G-6 - Kingfisher Airlines

KINGFISHER
AIRLINE
BUSINESS CASE STUDY
GROUP 6
Vansaj Raj Harshi Tandon

20bc391 20bc392
CONTENT
INDEX
INTRODUCTION
EFFECT ON BANKING
BRIEF HISTORY COURT VERDICTS
SECTOR
TIME LINE OF CURRENT SITUATION
REASONS FOR FAILURE
EVENTS
INTRODUCTION
Ex-Chairman of United Spirits,
United Breweries group
Founder of Kingfisher Airlines
Former owner of force India F1
team
Former owner of RCB
Former Member of Parliament (MP)
(Rajya Sabha)
Popular for his lavish lifestyle
Known as 'KING OF GOOD TIMES'
Ironically has acquired his position
in the list of people who went from
'RICHES TO RAGS'
BRIEF HISTORY
Family Background
Fat her Mr. Vi tth a l Mal l ya wa s a n a ccompl i s hed
i nv estor
Hi s mai n i n v es tmen t wa s i n ' Un i t ed Brewer ies
Li mi t ed' .
Lat er on pu rc h a s ed s tak e i n compa n y a n d b ec a m e
di r ector and a f ter s ometi me b eca me Ch a i rma n .
Af t er Vi ttha l Ma l l ya ' s d ea t h V i j a y M a l l ya b eca m e
t he chai rman of UB g roup.
BRIEF HISTORY
Business Background
He took charg e a s a c ha i rma n wh en t h e v a l uatio n
was 40 Cr b ut un der h i s ch a i rma n s h i p t h e v a l uatio n
of company ros e to 6 0 0 0 Cr.
Vi j ay Mal l ya h owev er di d n ot s t op wi t h t h e s uc cess
of hi s compa n y i n a l c o h ol i c b ev era ges a l on e. H e
wen t f urthe r to a c qui re Berger P a i n t s , Bes t , a nd
Cr o mpton i n 1 9 8 8 ; M a n ga l ore Ch emi ca l s a nd
Fer ti l i z ers i n 1 9 9 0 , Th e A s i a n A ge n ews pa per a nd
t he publ i sher of th e f i l m ma ga z i n e, a n d Ci n e Bl itz, a
Bol l y wood ma g a z i n e i n 2 0 0 1 .
BRIEF HISTORY
Business Background
He also went on the serve as the Chairman of
Sanofi India and Bayer Crop Science among several
other companies. These achievements catapulted
him into the status of one of the great Indian
business tycoons.
Vijay Mallya’s reach also extended to the sports
world. In 1996, he became the first Indian tycoon
to sponsor a cricket team to the world cup when
he did so for the West Indies through Kingfisher
(Indian beer brewed by UB). This gave birth to the
famous jingle ‘Oo la Lala le o’.
BRIEF HISTORY
Business Background
Hi s compan i es a l s o own ed t h e I P L t ea m Roya l
Chal l eng ers Ba n g a l ore, I -l ea gue t ea ms M ohu n
Bag an AC, E a s t Ben g a l FC, a n d Formul a 1 t e a m
For ce I ndi a. Vi j a y Ma l l ya i s a l s o a memb er of the
Wor l d Motor S p ort C ou n ci l repres en t i n g I n d i a in
t he F I A. He a l s o took a pa rt i cul a r i n t eres t i n h or se
r aci ng and a l s o own ed s t ud f a rms wi t h up t o 200
hor ses.
Vi j ay Mal l ya a l s o c ont ri b ut ed s i gn i f i ca n t l y to
p r otect I ndi a n h i s tory b y b ri n gi n g b a ck precio u s
ar ti f acts be l on g i n g to Ti pu S ul t a n a n d M a h a t m a
Gandhi .
BRIEF HISTORY
Business Background
I n addi ti on to th i s , h e a l s o b rough t b a ck 3 0 ot her
i tems bel ong i n g to Ti p u S ul t a n f rom a uct i on h ou ses
based i n the UK . I n 2 0 09 V i j a y M a l l ya on ce a g a in
bi d successf ul l y f or th e b el on gi n gs of M a h a tm a
Gandhi at US $ 1 . 8 mi l l i on a t a n a uct i on i n New
Yor k.
Mal l y a al so s erv ed i n th e Ra j ya S a b h a , t h e up p er
house of the Pa rl i a men t of I n d i a , f or h i s h ome sta te
Kar nataka.
KINGFISHER
AIRLINE (KFA)
S tarted i n 200 5
Af t er i ts l au n c h i n 2 0 0 5 , Ki n gf i s h er
Ai r l i n es soon bec a me s yn on ymous
wi t h F i ve St a r Ai r Tra v el .
By 2007 beca me s ec on d l a rges t
Domesti c Ai rl i n e wi th 1 /4 t h s h a re.
S ame y ear wa s n a med a s 4 0 t h Ri ch es t
p er son i n I ndi a by Forbe s .
KINGFISHER
AIRLINE (KFA)
KFA was ma rk et l ea der b ut wa s

