Sahara Force India boss Vijay Mallya says that he is going to put $80 million into the Formula 1 team in order to improve its infrastructure, and hopefully its performance. This is the next logical step for the team, which up to now has been buying technology with gearboxes and hydraulics from McLaren, plus use of the simulator in Woking and CFD from Computational Research Laboratories (CRL), which has just been sold. The next step to move up the grid is to invest in suitable facilities to move the team on to the same level as the big players. Mallya says that “we are looking at some investments which will start paying out rich dividends in the future”. This is an interesting argument as the team will need to move up significantly if it is repay the investment. This year the team is bound for seventh place, whereas it was sixth in 2011, which means that it will lose around $7 million in TV revenues. Moving up from seventh to fifth, which might be possible, would gain only $10 million, while seventh to fourth would net $14 million, and seventh to third would be $20 million, so it would be a long time before the investment was repaid, although the team might be able to find some sponsorship if it made such a huge jump forward. This is not likely when you look at the depth of equipment and expertise in the top F1 teams, bearing in mind not only those ahead, but also those behind which have under performed. Still there is no law against spending money… if you have it.
Mallya has recently sold control of the family’s United Spirits empire to Diageo and so in theory has a little more cash than previously was the case, although he still needs to sort out a lot of other loans and unpaid bills. The Indian newspapers are reporting today that Kingfisher Airlines has just paid its employees for the month of May, which means there are still salaries to be paid for six months. The good news is that salaries for March and April have been paid in recent weeks. The airline is still grounded and its licence suspended and will not be allowed to fly until it has submits a comprehensive revival plan. Other articles show that the Indian government is still chasing $36 million in taxes.
There is no doubt that having an Indian team in Formula 1 is a good idea, as long as Indians relate to it. It would probably help if the team had an Indian driver, but Mallya has always avoided this.
joeblogsf1 
The announcement I read didn’t say where the money was coming from, just that the board had agreed the direction of the spend.
The Diageo deal will take some time to pay up as there are new shares to be issued as part of the process increasing shares in circulation by 10% – that is new money for the business not a pay off to Mallya.
Further, Indian takeover regulations require a company to acquire 25% of the business before they can make an offer to the other shareholders. Again not yet done.
Forbes says Mallya is now downgraded to a mere $800 millionaire, much of which is not in liquid assets. $80m represents 10% of his entire worth – he probably does not have that in cash – so where the money is coming from – who knows yet.
Sahara have to pay back $4bn + 15% interest to small investors by December 15th – who they ‘inappropriately’ raised money from according to the Indian Securities Authority.
IMHO this is hot air until something more concrete is said about the where abouts of the cash.
Far be it for me to suggest such a thing. People always say I am biased about the bloke.
Bias is not necessary Joe 🙂 The facts are worse than any conceivable fiction. The Indian news outlets I’ve followed have reported an unpaid Kingfisher staff member’s wife from Hyderabad committing suicide due to financial ruin.
How much more unbiased can you get than to say “seventh to third would be $20 million” in a story on $80m going into the team, when Merc is dropping in way more and for this to come true it requires McLaren or RBR or Ferrari to fail to perform for a whole season. Where is that Brawn like silver bullet going to come from to create this magical season and return on $80m investment? I would say you exercised remarkable restraint in your writing Joe in not pointing out the obvious! Enjoy the last race of the season!
The pay off on the investment might not be dependent on improved championship performance. I’ve no idea how much they’ve been paying McLaren, but if we imagine it to be $10M a year then the cost of setting up their own infrastructure is written off within 8 years.
Add a pay driver or two and things could get cleared a lot faster. Senna to Force India?
Hi Joe,,,,any news on the drivers lineup???
They are looking at available talent/money. Sutil, Senna, Pic and a bunch of people saying they have money.
Read somewhere. Senna was in contention but they didn’t believe he had the talent, even though he was bringing $10m in sponsorship. Not sure how true this is. If so, they still won’t accept pay-drivers unless the driver in question has the required talent; somebody like a Maldonado I would assume.
Pic has his sponsors, Sutil brought some too, IIRC.
Is Algersuari in the running at all? A couple of months ago, the news was that he had already secured a drive somewhere; looks quite a bit unlikely now, though there’s still quite a few places up for grabs.
Do you have any information on Maldonado’s whereabouts next year?
With Karthikeyan likely to be out of a job after this weekend with the troubles at HRT it would make sense to employ him at FIF1 as a test and development driver like McLaren did with De La Rosa. His experience would surely benefit the team rather than a GP2 rookie!
Joe… so, Kamui is admitting he has little chance of staying for 2013.
Its very sad because I think at this rate we will only have the world champions (Ham,Vet,Alo,But,Rai) as real talents then a bunch of pay drivers.
we already lost Sutil, Barrichello and the toro rosso pair (Buemi/Alg) and instead we have Kartikeyan, Gutierrez, Senna in place of real talents!
