Vijay was the chairman of the UB group (mainly into beer and liquor) when he entered the Indian market with the name Kingfisher and found out that advertising about liquor, in India, is not allowed. So he used various alternative methods to advertise about his brand. His determination and hard work made him the ‘King of Good Times’, and the UB group became the 2nd largest beer and liquor making company in the world.
In 2005 he launched Kingfisher Airlines, with no knowledge in civil aviation. So, he was determined to grow his airline business just the way he has done with the UB group. So, he started providing luxury travels in the domestic sector, which was first of its kind.
‘Life King Size’
Mallya thought everything to be king-sized, so he provided facilities which no other airlines provided to its customers. As a result, Kingfisher was soon declared as a luxury brand for domestic travel. Within two years, the airline became the 2nd largest airline in the domestic market having one-fourth of India’s share of domestic travelers.
The root cause of the scam
In 2007 he decided to enter the international aviation market, which was prohibited under the rules, on the grounds of a minimum five years of domestic experience. But he was determined to enter the International market. So, he acquired an airline named Air Deccan, which was already in existence on International routes.
He was burdened with debt
He renamed the airline as Kingfisher Red, where he provided low priced travel, but with facilities no less than luxury travel. So, the people started to shift from luxury travel King- Kingfisher, to Kingfisher Red. This lead to a decline in the market share of Kingfisher.
It may have been the 2nd largest airline in market share, but the company was a loss-making company, due to which he had to survive on debts. And the pressure of customer services increased so much that he had to increase the price of low-cost tickets as well. As a result, people shifted to other airlines.
He tried to bring FDI investment but failed because of the government policies. The workers of Kingfisher went on strike as they were not being paid, and gradually left. The government had to cancel the license of Kingfisher in 2012, and the airline ceased to exist.
He then took help from several banks, 17 of which were PSU banks and 2 private sector banks. He took a loan from these banks and was unable to repay them. He then appealed the government for a debt restructuring, in which he used his political contacts (being a Rajya Sabha Member) to wave off his debt by converting his debt into equity at around Rs 65 per share when the actual market price was close to 40.
Even then he was unable to recover from the losses and demanded a NOC from SBI, which was allegedly denied at first, but granted after-words, under political pressure.
His total debt burden was Rs.9000 crores, which included interests. He appealed the banks to wave his interest and settle the claim in Rs.6000 crores, to which the banks disagreed, and he then made an exit route to Britain.
Now he is in the ‘Wanted List of India’ for wilful default of around Rs.7500 crores.