suf f eri ng l oss es .
Vi j ay Mal l ya, h owev er, wa s n ot
content by f l yi n g K i n g f i s h er on l y i n
I nd i an ski es.
As per I ndi a n rul es , a i rl i n es t h a t h a v e
bee n i n exi sten c e f or l es s t h en 5
years are not a l l owed to f l y ov ers ea s
r outes.
KINGFISHER
AIRLINE (KFA)
He f i r st bi d f or Ai r S a h ara i n 2 0 0 6 b ut
l ost t o Jet. H e l a ter wa s s ucces s f ul i n
buy i n g Ai r Dec c a n . I n 2 0 0 8 ,
Ki ng f i sher f i n a l l y g ot p e rmi s s i on t o
op e rate on i n tern a ti on a l rout es .
R enamed Ai r Dec c a n a s Ki n gf i s h er
R ed . KFR prov i ded l ow pri ce t i ck et s
wi t h si mi l ar k i n d of f a c i l i t y a s KFA
KINGFISHER
AIRLINE (KFA)
Cus tomer pref eren c e s ta rt ed s h i f t i n g

f r om KFA to KFR, wh i c h f urt h er
decreased thei r p rof i ts an d t o s us t a i n
t he y started ta k i n g l oa n s.
Manag ement n oti c ed th i s a n d t h ey
i ncr eased KF R f a re.
Cus tomer sta rted to s h i ft t o ot h er
ai r l i nes, whi c h f urth er d ecrea s ed t h e
busi n ess of ki n g f i s h er a i rl i n e.
KINGFISHER
AIRLINE (KFA)
Cashf l ow pos i ti on bec a me s o wors t t h a t

KFA was deni ed th e l a n di n g a cces s a t
Ban g al ore & H ydera ba d A i rport s .
Fur ther Hi nd us ta n a n d Bh a ra t P et rol eum
banned KFA, Due to th e i r n ega t i v e
cas hf l ow posi ti on .
KINGFISHER
AIRLINE (KFA)
However Ma l l ya tri ed to b ri n g FDI f or

r ev i v i n g hi s a i rl i n es but wa s d en i ed b y
t he g ovt of i n di a .
S al ari e s due s s ta rted to i n crea s e a n d
emp l o yees s ta rted to l ea v e t h e j ob .
2 0 1 2, KFA l i c en c e wa s c a n cel l ed
He started ta k i n g l oa n s from b a n k s ,
Maj ori ty wer e PS Us ( 1 7 Ba n k s )
Kingfisher Airline
We n t f or Deb t Re s t r uct uri n g.
Ma r ket Pr i ce o f S ha r e 3 9 . 9
Va l ua t i on Pr i ce a s p e r b a n k s 6 4 .4 9
Hi g hes t Pr i ce e v e r t o uche d 4 8
KF A wa nt ed t o i s s ue P r e f e re n ce sha re , T he y
a s ked SBI f or i s s ui n g NO C, to whi ch S B I
de n i e d i ni t i a lly b ut o n t he n e xt i ssue d the
s a me.
Ma r ch, 2016, Vi j a y Ma llya a gre e d to p a y the

p r i n ci p a l a moun t ( 6, 9 63 Cr.) a n d a sk e d b a n k
f or a i nt er es t wa i v e r , whi ch wa s de n i e d.
Vi j a y Ma l lya le f t I n d i a i n sa me mo n th a n d a
wi l l f ul def a ul t ca s e wa s r egi ste re d.
EFFECT ON BANKING
SECTOR
The country, especially the banking sector
witnessed a drop in the economy after the
scam by Vijay Mallya. The real estate was
struggling and this was the reason that no
one came forward to buy the assets of the
company for recovery of loans.
The Central Vigilance Committee (CVC), as
a result, told the banks to have a second
layer of verification process for evaluation
of loan requests by influential people and
businessmen and to have their own
consulting agency.
LOANS TAKEN BY VARIOUS
BANKS
REASONS FOR FAILURE
La c k of Busi ne s s S t r a t e g y La c k of Mana g e me nt 2 0 0 8 R e c e ssi o n
Fi r st, the comp a n y Vi j ay Mal l ya g ot too The r ecessi o n

l aunched as much i nvol v ed i n h i s i mp acted the wh ol e
economi c cl as s ai r l i ne busi n es s . wor l d and al s o th e
ser vi ce l ater th ey Ki n g f i sher d oes n ' t av i ati on i ndus try.
shi f ted to l ux ury hav e any l ong term The re i s hi g h i n f l a ti on
cl ass and af ter th a t CEO o r MD. i n f uel pri ce s or
to a l ow- cost a i rl i n e. ai r p ort charg es .
REASONS FOR FAILURE
Ai r De c c an Hi g h Ope r at i o na l Co s t RCB ' s Conne c t i o n
I n t he beg i n n i n g , both Hi g h o perati on a l c os t a s Founded i n 20 0 8 by

