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Diageo-United Spirits deal: Vijay Mallya’s failure in other ventures outside liquor business still a big puzzle

Vijay Mallya

Vijay Mallya
On a typical, hot muggy day in Chennai in the early 1990s, visitors to the stately Narada Gana Sabha were surprised and perhaps shocked out of their wits to see a scuffle involving a group of people.
The auditorium, bang in the heart of the city, normally hosts music and dance performances, but the sound was not the mellifluous tunes of Carnatic ragas but the unmistakable noise of a fight accompanied by shouting.

A group of people was trying to get its hands on a man who had just entered the hall, and it was being prevented by some others.

A few minutes later, it was all over, the protestors had dispersed still shouting slogans and the gentleman went about his business.

That man was Vijay Mallya, the owner of a string of liquor companies, which made popular brands likeMcDowellBSE 4.99 % and Bagpiper.

The protestors were employees of Best & Crompton, a struggling engineering company, which did not have the money to pay salaries. They had come to the annual shareholders’ meeting, hoping to corner Mallya, but did not succeed.

Mallya owned a lot of companies then. Some did engineering work, others were liquor firms, and there was Kissan, too.

Vijay Mallya’s failure in other ventures outside liquor business still a big puzzle

The famous ketchup brand was bought by Hindustan UnileverBSE -0.69 % (then Hindustan Lever) some time later but was owned by the UB Group for many years.

That episode at Narada Gana Sabha made the morning papers accompanied by photographs. Best & Crompton was a well-known local company and its troubles were natural fodder for news-hungry reporters.

Then it was forgotten, buried in the daily news avalanche, and Mallya moved on. He sold Best & Crompton some years later and the company continued to hobble along till new promoters arrived.

Nearly 20 years after the episode, in another era and in another city, Mallya is still fighting the same battles (that is till recently, and before the October agreement with employees of his airline company, Kingfisher Airlines): unpaid, angry employees, protest marches and the sad, tragic suicide of the wife of a Delhi-based employee.

One company owned by his group has been effectively shut, another is struggling under debt though it is making profits and owns some very profitable brands.

On Friday, Mallya took an important step to set right his group’s finances by agreeing to let British drinks firm Diageo Plc take control of his most successful business, United SpiritsBSE 1.22 %.

Diageo will buy some of Mallya’s stake, invest some more in the company, and make an open offer for 26% to public shareholders. If all goes well, it will end up owning 53% in United Spirits.

Mallya’s father, the late Vittal Mallya, bought the shares of a few liquor companies from Englishmen who were leaving India after 1947, forming what later became known as United Spirits.

Once the latest deal is complete, ownership will transfer to another London-headquartered firm, albeit one with a Spanish sounding name.

“The timing was not good. The writing was on the wall,” said Ravi Jain, Mallya’s former partner in a beer venture. Lenders to Kingfisher AirlinesBSE 4.97 % have been exerting immense pressure on Mallya to invest and revive the airline.

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