the start-up fees are so high (about £60-80 million to be at Caterham/Marussia level), so “waiting for the economy to improve” is not a viable tactic. Ironically, it’s cheaper to do the intervening years, provided nobody successfully issues a winding-up order. (For that matter, if they do, Force India is merely back to square one).

Though the teams that do their homework will likely win out, on average, in the end – because usually, the more and better preparation a team does, the better it fares in the championship.


This is the F1 not some kind of beauty contest where we have a parade of drivers wating to see who ends up beeing the winner. Nor I believe it should be some kind of auction either where the one with the highest bid ends up with a seat. I know it is what it is. I have the right to be against this type of methodology


Well I believe it is very unprofessional what Force India is doing. Look, if they are in a big economic trouble it is better to call it a day. Then later if there is a turn around in their situation they can come back. Also other small teams, they fix the problem with pay drivers while respected drivers like Kovalainen are losing their jobs. And those drivers need to go to DTM, Lemmans or WRC

At the same time every year we have a team that in the first test of the season they don´t have their new car ready so they bring the old one. And some other team like Force India who still haven´t confirmed their drivers line up. Those situation are unfair to other teams who do they homework. So I think we need new rules.

I know they have meetings, the concord agreement, budgets talks. But the reality is always the same and nothing really change for the better.


“Demand” is a heavy word Anne- All for your “opinion” I understand what your “suggesting”


You read it here too!


Yes James but you mentioned a report from autosport. It´s no longer a report it´s official. Well with Force India what is official today could be something very different tomorrow. I wouldn´t be suprised if they end up with Kartykahyan.

The thing is we are near the sencond test and Force India is still up in the air


Force India still has Kingfisher as a sponsor, so surely some money must change hands withing the corporate tent, no?

I have a very hard time believing that all of this isn’t having and effect on FI.

Who is their second driver, again? That’s a bit ominous.


Several of Mallya’s companies are on the car, so it is likely that the change would simply be that one of his other companies would feature on the car. This works provided there continue to be enough companies in his empire in a position to put decals on the car.


Hey guys,

You are talking about a business man who is an Indian.. let me tell one thing very clearly….

SFI and Kingfisher just have a common shareholder… they are not sunsidiary of each other…. so what happens in kingfisher wont affect SFI at all….. at max in the worst to worst case scenario what can happen is that banks can sell Vijay Mallayas share to somebody else.. and that too if they are in his name… if they are in his sons name they wont be able to touch it even …. thats the way indian law is 😀 … all the more… also for a person as big as Mallya… he can easily get his way out… the issue here is .. he is not willing to give up on the airlines and wants to run it again… thats the only issue … so SFI is very much safe and looking to go further… if u all have good memory you should remember the team just gave an expanision plan of around 50mil USD if i am nt mistaken… so think urself on the future of the team… Indian laws are way different than other countries… its a public limited compnay the only isssue is the Mallaya has given personal gurantee thats it


Agree with your logic in general, but we are all still speculating. The only way to know what impact one of “his” companies has on another is to painstakingly go through all the numerous financing, security, and shareholder agreements, personal guarantees, etc – an analytical process that can sometimes confound the very law firms and finance experts that put these deals together in the first place.


I’m not sure if I have the right end of the stick here, but isn’t Kingfisher one of the main Force India sponsors? Doesn’t that have a huge impact on the team finances?


this is worrying news, I’ve supported the team since the Jordan days. You have to applaud the way this team has moved back up to the grid after Mallya brought the team. The team wouldn’t be this competitive without his money. It does saddened me that he is in the situation, i really hope this doesn’t effect the team. I really dont want to go back to the midland/spyker days….

Hopefully Mallya finds away out but this is the best opportunity to get TATA involved into the team and use the Jaguar brand instead. Anglo-Indian team as force India is now.


I to have supported the team since the Jordan days, and Mallaya has always done the best by the team, like getting Mercedes on board and paying Ferrari off a year early. He also tends to get the best drivers available, and never resorted to pay drivers as such (I know Sutil bought some sponsorship but I believe he was paid).

I think the team are just confused about whether to bring Sutil back or not, something I would welcome personally. I am really dissapointed we couldn’t keep Nico, but you can’t blame him for leaving, and I still hope he does well (I’ve always like Sauber to) and I hope he gets the top drive he deserves one day. It was a real shame that safety car stopped him winning the Brazilian grand prix, because he was so far out in front at that point 🙁

Being Jaguar would mean a cosworth engine most likely – no thanks (mind you beggers can’t be choosers). I guess we would also stop employing German drivers (we had one every year since Mercedes signed with us), maybe James can provide some insight there?


oh totally forgot about the engine front! agreed Jaguar wouldn’t be a good option then.

