Can Sidhartha Mallya turn Kingfisher to 'good times'?

It is the 95th annual general meeting of the shareholders of United Breweries Holdings, in the Good Shepherd Convent auditorium near downtown Bangalore.

Shareholders are agitated by the damning report on Kingfisher Airlines' finances by research firm Veritas that hit the headlines a few days ago. In his report, Pie in the Sky, and in subsequent interviews, analyst Neeraj Monga of the Toronto-based company had said Kingfisher Airlines was essentially a bankrupt organisation and that United Breweries Holdings was "on thin ice" because of its investment in the airline.

Chairman Vijay Mallya dismisses the report and the research firm itself, answers other questions and gives a loquacious shareholder a patient hearing.

Two seats away can be seen his son and board member, Sidhartha Mallya. Dressed in a black Royal Challengers blazer and red tie, the 24-year-old heir to the over Rs 12,000-crore (Rs 120-billion) empire that spans liquor, aviation, sports, chemicals, real estate and engineering in India and abroad sits quietly through the proceedings, at times fiddling with his phone.

...

Once the businesses on the agenda have been dealt with, the pantheon on the stage disperses but not before Sidhartha has consented to have a few photographs taken.

One reason why the paparazzi follow Sidhartha is that he is often seen in the company of beautiful people.

He is always nattily dressed and has in the last couple of years shed more than a few kilos to get the lean look - he even ran the Mumbai Marathon last year.

It would be easy to dismiss him as just another rich playboy, given the kind of press he usually attracts - mostly to do with speculation about the exact status of his relationship with Bollywood actress Deepika Padukone.

Sidhartha has been on the cover of lifestyle magazines People and GQ, and in the GQ interview he even says: "To be honest, this is the only magazine that I thought was worth doing." He went on to win the magazine's Most Stylish Man of the year award.

...

But glamour is just one part of being a Kingfisher scion, and an attendant one at that, as demonstrated amply by Mallya senior - he may party hard but he works harder.

For instance, he finalised the deal to buy Capt Gopinath's Air Deccan from his yacht, The Indian Empress, off Monaco.

"I work hard, up to 18 hours on some days, but I also enjoy life. This doesn't mean that I am irresponsible towards my family. I have adequately provided for their financial security and I continue to do so," Mallya had told Business Standard in an interaction in 2003.

The other part of Sidhartha's being is inheritance of a vast business which is in parts tough (aviation) and complex (liquor).

In a first-person account in a national daily in April 2002, Mallya had written, "Provided he measures up, Sidhartha will succeed me as chairman of the UB group." So the billion dollar question now is - does he?

...

Sidhartha was born in Los Angeles and brought up in the United Kingdom where his mother, Sameera, is based.

He was eased into the family business on turning 18, when he was appointed on the United Breweries Holdings board, and his birthday was celebrated with the launch of Kingfisher Airlines.

He went on to study for a bachelor's degree in business management at Queen Mary, University of London, after which he began working - not at one of the family concerns, but at the London offices of Diageo, the world's largest spirits company by revenue (United Spirits is the largest by volume), where he was an assistant brand manager, focusing on the Guinness Premiership Rugby Union.

...

The experience would come in handy when he finally relocated to India in January 2010, and was made director of Royal Challengers Sports.

In June the same year he was also made deputy general manager (new generation sales outlets) of United Spirits at an estimated monthly salary of Rs 1,67,000.

But it's in his role of managing Indian Premier League team Royal Challengers that he is most visible.

The team began its innings dismally by finishing seventh in the first season but picked up pace subsequently and made it to the finals in 2009 and in this year's edition, though on both occasions it was the runner-up. Royal Challengers Bangalore also made it to the finals of the Champions' League this month, but lost to Nita Ambani's Mumbai Indians.

...

Experts will tell you this turnaround performance happened because of significant changes in the team - non-performers were dropped and fresh talent was drafted. Sidhartha's acumen first got noticed here.

"Sidhartha over time has become a very passionate owner. I think after grasping the reins of the team he has become more confident," says friend and on-field rival Mohit Burman (co-owner of Kings XI Punjab).

"He has made his presence felt not only in the matches but in all management decisions of the team. At the auction he is assertive, especially when he gets into a bidding war."

Sidhartha, or SVM as he is referred to in the company, is known to sit for most selection and team meetings, and the decision to let Virat Kohli captain the squad in Daniel Vettori's absence is reported to be his, a bet that seems to have paid off in recent matches.

...

Marketing is Sidhartha's primary area of interest, by his own admission, and he seems to be emulating his father's mantra of being his company's ambassador - choosing to wear a Royal Challengers blazer to the holding company's annual general meeting being just one aspect of this.

There may be a grand design here. There is no significant homegrown challenger to United Breweries left in the liquor business in India.

