From bang to bust: The Kingfisher story

He owned India's biggest liquor company, a private jet, an Airbus and many other riches. Then in 2005, Vijay Mallya launched Kingfisher, an airline to match his style and flamboyance. Khushboo Narayan, Johnson T A and Shaji Vikraman tell the story of how Kingfisher went from bang to bust.

Sometime in 2006, the Mumbai-based IDBI Bank got a proposal from Kingfisher Airlines, seeking funds to acquire aircraft. Vijay Mallya had launched the airline the previous year, in May 2005, on his son's birthday and he had been cruising. He had bought Shaw Wallace, one of the oldest liquor manufacturers in India, for Rs 1,300 crore from the Chhabria family after the death his arch rival, Manu Chhabria, in 2002. He had topped that by striking a deal with the British beer maker Scottish and Newcastle, which had bought a 37.5 per cent stake in Mallya's United Breweries Ltd for Rs 940 crore.

That was also the time most Indian business houses, riding on easy liquidity and buoyant growth, were getting into infrastructure projects building airports, ports, power plants, roads and acquiring mines. However, when the Kingfisher proposal came up at a meeting of the credit committee of the IDBI in those go-go days, not many were convinced about financing the aircraft acquisition plan. They had their reasons: The highly competitive airline industry was known to be a capital guzzler and this, after all, was a fledgling airline. There was another reason too. Much earlier, as a development financial institution, IDBI had encountered lending problems while dealing with Mallya after his acquisition of Mangalore Chemicals and Fertilizers. So the committee chose not to approve the proposal.

WHAT KINGFISHER OWES BANKS Bank Rscrore SBI 1.600 IDBI Bank 800 PNB 800 Bank of India 650 Bank of Baroda 550 United Bank of India 430 Central Bank 410 UCO Bank 320 Corporation Bank 310 State Bank of Mysore 150 Indian Overseas Bank 140 Federal Bank 90 Punjab & Sind Bank 60 Axis Bank 50 3 other banks 603 Total 6,963 But a few years later, in 2009, the bank provided a loan of Rs. 900 crore to Kingfisher, a decision that has come to hurt top officials of the bank, who are now being put on the wringer by the Central Bureau of Investigation (CBI) and other agencies with Mallya being declared a 'wilful defaulter'.THE FINANCES 5,238.98 4,997.23 Net revenue (Rscrore) Interest cost (Rs crore) Net profit (Loss) 1.622.13 1,921.85 305.55 778.55 1,102.59 989.12 10.21 25.57 62.40 103.84 -19.53 -272.44 419.58 -250.85 -1,608.83 -1,647.22 FY05 FY06 FY07 FYOS FY09 FY10 But as oil prices started to climb (an average of $72.68 a dollar between 2005 and 2010) and the company struggled to run a business that included a full-service airline and a low-cost carrier, its finances floundered and its debt burden and losses surged. By the end of March 2008, Kingfisher's debt had mounted to Rs 934 crore. A year later, it had multiplied to Rs 5,665 crore. Its net losses widened from Rs 188 crore in 2007-08 to Rs 1,608 crore the following financial year