Kingfisher Airlines fell 14 percent in value on the Mumbai stock exchange, following reports that some of Vijay Mallya’s lessors are planning to reclaim their planes because the Force India boss has defaulted on payments. The value of shares in the airline has fallen 72 percent this year. In recent days the company has cancelled more than 100 flights because it cannot pay for fuel. The airline has borrowed money left, right and centre and is struggling to find new lenders.
Mallya formed Kingfisher Air in 2005, in part to get around the Indian ban on beer advertising. There are fears that the airline will drag down Mallya’s main company United Breweries. Mallya has recently sold half of the Force India team, which it seems he can no longer afford.
And yet the man bought a football team! Crazy. Doesn’t sound like a good situation.
Hey Joe,
Yes Kingfisher is in serious trouble with the aircraft lessors. There is a serious belief that the airline company might be liquidated. If the aircrafts are taken back then it is doomsday for the airline company. It has an accumulated loss of over 4000 crores or roughly 800 million $. On the other hand his liquor business is doing relatively better at 150 million $, infact a doubling of net profit from 2007-08. The margins are only going to be better and with sales at 2600 million $, it will do well. With the SAHARA group coming in, i think FIF1 can tide over very easily. But yeah, being an equity analyst myself, have no great confidence over both the owners accounting standards. But the team has actually moved from a back marker to almost 6th. The championship money could help the set up. Being a fan of the silverstone team right from the jordan era, faced some desperate times during spyker and midland era. You have to give credit to Mr. Mallya for bringing it back to life. It is a success in many people’s books. And as we have seen, lot of corporations are in trouble no less than half of eurpoe is in huge debt and staring at bankruptcy. So life will move on, an VJM will hopefully run the team towards further success.
Cheers
Kvasista
Which is why he was selling the team, as you said, and not just partnered up like other websites claimed. Good job, Joe
Hi Joe,
The situation seems even worse than reported yesterday. According to today’s Times of India, Kingfisher on Thursday only flew 269 flights out of it’s scheduled 418 daily flights.
Also, due to lack of payments, more than a hundred pilots have quit.
What kind of effect could this have on Force India? Is it possible that Mallya could exit from F1 completely?
“Schadenfreude” …is all I can think of.
Joe, it is claimed here http://www.pitpass.com/44961-How-Force-India-got-new-owners-without-being-sold that Mallya hasn’t sold his share in Force India. But you clearly mention(again) that Vijay Mallya has sold part of Force India since he could no longer afford it. I’d love to hear your response. i think pitpass article is of 2 pages.
Syed,
Believe what you like.
Seems to imply that marketing two large international businesses through F1 is not an automatic win as F1 people would have us believe.
Syed,
Whether Mallya sold his existing shares or he issued and then sold new shares the effect is pretty much the same: he sold a part of his Force India team ownership.
What the hell PitPass. Whats with the outright attack. Lack of F1 experience? No Business Knowledge? I like how it was written about blogs in general that then launched into an attack on this blog. That way when the facts of Joe experience are shown they can say that that remark wasn’t about him despite the fact that is was be taken by most readers.
No link to the blog either so people can judge for themselves (unlike here), no comments on the artical, and not even a name of the person who wrote it.
Well I will stick to the GP+ and this blog and will read what Joe is saying a remember that often on blog there is opions and rumours and then fact inbetween. Joe is very good in telling us which is which is which.
Also I think Lotus and Force India will be sold (not so sure about Toro Rosso) but I won’t expect them to remove that story.
I know the mind rebels at such simplicity, and so does the entire buy side of Mallaya f1 team: if it all boils down to this, then there really isn’t much value added by the endless reams of your reports , all you are waiting is for the end of one more independent formula one team, i am sure you will always prefer the toyota’s and honda’s.
But let’s presume for a moment that it really is this simple.
Cheers
kvasista
Sounds like Vijay is getting a well-deserved business lesson in Karma 101. Since he supposedly has a habit of not paying when he
has the money, don’t look for many tears to be shed as the myriad debtors come after him.
Wow. That Pitpass article seems more about this site than it does about Force India.
Pity Mr Sylts site doesn’t have a comments section to allow people to respond, but then he probably wouldn’t have made the comments if he did.
Just to say Joe that article in pitpass is rubbish.
I have little idea about your background in journalism, but there article gives a pretty mediocre analysis of the sale. And doesnt at all answer the question that if no one sold any shares and Mol and Mallya started off 50:50 how did they then go down to 42.5:15. Unless of course Mallya was given new shares to take him above Mol.
But however they do the maths regarding shares, there is one company and previously Mallya owned 50% and now he owns 42.5%. Which means he has less of it then he did before and i would assume has been compensated for it in someway.
Has VJ got his floating ego at this round or has it quietly disappeared?
Joe,
As I mention in another post on your site, these guys, just don’t do their homework on deals and over pay and over extend themselves with debt, thinking their own name (Brand) will keep the lenders to their business happy and at bay. Also if you borrow too much, then going bust really isn’t an option that the lenders really want either so a fudge is put in place.
Yes he did screw out a great deal – value for the F1 team, as you mention, very much overvalued. As for the airline, he borrowed way too much, and had taken on board to much debt, no wiggle room left in hard times.
Very little was actually put down on the booze business he acquired in the UK, and that is pretty much leverage to the hilt, but has a pretty good cash flow to keep everyone happy so far.
Lots of balls up in the air right now, and depends on which one he wants to catch and hold on.
Like Robert says, the old proportions of ownership compared to the new proportions do not tally with a new party merely being given extra, new shares. Yet the PitPass article does not address that at all.
Just read an article of his where he fell hook, line and sinker for the “If F1 changes away from the current engine rules, all the promoters will switch to INDYCAR races” line, a ruse which you, Joe, saw right through.
Joe,
Quick update as per the “Times” today, Kingfisher are in the hole to a tune of $1.4 Billion, (that is a lot of money) and that the shares have dropped 19% in the last 2 days, and that he has asked the Indian Government for help.
I am not an expert on Indian tax laws, but know a little bit, and you can take out a lot of cash from your business, and replace it with debt. Looks like that is what has happen in this case, given the deal on the planes and the fee paying customer, and his load figures.
In short. Without having looked at the Pitpass article everyone seems to be talking about it seems to me that Vijay Mallya has diluted himself. Pocketed the money and now has a far lower exposure in case Force India implodes, or the blowback from the airline impacts his other business interests.
Its been my experience in business that no one dilutes themselves without a reason, that being said, maybe this is the exception to the rule.