Is Vijay Mallya’s empire under threat?

Heineken had bought an additional 1.35% in UBL from the open market on Tuesday, raising its stake to nearly 39%. Photo: Bloomberg

Livemint :Mihir Dalal  |  P.R. Sanjai :Dec 13,2013

With Heineken buying more shares in UBL, all UB Group firms except one have different majority shareholders

Bangalore/Mumbai: Vijay Mallya’s conglomerate UB Group is in danger of falling apart.

The man who likes to be called the ‘King of good times’ runs the risk of being left without an empire.

With Dutch brewer Heineken NV buying additional shares in India’s top brewer United Breweries Ltd (UBL) earlier this week, all operational UB Group companies, except for UB Engineering Ltd, have different majority shareholders—and in each case, Mallya has ceased being the single-largest shareholder sometime in the past year.

Asked about the prospect of his losing control of the group, Mallya replied: “All rubbish”.

UBL said in a regulatory filing on Thursday that lenders holding UBL shares pledged by Mallya as collateral against borrowings had sold some of those shares. Consequently, Kamsco Industries Pvt. Ltd, a promoter entity, now holds 2.356% in UBL, down from 3.7%.

Mallya’s stake in UBL is now roughly 36%, down from 37.41% earlier, according to BSE data. And at least some part of Mallya’s stake is pledged with lenders.

At a group level, UB has debt of over Rs.19,000 crore across companies. This includes Rs.7,000 crore on the books of the now-grounded Kingfisher Airlines Ltd. Reserve Bank of India Governor Raghuram Rajan has asked lenders, many of them state-owned banks, to get tough with defaulting borrowers—cause for alarm for businessmen such as Mallya who have in the past managed to extract sweetheart loan restructuring deals from banks without losing control of their companies.

Heineken bought an additional 1.35% in UBL from the open market on Tuesday, raising its stake to nearly 39%.

“I can confirm that we have bought a block of shares in UBL on Tuesday (1.3%). This now makes us the largest shareholder (in UBL). We went from 37.4% to 38.7%. This is a relatively small movement that does not materially change the ownership structure. It is very much business as usual for all parties,” Christine van Waveren, spokesperson at Heineken said.

“These shares were offered to us by Citibank; as a long-term partner in UBL it made sense for us to buy them. We believe in the Indian beer market and UBL’s long-term future and want to increase our exposure to the potential future upsides,” Christine said without elaborating.

A UB spokesperson did not immediately respond to questions seeking comment.

This year, lenders to the grounded Kingfisher Airlines and other UB Group companies have sold hundreds of crores worth of pledged shares of UB Group companies to recover their borrowings.

Because of this, and the stake sale by Mallya in United Spirits Ltd (USL) to Diageo Plc., the former billionaire has lost part of his ownership in UB Group companies.

Mallya has investments in the UB Group companies through his holding firm, United Breweries (Holdings) Ltd (UBHL) and other promoter entities.

There are five big UB Group companies: UBL, spirits maker USL, Mangalore Chemicals and Fertilizers Ltd, UB Engineering and the grounded airline Kingfisher Airlines Ltd.

A majority of Mallya’s remaining ownership in firms such as UBL, spirits maker USL, Mangalore Chemicals and Fertilizers and even UB Engineering, is pledged with various lenders including the State Bank of India.

Over 60% of Mallya’s current stake in UBL and nearly all of his 11% in United Spirits is held by lenders as collateral. The lenders also hold 52% of his shares in Mangalore Chemicals.

Even in UB Engineering, 90% of Mallya’s shares are with lenders, according to Mint Research and BSE data.

“Unlike in the past, when UB was an operational conglomerate in different businesses, now it has become largely an investor conglomerate. In most businesses, it is now practically an investor and not necessarily in operational control at key companies,” said Nikhil Vora, managing director at IDFC Securities.

“UBL and USL both operate in businesses which are government-dictated so it helps if you have an entrepreneur like Vijay Mallya. But both companies are fairly mature now and for many investors there have been transparency issues with the UB Group. So to get global leaders like Diageoand Heineken, who can take the businesses to the next level, will only increase the investor appetite for these companies, “ he added.

There have been increasing pointers of Mallya’s waning influence on UB Group companies.

In August, Diageo, which bought a 25.02% stake in USL in July, shifted as many as 100 UB Group executives off USL payrolls to UBHL.

From Friday, the email ids of United Spirits employees will change to @unitedspirits.in from @ubmail.in, a person familiar with the matter said.

At Kingfisher Airlines, Mallya is at the mercy of lenders who have filed petitions to wind up UBHL and moved the Debt Recovery Tribunal against Kingfisher. Last month the Karnataka high court admitted a winding-up petition filed by BNP Paribas against UBHL.

The court rejected a petition on Wednesday by Kingfisher challenging the move by a consortium of lenders to take possession of its “Kingfisher House” property in Mumbai.

Mallya said on 24 September that Kingfisher was in talks with a “foreign” investor to get funds for a re-start and may conclude the discussions within 90 days.

Analysts, however, have expressed doubt if Kingfisher will fly again.

Mallya also said then that he was interested in buying back shares in Mangalore Chemicals from Deepak Fertilisers and Petrochemicals Corp. Ltd, the company’s largest shareholder, and from Zuari Fertilisers and Chemicals Ltd, another company which has built a large stake in Mangalore Chemicals this year.