Totally agree with you about Sutil, I really hope he gets the seat as i was saddened when he lost it last time. A very very quick driver and is able to perform similar to the Hulk. Regarding next season, i do hope we are still a Mercedes customer as I really don’t want Biachi as our 2nd driver! it will go back to the days when Honda forced us to have Sato in the team!

lets wait and see for the Barcelona test, as normal the media or Tv don’t really pay attention to this team but i do feel we have developed a much better car in which we will beat the Saubers! Hopefully The Hulk would change his mind and come back to Force India.


diabolo, please explain why Bianchi is better than Sutil. I can’t get my head around how he can be faster and better than sutil.

you have to remember Sutil consistently scored points and qualified in the top ten. I always remember he got the fastest time in practice in a midland! and spyker in monaco. beat hamilton in f3…


Sorry guys but i completly disagree! Sutil, better than Bianchi? are you killing? Sutil had his chance. and if he would have been so fast, why team managers didn’t call him?


It is a real shame, but the team are clearly in financial trouble reflected in the drawn out 2nd driver discussions and it being a ‘shareholder decision’.

If Force India do fold how long will it be before we return to the 3 car team discussion? Personally I think we have to do it this time as the last approach (introducing 3 new teams in 2010) hasn’t really worked.


These days, with the dirth of real talent in the midfield and a myriad of talent on the sidelines, I think a very strong argument can be made for the return of the 3rd car guest driver (or for 3rd cars in general, or for customer for that matter).

Imagine Ferrari or RedBull being able to field Kobayashi in Japan, or Schumacher in Germany.

Yes I know that guest drivers in the past were mobile chicanes, so Superlicense rules would have to apply.

I think that would be VERY entertaining.


Very interesting idea.

Would certainly be great for the spectacle and the media would love it!

Teams would just have to nominate the 2 cars before the race that are eligible to score towards the Constructors.


Mallya has repeatedly said that the Diageo deal and the money accrued from this will not be used to revive Kingfisher Airlines or repay its debts. Mallya’s spirits company (United Spirits) has a fairly large amount of debt on its books and I presume a large part of this money will be used to retire that debt.

Separately, IIRC, Whyte and Mackay- the Scottish distiller acquired by Mallya a few years back will be kept out of the Diageo deal (regulatory issues I presume) and this is a relatively valuable asset that Mallya will control – so it’s not the end of the road just yet for him. The rider here being that Mallya has furnished Kingfisher Airlines bankers with financial guarantees- it’s still unknown if these include shares of United Spirits/Breweries/other group companies.


Force India is to strong a team to fold up… unlike HRT it should have some backers.. it would be a travesty to have a strong mid feild team to simply fold up… Despite Mr mallaya financial trouble he has certainly upped the team to a respectable level


Weren’t Lola Cars interested at one point to enter F1. It could be that somebody like them buy the team should anything happen, but I don’t know.


Oh, wasn’t aware, no 🙁 That’s a shame. My bad…


Lola Cars? You do realize they went bankrupt last year?


Well 3 car teams would be better than customer cars, thats for sure. If the grid falls to 18 or less cars, then 3 car teams are allowed under the new agreement.

Parr and Mosley’s budget cap idea would have made it much less likely for smaller teams to go bankrupt as well as keep the competition closer while still having decent technical freedoms.


maybe they could sell of a majoirty stake to Tata … and we could have a new Jagauar F1 ..like 2003 …


Would be Great to see a properly run/funded Jaguar team back in F1.


Or perhaps a Land Rover/Range Rover F1!!!!!!!!


Not sure if 4WD is permitted in F1… 😀


James, you say “Mallya sold a chunk of his United Spirits business for $1.2 billion at the end of last year”.

I may be wrong, but I think that deal has yet to go through the Indian regulatory approval process before the money can pass to Mallya. Hence the problems that Mallya may be facing in using that yet to be released cash to finance his other debts or interests.


Exactly my thoughts, the company buying this (i believe 26%) chunk, is DIAGEO, who happen to be a McLaren sponsor, interesting…


Obviously the management have to say what they have to say, and I agree some of the stories are hyped up (sometime by the notable anti-Mallya members of the media), but it’s hard to a believe that any team will be unaffected by the financial travails besetting its major shareholders and apparently only sponsors. James, is Michael Mol still involved in FI, I recall he was in cahoots with Midland and then led the conversion to Spyker, but I can’t remember if he kept a shareholding when Mallya bought in.


Sahara is in some financial trouble too… !


I’m from India and this swoop down on Mallya’s Kingfisher Airlines is a case of too little, too late. Mallya is an influential man and he has managed to keep the banks at bay for the better part of 2 years now and I’ll be surprised if he loses control of the more profitable parts of his conglomerate (he runs a fertilizer company, an engineering company apart from his flagship spirits business) as a result of banks recalling their loans to Kingfisher Airlines.

This is not to imply that Force India is completely insulated from turbulence at Mallya’s firms. What maybe more worrying for Force India is that the team’s part owners Sahara India have been attracting the ire of the Supreme Court of India and the capital market regulator SEBI for over 6 months now and this has culminated with SEBI freezing Sahara’s bank accounts, seizing their immovable assets et al beginning late yesterday evening.