Disagree. I think Karthikeyan, Gutierrez and Senna all have plenty of talent.
I thought he said “we are looking at some investors which will start paying out rich dividends in the future”.
But it said ‘investments’…
Good luck to all involved. Hats off if he pulls it off.
Lewis said a few nice things recently about Karthikeyan. How do you/the press room rate him?
I think he is a good solid talent. He’s not an Alonso or a Hamilton, but he deserves his place in F1.
There are egos at play between Mallya and Karthikeyan, from the days before Karthikeyan was even in F1. Same between Chandhok and Mallya. The ego stems due to the fact that Chandhok and Mallya are both from separate ASNs in India. Chandhok is part of FMSCI and Mallya is of MAI.
Mallya has always said that the priority was not to have an Indian driver on the grid, unless he had the talent. The subtext of that message was that he would be happy to run an Indian driver as long as it wasn’t Karthikeyan or Chandhok. Pity really. Chandhok never even got a proper chance on the grid; atleast Karthikeyan’s had 2 solid seasons, plus half a season last year.
Is is possible that an Indian driver with sponsors like TATA would not get a seat with FIF1 because they might not want to be associated with Vijay
So Mallya is pouring money into his F1 team while Rome burns? I guess it keeps his mind off the chaos back home.
Well, that is what he is saying he is doing.
Was going to say that same as bigwagon. What about the people he owes millions to. They’re going to be ‘really happy’ at reading that he’s sinking money he owes into his expensive hobby.
This time last year I seem to remember Joe predicting the demise of his whole empire and possibly the team with it…. Now they are apparently investing an additional 50m.
Still, it amazes me that people still think of FI as ‘his’ team for his own personal whims, whereas he is a equal shareholder but only team principle. He is not the real power there now and hasn’t been for some time.
The clue is in the name….
You seem to know a lot about it. Why not start a blog.
Actually it might be have me betting on that collapse, but then I can never find my old posts on this blog easily, and my horizon was two years. Whatever the case Joe never makes calls like that. If you want a near term accurate prediction, you could learn to better read his pieces, though. Damned sight better than reading the weather report. I happily confess to adjusting my long range predictions because I felt I could rely soundly on Joe’s near term predictions. (because they happened to correlate to a whole lot else I had been looking at elsewhere, mind, but it all fit. Also, you get it easier in long range predictions: hardly anyone remembers and you deal with such a large margin of error anyway. Like a true friend of mine pointing out, after we’d not seen for 8 years or more, “John, everything you said happened, only in a different part of the market”. I was chuffed, but still radically poorer than my mate.)
Joe – how much of this press release is a marketing effort to lure pay drivers? Perhaps VJ believes that he can replicate Williams’ success in landing a big (paying) fish?
>Moving up from seventh to fifth, which might be possible
Possible in a good year, or possible consistently? Or just “possible” (and unlikely)?
Jordan did get ahead of Benetton for a few years at their peak, but unless Genii hit the financial buffers (which looks a bit less likely now than it did this morning), I can’t see FI displacing Lotus consistently if the former remain in anything like their current state (i.e., absent the kind of transformation in budget and otherwise that turned Jaguar into Red Bull, or Brawn into Mercedes). And their chances of displacing Merc instead must be even less, unless or until the men from Stuttgart follow BMW, Toyota & Honda out of the paddock.
What I was trying to say is, just as there’s a big step up needed from where Lotus are now to being able to mix it with Ferrari, Mclaren and Red Bull consistently, year in, year out, there’s a similar- sized step up needed to get out of the ‘midfield’ of FI, Williams, Sauber, and potentially STR and Caterham, to compete with Lotus (or Merc) consistently.
All IMO, obviously, but the last two teams to break in to that level and stay there were Honda –> Brawn / Mercedes (Ross Brawn + dropping a year + Mercedes money to make it stick) and Stewart / Jaguar –> Red Bull (big money from RB + Adrian Newey). Toyota and BMW (with Sauber) tried and failed, and Honda ran out of time, money and patience just as success was within reach. I can’t see FI making that kind of step up (altho’ I could imagine Lotus or Mercedes suffering a sever decline, promoting FI at more or less their current performance level. But -that- scenario doesn’t need or justify a bigger budget…)
So… where might the funds be coming from to complete these capital works?
Seems odd that someone might harvest an income from selling part of his income producing alcohol business to plough into a cash guzzling racing team??
Cloudcuckooland?
So from this news does that mean that their deal with Mclaren is coming to an end? Or in the meantime will that be extended to cover the gap between now and whenever all this new technology is up and running?
Mallya has seemingly learned a lot from Bernie about news/press releases and diverting attention away from more important matters.
Maylla’s ‘more important matters’have been going on for at least 18 months so when is he expected to release ‘good news’?