Analysis: Mallya’s next move

Despite owing Indian banks an estimated £1.1bn including interest, Vijay Mallya, the chairman of India’s United Breweries and former head of United Spirits, is not yet on his uppers, writes Ron Emler.

Not only has he been able to post £650,000 bail following his arrest in London to face extradition proceedings but he also continues to live in the £12m sprawling mansion in Hertfordshire to which he fled in March 2016. He remains the main backer of both the Force India motor racing team and the Royal Challengers Bangalore Indian Premier League cricket franchise.

But extradition to India and subsequent conviction on fraud and money laundering charges would mark one the most spectacular financial collapses ever seen. It would be the stuff of movies.

Now aged 61, Mallya’s route to fortune began aged 28 when his father died suddenly and he inherited what became United Breweries. He built the company to take a 50% of India’s beer market and turn the Kingfisher label into a global brand. UB is now effectively controlled by Heineken.

The now defunct Kingfisher Airlines

Known as the “King of the Good Times” because of his extravagant lifestyle, Mallya sought to diversify out of alcohol (he also owned United Spirits until the 2012/13 takeover by Diageo). Trading on the Kingfisher name he launched a low-cost airline in 2005.

His timing was disastrous. After a flamboyant and costly start up, the global financial crash followed in 2007/8 and until it failed in 2012 the airline never made a profit. It collapsed into administration at the cost of more than 8,000 jobs and with staff striking over non-payment and airports seizing planes in attempts to force Kingfisher to pay fees.

Some of the charges against Mallya allege that he diverted money borrowed to prop up Kingfisher into buying property overseas. It is also alleged that $40m was diverted to his children. The main charge he faces is that he conspired to cheat 17 banks when securing almost £600m of loans.

Mallya denies all the charges, staunchly maintaining that “not one rupee was misused” and that he is eager to come to a settlement with his creditors. That could be problematic because the Indian authorities have frozen his assets on the sub-continent.

His creditors, mainly Indian state banks, are now demanding that his remaining minority stakes in both United Breweries and United Spirits be forcibly sold to pay some of his debts. Some of his palatial homes have already been sold off as has his private jet.

Mallya, the ‘King of good times’

Mallya fled to the UK in March 2016 immediately after agreeing a $75 deal with Diageo for him to step down from all offices at United Spirits. That payment is also frozen and meanwhile Diageo is seeking £138m from Mallya, which it alleges was transferred without due authority from United Spirits to other Mallya companies.

When he was declared a willing defaulter, India withdrew the diplomatic passport held by Mallya as issued to all members of the country’s congress.

He has been required by Westminster magistrates to surrender his ordinary passport and keep his mobile phone fully charged, turned on and permanently in his possession, presumably so that his whereabouts can be tracked if thought necessary.

Mallya’s case is the subject of party politics in India. Opponents of Narendra Modi’s government have made accusations of cronyism in the granting of some state bank loans to Mallya and also accuse the authorities of negligence in letting him flee the country on the very day that creditor banks were seeking revocation of his passport.

Both Modi and his finance minister Arun Jaitley pressed the case for extradition in recent meetings with British Prime Minister Theresa May and Chancellor Philip Hammond.

Officially the case is being handled by both India’s Central Bureau of Investigation (CBI) and its Enforcement Directorate.

But the political importance of the matter was underlined when an Indian finance minister Santosh Gangwar said: “Mallya will be brought back to India. The government is working towards it. No-one will be spared.”

Whatever the political background, however, it is certain that Mallya will remain in his UK home for a considerable time. Extradition hearings in the UK require a high level of prima facie evidence of guilt before an order can be granted and the legal process through courts of ascending importance can be drawn out and torturous.

Since the first allegations against him were laid, Mallya has insisted that they are politically motivated and is certain to challenge the likelihood that he will receive a fair trial in his homeland.

He claims he is in “forced exile” and that he would return to answer the charges against him if he could be assured of a fair hearing. He has three times ignored court orders to appear in person.