Mallya sold a part of his stake in Force India to Sahara when troubles at Kingfisher Airlines started mounting and funding was hard to come by. The troubles at Sahara may have a far reaching impact on Force India and this, combined with Mallya’s tiff with his bankers may just upset Force India.


Interesting insight


On the second driver, it has to be Jules Bianchi – the rumours around Narain Karthikeyan were a joke (probably dreamed up by GMM).

It is worrying though, ‘The Force’ have some such a long way from back of the grid to fighters in the mid-field over the last 3-4 years – would be a massive shame if these troubles effect the team’s progress. Poor Paul Di Resta.


“Blessed to have quality shareholders like Vijay and Sahara”…

Lol…oh that cheered my morning up. Of course Fernley’s not going to say he thinks his boss is incompetent and a destabilising influence on the team.

FI need to get away from ViJay and start afresh, they’ve been nothing but a vanity exercise to him. How the team can be happy being headed by a heavily indebbted business man is beyond me.


Vijay is a business man with a passion for Sports, be it F1 or Cricket. Whether he is a good or bad business man – we may not know.

Even the best business man in the whole have made stupid decisions – some may become apparent immediately while some takes time. Having said that, business men always take risks. Thats what separate them from the rest of the simpletons. In my Opinion, his business decision on an Airline was what got him into such a mess – knowing that almost all Airlines (except the middle east ones) are either running on losses or wafer-thin profits.

Now, coming to F1 – I’m pretty sure that he managed day to day business in 2011 or even in 2012. He has done tremendous well, to bring the team up to where it is now. While, several teams came and shut shop, FI have kept going strong. For that, he has my utmost respect. No one knows what will happen to any of the team a few years down the line. But, as it stands now, I do have respect for both the team and their boss.


Huh, correct me if I am wrong, Tony Fernandes’ Air Asia is doing extremely well, no?

I thought he started with one or two planes and now the airline is operating(forgot the exact number) a fairly large number of planes?


AirAsia made $42.64 million last year, not including one-off expenses. Given how large “one-off expenses” can be in aviation, that’s wafer-thin profit. It looks like it’s doing extremely well largely because most other airlines are making a loss.


AirAsia may be running with profits, haven’t checked them yet. But, those profits should be way down than what is supposed to be (before the global recession), when all these airlines came into business.

While Tony Fernandez may be more successful in Airline business than Vijay Mallya, when it comes to F1, he has been blowing only hot air. Every week he used to comment about getting points, how Caterham would be in mid-field, etc – but, delivered little to nothing… He is a complete opposite to Vijay when it comes to F1.


I don’t agree with you.

Force India is doing very well for a midfield team. Fernley is right in what he is saying. He is looking strictly to Force India F1 Team and the team is doing well.

It doesn’t matter for Fernley that other businesses of Vijay are unsuccessful. It’s not his business.


Well it must do if VJ is a major shareholder.


Since when did I say FI weren’t doing well? I didn’t…

Irrespective of their ontrack performance it’s not good publicity to be associated with someone who’s being constantly pulled up on bad business practice.


“FI need to get away from ViJay and start afresh, they’ve been nothing but a vanity exercise to him. How the team can be happy being headed by a heavily indebbted business man is beyond me.”

Since Vijay and Sahara are the main shareholders, the team can’t do anything to get away from them. It’s not their choice. The people working in the team are employees. So saying they need to get away from Vijay is not right…because it’s not their choice.

Like I said, FI have been doing well in the past years and Vijay’s problems started a few years ago, not yesterday, therefore it looks to me the team has not been affected by Vijay’s problems with his other businesses.

As long as the F1 team is separate and will not be distracted by the rest of Vijay’s problems, they should be fine.

The problems will only start if there will be no budget to keep the team running, but so far there is no sign of that. Even if at some point that will be the case, the team can’t do anything to change their owners. It would be like me not being happy my boss has some debt, so I decide to what, fire my boss?

I hope you understand my position.


But if your two majority shareholders are billions in debt and facing various legal cases – it won’t matter how well the technical team are doing. Once the money dries up, the team can’t develop or pay wages – much like a glorified HRT.

They can go on about ring-fencing all they like – but if the money stops coming in – the car stops running. Even if Paul Di Resta and his future teammate drive for free just to have a seat – if the car is not funded it’s the end of the road.


Agree with you, but at this stage the team can only hope they will not be affected and the annual budget will be allocated as usual.


Vijay is just an Indian Donald Trump, the son of a rich businessman who gives it the large one all the time, yet his grand ideas and businesses are all failing houses of cards built with other peoples money.

Bizarre how the team manages to keep on going, especially how well they are doing… I seem to remember PdR leading a race not so long ago.




Di Resta led the race in Bahrain, albeit for a lap.


Pinnacle of his F1 career.

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