Two tycoons combine for Formula One’s Force India
It’s as if they were born for each other. Two of India’s most colourful and controversial business tycoons came together last night to help the more flamboyant and cash-strapped of the two cope with deep financial problems.
Both love the image of running airlines and mixing with film stars, plus the colour and drama of sports sponsorship – they own rival teams in India’s IPL cricket league. Both have long links with influential politicians, businessmen and other powerful figures, and both are used to digging themselves out of financial and other crises.
They are Vijay Mallya and Subrata Roy, who appeared together at a press conference in one of Delhi’s lesser four-star hotels to announce that Roy is investing $100m in Mallya’s motor racing team, Force India. The UK-based team, bought by Mallya and a foreign partner just four years ago, is currently ranking a creditable sixth in the Formula 1 constructor’s (team) championships, and Mallya urgently needed funds, which he could not afford, to boost its performance and train potential Indian drivers.
Mallya looked far from his usual ebullient self last night when he walked slowly onto the hotel stage to a cacophony of sound and flashing lights organised by Roy’s controversial and privately-held Sahara India Pariwar group. That was not surprising because Roy, who gives his full name as Saharashri Subrata Roy Sahara, has taken over the chairmanship of the renamed Sahara Force India.
Mallya remains “team principal” and managing director and will no doubt continue to appear prominently on international motor racing circuits. But that was a rare loss of face for a man who models himself on the Virgin group’s Richard Branson and whose brand-based United Breweries (UB) empire stretches from the world’s largest spirits business and India’s biggest brewer, to Kingfisher Airlines, one of India’s largest operators. Named after UB’s famous Kingfisher beer, the airline has never made a profit and last month it ended cut-price flights (started when it bought Deccan Aviation four years ago), to try to stem debt and accumulated losses of over Rs5,000 crore ($1.1bn).
Roy has also owned an airline in the past - Air Sahara, which he regarded as brand building for a massive para-banking and poor savers’ “chit fund” business and allied real estate developments. Roy’s empire is based in the Uttar Pradesh capital of Lucknow, where he has a 270-acre private estate in the centre of the city. His links have included Malayam Singh Yadav, a former UP chief minister, and other politicians plus Anil Ambani, one of two brothers who run separate Reliance group businesses, and a galaxy of film stars led by veteran Amitabh Bachchan.
Roy has been revamping his financial empire in recent years under the watchful eye of the Reserve Bank of India and Sebi, the stock market watchdog, but has a separate image gained by extensive sports sponsorships that led to him meeting Prince Charles during last year’s Commonwealth Games in Delhi.
But possibly his most audacious coup – till last night’s Force India deal – came ten months ago when, for just $470m, he bought the prestigious Grosvenor House Hotel in London’s Park Lane. He got less favourable publicity however a few months later when he threw a party at the hotel to mark an issue of Royal Mail stamps carrying pictures of him and the Sahara group’s activities. The guest list included Cherie Blair, wife of the former British prime minister, but it was reported that such sets of stamps were not a singular honour and could be arranged with the Royal Mail for a few pounds.
Yesterday’s deal was put together quickly in time for India’s first Formula 1 Grand Prix race that will take place near Delhi on October 30. Mallya approached Roy for financial sponsorship a month or so ago, but Roy trumped that by offering an injection of $100m new funds in return for a 42.5% equity stake, the chairman’s post and the new brand name. Mallya’s equity stake, which he holds privately, comes down from 75% to a matching 42.5% (plus debt), and the balance is held by Michiel Mol, a Dutch entrepreneur and Mallya’s original partner.
The deal gives Mallya some breathing space – his group’s shares rose on the news that he had found someone to help fund the racing team. However, he has not been so successful attracting investors into the UB group, and Indian government policy stops a foreign airline investing in Kingfisher.
Aside from that, the main interest now will be how Mallya and Roy – at the same time so similar and so different – rub along together on the race tracks.Tagged in: airlines, formula one, India, motor racing, Royal Mail, tycoons
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