wer e t reated a s compared to oth er Uni ted Spi ri t s , RC B
sep arate comp a n i es . i nd ustri es, h i g h f uel p r omotes i ts bra n d
Af t er t he can c el l a ti on p r i ce and th e c omp a n y Ki ng f i sher ti l l 2 0 1 3
of Ai r Deccan f l i g h ts was n ot abl e to rec ov er but no l i quo r bra n d
cus tomers shi f ted to i ts cost and c on ti n uos l y was p romote d by
competi tors. mad e l oss. R CB.
AUDITOR'S ROLE
COURT VERDICT
Government of India requested a court in London The court opined that the appellant will not get a
for his extradition to India and argued that he fair trial in India. They applied human rights in a
ran from the country after doing a scam with the strict sense and denied the request of Indian
intention to defraud banks. They again filed an government. They found the request of
extradition request in 2017 in the court on the extradition by the Indian Government opposing
basis of which he was arrested and granted bail and against the European Convention on human
again. This happened every time such a request rights because of poor prison conditions in India
was made in court. and ordered to improve the conditions and
facilities in prisons.
ACTIONS TAKEN
Vi j ay Mal l ya wa s c h a rg ed un d er v a ri ous
secti o ns.
S ecti o n 120B rea d wi th S ect i on 4 2 0 of t h e

I nd i an Penal C ode ( I PC ) , 1 8 6 0 wh i ch s t a t es
about the pun i s h men t of cri mi n a l
con spi racy a n d p un i s h me n t f or ch ea t i n g
and d i shones tl y i n duc i n g d el i v ery of
p r operty res p ec ti v el y.
S ecti o n 13 o f th e Prev ent i on of Corrupt i on

Act ( PCA) , 19 8 8 wh i c h st a t es a b out t h e
of f ence of c ri mi n a l mi s c on d uct b y a pub l i c
ser vant.
Charg ed und er s ec ti on 3 of P rev en t i on of

Mon ey Launderi n g Ac t, 20 0 2 f or t h e f ra ud
and money l a un deri n g .
ACTIONS TAKEN
The l enders i n v a ri ous b a n k s were
p er mi t ted to rec ov er th e pri n ci pa l a moun t
and i nterest by s el l i n g the a s s et s a n d
p r operti es o f Vi j a y Ma l l ya ' s compa n y
Ki n g f i s her as p er S ARFAES I A ct .
S up reme court c h a rg ed h i m wi t h Con t empt

of Court and f ra ud a n d ord ered t h e
g ov ernment to s eek h i s e xt ra d i t i on .
Gov ernment a p p ea l ed i n t h e court of

Lon don to se n d h i m ba c k b ut h e got b a i l ed
ev e ryti me due to h i s p ol i t i ca l a n d
i nf l uenti al p os i ti on .
CURRENT SITUATION
Harsh Vardhan Shringla, the Foreign Secretary

of India, during his visit to the U.K held
meetings with officials to enhance the ties
between the two nations and stated that the
Indian government has “best assurance” from
the U.K authorities of Vijay Mallya’s
extradition. He stated that British authorities
are working on the extradition process at
present. Gaitri Issar Kumar, the Indian High
Commissioner stated that the extradition has
been decided, the only thing remaining is the
legal process.
CONCLUSION
Laws are made to protect people and punish

the ones who violate them but these laws are
also misused by high profile people which is
often accompanied by ill-advised political
commentary. It has been years and the Indian
government is still making efforts to extradite
Mallya while he roams free. The delay would
only lead to injustice and further degradation,
this should act as a benchmark and strict action
needs to be taken so as the offenders think
twice before committing such crimes.

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KINGFISHER

Vansaj Raj Harshi Tandon

KFA was ma rk et l ea der b ut wa s

Cus tomer pref eren c e s ta rt ed s h i f t i n g

Cashf l ow pos i ti on bec a me s o wors t t h a t

However Ma l l ya tri ed to b ri n g FDI f or

Ma r ch, 2016, Vi j a y Ma llya a gre e d to p a y the

La c k of Busi ne s s S t r a t e g y La c k of Mana g e me nt 2 0 0 8 R e c e ssi o n

Fi r st, the comp a n y Vi j ay Mal l ya g ot too The r ecessi o n

Ai r De c c an Hi g h Ope r at i o na l Co s t RCB ' s Conne c t i o n

I n t he beg i n n i n g , both Hi g h o perati on a l c os t a s Founded i n 20 0 8 by

S ecti o n 120B rea d wi th S ect i on 4 2 0 of t h e

S ecti o n 13 o f th e Prev ent i on of Corrupt i on

Charg ed und er s ec ti on 3 of P rev en t i on of

S up reme court c h a rg ed h i m wi t h Con t empt

Gov ernment a p p ea l ed i n t h e court of

Harsh Vardhan Shringla, the Foreign Secretary

Laws are made to protect people and punish

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