Late Thursday evening, the critics of crony capitalism were offered most powerful ammunition, that too on a silver platter.
In what may be the final chapter of the larger-than-life and unapologetic lifestyle of liquor-to-airline baron Vijay Mallya, UK-based liquor company Diageo agreed to pay him $75 million (Rs 515 crore) to get him out of their hair.
The enthusiasm with which Diageo announced the deal was hard to miss, despite the message being delivered via telephone.
A Diageo spokesperson late on Thursday in Mumbai told reporters across the country that the company was “pleased” -- a term usually reserved to welcome an executive in the corporate world -- to announce the exit of Mallya from the chairmanship of United Spirits Ltd (USL), in which the UK company holds a controlling stake now.
Since mid-last year, Diageo had demanded Mallya’s resignation as chairman of USL after an internal audit claimed to have unearthed financial irregularities in the company that took place prior to the purchase of its controlling stake. Mallya had refused to step down.
For cash-strapped Mallya, whose fall came with the grounding of his Kingfisher Airlines (KFA) in 2012, the $75 million would be the sweetest deal he could have pulled off to quietly walk into the sunset.
Kingfisher Airlines still owes over 15 banks a sum in excess of R7,000 crore (and an equal if not more in accumulated losses in the balance sheet), and long overdue salaries to some 1,500 employees that led to at least one suicide in 2012 when the wife an KFA employee unable to handle the domestic financial pressure killed herself. Many of KFA’s former employees had to take as much as 40-50% salary cuts their new jobs.
As of date, State Bank of India, Union Bank of India and Punjab National Bank , have declared Mallya a wilful defaulter, a title reserved for extreme and hopeless delinquents in the banking world.
Despite a financially-disastrous end to a nearly four-decade flamboyant long-life in business, very little seems to change on his personal front.
His display of wealth and opulence reached a point where even the country’s central banker felt the need to pull him up in public. Following an expensive birthday bash Mallya threw in Goa in December last year, Reserve Bank of India governor Raghuram Rajan made a veiled attack on him when he said, “If you flaunt your birthday bashes even while owing the system a lot of money, it does seem to suggest to the public that you don’t care. I think that is the wrong message to send. If you are in trouble, you should be cutting down your expenses.”
Among the questions that remain unanswered are the chances of public sector banks recovering the staggering dues, particularly after Mallya moves to the United Kingdom.
One senior executive in the UB Group is alleged to have said, “It is not in our principle to pay interest, nor it is in our interest to pay the principle,” which perhaps sums up the future of the bad loans owed by Mallya.
The non-competing clause Mallya and Diageo signed off allows him to continue his business interest in the UK. “Having recently turned 60, I have decided to spend more time in England, closer to my children,” he said in a statement issued to the media on Thursday evening.
He also said the agreement with Diageo secures his family legacy, but did not explain what the legacy might be.