Force India has been doing remarkably well on the race tracks this year, with Nico Hulkenberg lying third in the World Championship after Bahrain and Sergio Perez picking up the team’s first podium since Giancarlo Fisichella’s amazing show at Spa in 2009. This means that the team is currently second in the Constructors’ Championship. It is all very positive.
However, out there in the real world, things look rather different. The team’s title sponsor Roy Subrata Sahara (who owns 42.85 percent of the team) remains in Tihar Prison in Delhi for failing to pay the $1.6 billion that the High Court of India ordered him to pay. He has been in jail for more than a month. Sahara became involved in the F1 business by loaning it money and took over the shares in Orange India Holdings SARL, the Luxembourg-based parent company of the Force India F1 team, when those loans were no repaid. He has no obvious interest in the sport.
The team says that there are no problems with money for this year. This is probably because there is a debt guarantee for $135 million in place, given by Diageo as part of its deal to buy control of Mallya’s United Spirits company. Mallya’s situation is anything but easy with his creditors becoming more and more forceful in their pursuit of money that they loaned him for the disastrous Kingfisher Airlines. The latest developments in this respect are that in addition to selling shares in Mallya companies that were pledged in exchange for loans (which has weakened Mallya’s control) there have also been steps to have him declared “a wilful defaulter” which will mean that he will not be able to borrow any more money in India. In addition the creditors have put all the Kingfisher trademarks up for sale. On top of that the three remaining directors of Kingfisher Airlines have all resigned.
Mallya remains a wealthy man in terms of his assets, although these are reducing all the time, but he still owes a huge sum of money. Keeping a racing team – which eats cash – in such circumstances is anything but easy. In theory Diageo could one day turn its loans to the team into equity (as Sahara did) and buy shares in the business, but it is a drinks company and is not obviously interested in owning an F1 team, as there are restrictions on liquor advertising in a number of F1 markets. It should also be remembered that the firm has a long-standing marketing alliance with McLaren, using its Johnnie Walker brand.