However, he has not specified how he would fund any share purchases.

While the transfer of majority ownership and, eventually control, to someone else, will mean that Mallya no longer has to worry about the loans on the books of his companies, he will still have to extricate himself from the personal guarantees he has given several lenders.

“There’s a fair bit of value in the investments of the UB Group in UBL and USL. Whether they will be able to retain a significant part of the remaining investment is debatable given that the court cases and that the group liabilities remain high (related to Kingfisher),” Vora said.

Shares of United Breweries closed at Rs.813.80, up 2.85%, on Thursday, while the BSE’s benchmark Sensex ended the day at 20,925.61 points, down 1.16%.

Beyond 2013 : Knowing how to think empowers you far BEYOND those who know Only what to think

There's always a fear that I can lose everything: Amitabh Bachchan

Image: Vikas Khot

Bachchan is acutely aware that the failures of the past can never be forgotten

Forbes India Sourav Majumdar Dec 13,2013

Fame and adulation sit easy on Bachchan’s shawl-draped shoulders, as he tells Forbes India in an exclusive interview that despite all the successes he has had, there’s always a fear, an anxiety that tough times could return again without warning

N early forty five years after he first faced the cameras in Khwaja Ahmed Abbas’s Saath Hindustani, Amitabh Bachchan today is revered as the ultimate megastar of the movies, arguably the biggest Indian cinema has ever seen. Every Sunday evening— for the past thirty years and more since he suffered a debilitating injury during the filming of Manmohan Desai’s Coolie—crowds throng outside his Juhu home in Mumbai, to merely get a glimpse of the man who has been synonymous with superstardom for decades.

Today, at 71, Bachchan is happy playing elder statesman to the world of Hindi cinema, and content with playing a variety of parts in movies as different as Sanjay Leela Bhansali’s Black to Prakash Jha’s Satyagraha. The latter was his only release in the past year, but Amitabh Bachchan continues to dominate Forbes India’s Celebrity 100 list, holding rock steady at number five for the second successive year, and actually increasing his earnings by a healthy 27 percent, thanks to his hugely popular television quiz show Kaun Banega Crorepati (KBC), which just concluded its seventh season, and a string of endorsements.

Fame and adulation sit easy on Bachchan’s shawl-draped shoulders, as he tells Forbes India in an exclusive interview that despite all the successes he has had, there’s always a fear, an anxiety that tough times could return again without warning.

Bachchan has seen ups and downs like few have. Despite being a megastar and being labeled a one-man industry, Bachchan’s financial fortunes saw a steep decline after his company Amitabh Bachchan Corporation Ltd (ABCL) got into serious financial trouble. His homes were attached by lenders who once clamoured to lend to his company and his bank account was down to a pittance. But bit by bit, he managed to pay back all his creditors by getting back to doing what he does best: facing the arc lights and getting back to acting. Today, his success is stuff of legends.

While marketing gurus, the media and analysts marvel at the way he has repositioned Brand Bachchan, the man himself takes all this with more than a pinch of salt. “These [the repositioning and revival of his brand] are words I keep hearing,” he tells Forbes India. I was without a job. So I went across and asked some people for a job and started working, that’s it.”

But Bachchan is also acutely aware that the failures of the past can never be forgotten. “Anything can happen to me just now and I could lose everything. I think the eventuality of that should never be forgotten. There is always going to be a risk; if you are aware of that risk and the fact that it could happen at the drop of a hat, perhaps that is what drives you to not fall into that situation again,” he says. “There’s always going to be that fear, that anxiety that you may get back into that situation which was horrendous and most embarrassing. So I guess you just continue working to ensure that doesn’t happen,” says Bachchan.

Is that the reason which forces him to keep working at a frenetic pace even at 71, when he could easily afford to take it easy? Says Bachchan: “I don’t know whether that is the reason but I think that is a fear.”

For Bachchan, it was important to carry on doing what he knew best to try and emerge from the adversities he faced at the time. He points out that while the biggest and greatest companies have had financial and even bankruptcy problems, he decided to carry on working. “That is the only thing I knew,” Bachchan says, looking back on those tough times. Today, ABCL has been renamed AB Corp and from a staff of 300, it now has only one staff member, a chartered accountant. He has decided to focus on the creative aspect of cinema only, and therefore does not feel the need to have a large organization.

"If I need to do a production or co-production, I would hold hands with someone who knows the job; I would share equity," Bachchan says.

The full interview of Amitabh Bachchan is available in the Forbes India Celebrity 100 special issue, out on stands from 13 December.

The Spirit of Dr A P J Abdul Kalam :Difficulties in your life do not come to destroy you, but to help you realise your hidden potential and power, let difficulties know that you too are difficult.

Difficulties in your life do not come to destroy you, 
but to help you realise your hidden potential and power,
 let difficulties know that you too are difficult. 

              ― A.P.J. Abdul Kalam

ThePokhran-II nuclear tests were conducted during this period where he played an intensive political and technological role. 

Kalam served as the Chief Project Coordinator, along with R. Chidambaram during the testing phase.Photos and snapshots of him taken by the media elevated Kalam as the country's top nuclear scientist.

Kalam's writings

• Envisioning an Empowered Nation by APJ Abdul Kalam with A. Sivathanu Pillai; Tata McGraw-Hill, New Delhi