Vijay Mallya's Scam Case

Vijay Mallya's Scam Case

Vijay Vittal Mallya is an Indian businessman and former Member of Parliament. He is the subject of an extradition effort by the Indian Government to return him from the UK to face charges of financial crimes in India. Mallya is a former owner of the Royal Challengers Bangalore cricket team.

In 1983, after the death of his father. Under his leadership, UB Group becomes world’s second largest liquor  maker selling 55 million cases, after Diago, a British liquor giant, who sold 91 million cases in 2005. Vijay Mallya had grown his  father’s business empire into a conglomerate with revenue of  $2.1 billion. 

WHAT IS VIJAY MALLAY’S SCAM 

In 2005, Vijay Mallya entered into Airlines Industry and introduced KINGFISHER AIRLINES. Very soon Kingfisher Airlines  becomes the first choice of business class people and it acquired more than 22% Domestic Market Share. 

Vijay Mallya wants to expand his airlines business by flying Kingfisher on international routes. But the Indian Government  did not allowed Kingfisher to fly international flights as it has  completed only 2 years. And it’s mandatory to complete 5 years  to fly internationally. To fulfil his motive of flying international  flights, Vijay Mallya acquired AIR DECCAN, which was a loss- making international airlines and merged it with Kingfisher  Airlines. It could not make profits and the business was in heavy loss. To run this business, Vijay Mallya continuously took loans from Banks. He took loans from 17 different public sector banks.

BANK LOAN AMOUNT (RS)

STATE BANK OF INDIA 1,600 CRORE

IDBI BANK 900 CRORE

PUNJAB NATIONAL BANK 800 CRORE

BANK OF INDIA 650 CRORE

BANK OF BARODA 550 CRORE

UNITED BANK OF INDIA 430 CRORE

CENTRAL BANK 410 CRORE

UCO BANK 320 CRORE

CORPORATE BANK 310 CRORE

STATE BANK OF MYSORE 150 CRORE

7 OTHER BANKS 943 CRORE

Although SBI has declared him as bankrupt, other banks kept lending him loans because he was a member of Rajya Sabha and some political parties supported him. The company also did not  pay the salary of its employees and has ran out of cash. Finally in 2012, Kingfisher Airlines had to shut down its operations. Vijay Mallya had a loan of about Rs 9,000 crore and he denied to repay this loan amount. Banks filed a case but before taking any action against him, Vijay Mallya flew away to United Kingdom. 

There is also a side story. For the settlement of loan of Rs 9,000 crore Vijay Mallya offered Banks to pay the Principal amount of Rs 6,800 crore. But the banks refused his offer. Banks were demanding Interest as well. 

FAILURE REASONS OF KINGFISHER AIRLINES 

• Lack of Business Strategy - Kingfisher initially launched all economy class and later shifted to luxury business class. But soon, the airline shifted to low cost air travelling. As the company continuously changes its target audience, passengers lose interest in this airline
• Recession - 2008 Recession affected the whole world and had an indirect impact on the air travel rise in fuel prices, airport charges, etc. 
• Lack of Management – Kingfisher Airlines does not have any long-term CEO or MD. Management is an important part of any business whether its failure or success.  
• Air Deccan – There was lack of connection between Deccan Airlines and Kingfisher Airlines. Every time, there was an Air Deccan and Kingfisher flight at the same time-slots, then a decision was taken to cancel the Air Deccan flight and run Kingfisher Airlines. But this didn’t work well as potential customers shifted to their competitors. 
• High Operational Cost – Operational costs of airline industry are very high compared to other industries. High operational costs without good profit margin caused the Kingfisher to downfall.

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