Saturday, July 6, 2013

The Force of India?

The Force India Formula One team's excellent results in the recent British Grand Prix back up claims made by its owner Vijay Mallya, back in 2007, that he would ensure the team had the resources and commitment which would push the team into the Top Ten.

Adrian Sutil's 7th, and Paul di Resta's 9th places, pushed Force India to fifth place in the 2013 Constructors' Championship - 22 points ahead of McLaren Mercedes!

I met and interviewed Vijay Mallya at Albert Park in 2007, Force India F1's debut outing, and I took an immediate liking to him.

He's down-to-earth, and one of India's commercial princes. He has built on the fortune created by his father in brewing, spirits and chemicals to make UB Group one of India's biggest conglomerates.

Known for lavish parties aboard his luxurious yacht, the Indian Empress, and over-the-top hospitality at IPL cricket matches when his Royal Challenger Bangalore team is playing, Mallya has unfortunately become a figure of fun in India thanks to the grounding of his Kingfisher Airline in 2012.

Kingfisher Airlines owes a total of USD$2.5 billion to banks, suppliers and employees and was stripped of its flying licence last December.

Mallya apparently did what all free-wheeling capitalists indulge in - debt-leveraging. The raison d'etre behind the creation of Kingfisher Airlines was so he could advertise the Kingfisher 'brand' as he is not allowed to advertise Kingfisher Beer in India. Mallya says: "I can't advertise, so I have to live my brand!"

However, the airline business in India fell on hard times in 2010-11, and heavily debt-laden Kingfisher was unable to dig itself out of the hole its massive debts created. Stranded passengers, cancelled flights and Banks banging on the boardroom door has seen Mallya's vision dissolve. He is stubbornly hanging on, hoping the banks will help Kingfisher's recovery, but so far they have steadfastly declined, and are now selling off pledged shares!

In a 2010 interview, Vijay admitted to me that his lifestyle, and his association with Formula One created a fair number of critics in India who, he says, are just jealous of his position.

Bernie Ecclestone holds him in high regard because of Mallya's ability to bring Formula One to India.

They combined to create an Indian Grand Prix and Bernie says Mallya's parties on board the Indian Empress in Monaco don't hurt the sport's image - but that's all froth and bubble!

Force India F1 is doing well, and Mallya is managing to hang on to the team, but for how long? Clearly Mallya has every division of UB Group leveraged against each other to create enough cash flow to keep all the balls in the air, but it could end up with Force India going the way of all the other teams which have found the cash-sucking sport too hard to fund.

Especially with USD$2.5 billion of Kingfisher Airlines' debt hanging over its garage.

Hang in there Vijay, don't let the critics beat you. Maybe Bernie would stand you a loan?

BTW, I suspect Marussia may be the next F1 casualty, because the team, which is now last on the points table is in deep financial poo. It's almost impossible to find out how many Russian-built sports cars it has actually sold (if any), and despite its dire position Marussia F1 has rejected talks aimed at merging with Caterham F1, and may not appear on the grid in 2014!

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