Thursday, July 21, 2016

Kingfisher and VRL: The tale of two Vijays

It was in the year 2003 that Vijay Mallya, the flamboyant Chairman of UB Group planned to start an airline, with no prior experience of running an airline. Many in the industry advised him including his close confidant and Group CFO Ravi Nedungadi but no heed was paid to it.

On May 7, 2005 on the birthday of his beloved son Siddhartha Mallya, the airline was started with much fan fare.

The funding for the airlines Kingfisher was done through the UB group, whose profits were bulging. Mallya surprised everyone by his swanky airline that offered the most comfortable journey with entertainment and gourmet cuisine, running in time and of course the battery of beautiful air hostesses.

He did not stop at making Kingfisher one of the most sought after airline but went ahead and acquired Deccan Airline, which was supposed to get a license to fly international in 2008 after having started operations in 2003. The acquisition meant Mallya gets to fly his KFA abroad within 3 years of operations instead of 5 years, which was the norm then

As luck ran out of the King of Good Times, KFA was grounded in 2012 and a consortium of 17 banks fighting cases in multiple courts to recover their dues of nearly Rs 9,000 crore including compounding interest.

Kingfisher’s Vijay (which means victory in Indian languages) lost all his battle at home and is now residing in Britain never to return to India—he has a lot of non-bailable warrants haunting him now.

Cut to May 2016, another Vijay--Vijay Sankeshwar, the chairman of VRL Logistics, announced that the promoters plan to venture into a regional airline business. Here again, there is a father and son duo.

VRL stock tanked on consecutive days, with promoters clarifying that it will be promoted by their funds and only 2 per cent of their stake will be offloaded to fund it.

Within 2 months of that announcement the company announced to the exchanges on Wednesday that it has shelved its plans. The company said that “the regional connectivity related aspects listed in the New Aviation policy do not augur well with our planned business model envisaged for the proposed activity”.

The stock is up again.
 
What has really led to the shelving of the plans? Is the draft Regional Connectivity Scheme not lucrative enough. VRL and investors have said it all.

For VRL, it is “All is well that ends well”. It is always better to square positions with loss rather than loosing thousands of crores, your personal assets and peace of mind.
21/07/16 Shiv Gupta/Business Broadcast News

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