The only serious threat, the late Manu Chhabria's Shaw Wallace, was acquired by Mallya some years ago. To ward off multinational corporations like Diageo, the group needs marketing muscle.

And the liquor market is changing fast: In modern retail stores, people can choose and pick what they want and are no longer dependent on whatever the surly attendant hands over through the small hole in the window.

The same skills Sidhartha will need to grow Whyte & Mackay, the Scotch whiskey his father acquired in 2007 for almost Rs 3,000 crore (Rs 30 billion).

...

Sidhartha does not respond to an interview request. At least half a dozen United Breweries executives refuse comment. Some acquaintances back out at the last moment because "Sidhartha is a dear friend". But observers say that he will need more than just marketing acumen to step into his father's shoes. Liquor happens to be a highly regulated sector that requires constant lobbying.

While each state has its own excise laws for liquor, New Delhi needs to be lobbied to keep inexpensive producers from East Asia out with the help of high import taxes.

There is strong regulation in aviation as well. Mallya is well wired into it. But Sidhartha is still unknown in New Delhi's power circles. "He is largely a Bangalore and Mumbai boy," says an insider in the city's swish set.

...

An active Tweeter, with 1,47,956 followers, Sidhartha uses his account to cheer his team and players, and to thank Royal Challenger Bangalore's fans (and to announce that he has started training for the 2012 Mumbai marathon).

He was invited to speak about the "green" initiatives his team has undertaken at the Indian Institute of Management, Bangalore, last year, where he made his stand clear to a member of the audience who wanted to know if companies were going green merely as a marketing activity, saying: "What difference does it matter as long as results are being achieved." Sidhartha doesn't shy away from taking potshots at rival Jet Airways, either.

At the same IIM lecture, he said the amount of carbon-dioxide reduced by their free bus service initiative was equal to that emitted by 14 Bangalore-Delhi flights, adding with a straight face, "I'd like to stress that's probably Jet Airways flights, not Kingfisher."

...

Mallya has said on various occasions that Sidhartha will need to work his way up the ladder, something he too had done.

"Mallya was put through the grind in every division, so he will do the same with Sidhartha," says an executive who used to work with him.

Fashion designer and family friend Prasad Bidappa says: "Sidhartha seems to be involved with the day-to-day affairs of the company as well as handling Royal Challengers Bangalore, and is clearly being groomed to take over."

...

On a personal note, he adds, "He is very friendly and down-to-earth - very much a chip off the old block."

Adds Burman: "Mallya is one of a kind and it will take some time for Sidhartha to step into his shoes, but I'm sure with the grooming that he is getting from his father it won't be long."

During interviews, the heir-apparent has said he has a few ideas of his own for the business, though he has declined to reveal the details saying he does not want them to be stolen.

...

When asked if Sidhartha was shaping up to be like his father, a senior executive in the company, who does not wish to be quoted, says: "He is still very young, so it would be unfair to compare him to his father."

But it so happens that the Mallya men have assumed positions of power at a very young age - Vittal Mallya became chairman of the United Breweries board when he was 23, and Mallya was elected chairman when he was 28 after his father's sudden death.

The stories of how his entry was greeted with scepticism and how he transformed the business are now legendary, but son Sidhartha might well have to undertake some kind of transformation himself.

For one, he will have to learn financial management. The restoration of the financial health of Kingfisher Airlines could have been a good learning experience for Sidhartha, but aviation industry insiders say he is not involved in the business at all.

...

The airline is weighed down by debt, estimated to be Rs 7,000 crore (Rs 70 billion). It recently announced that it would exit the low-cost format, which it operated through Kingfisher Red, to cut down the losses.

The wisdom of this move isn't apparent to analysts who argue that it is only the low-cost carriers like IndiGo and Spice in the country that are making a profit.

United Breweries Holdings recently said it plans to raise its borrowing limit by another Rs 1,000 crore (Rs 10 billion), to bring in some much-needed liquidity.

But that hasn't killed Mallya's appetite for deals.

...

On Wednesday night, with just over a fortnight left for India's first Grand Prix, he announced that the Sahara group would take 42.5 per cent in his Formula 1 team, Force India, (rechristened Sahara Force India, after the deal) which would make them equal partners. (Dutch enterpreneur Michiel Mol will hold the rest of the stake; Mallya and he had bought the team for $110 million in 2007.)

"The capital will help us to now scale up our research and development efforts, and invest in the upgrade of facilities. It is a big shot in the arm for the team," he told mediapersons. And this, an old rival says, shows how Mallya doesn't get bogged down by problems. That's the spirit his son will have to show.

When the time comes for Sidhartha to take over, whenever that is, he might well have his task cut out to ensure that the oft-repeated "King of good times" tag is not a misfit with brand Kingfisher.