New Delhi: Sahara Group chairman Subrata Roy acquired a 42.5% stake in Force India, the Formula One team owned by liquor baron Vijay Mallya, for $100 million.
The sale of new shares to Roy will bring Mallya’s stake in Force India down to the same level—42.5%. Force India will be renamed Sahara Force India and Roy will take over as the chairman of the company, while Mallya will continue to be the principal and managing director of the team that is now ranked sixth in the constructor’s championship with 48 points.
Sahara Group’s Subrata Roy. By Abhijit Bhatlekar/Mint
“No shareholders sold stakes and the entire $100 million will go to the team,” Mallya said. “This partnership will enable the team to invest in technology. There is no scope for any other stakeholder to come in, but we are open for sponsorships.”
Mallya said he approached Roy and the deal was completed in record time.
The decision to sell the stake will help Mallya, who owned 75% of Force India before Roy’s investment, infuse funds into the racing team as he struggles to turn around other companies controlled by him, including Kingfisher Airlines Ltd. The development comes weeks after Mallya said Kingfisher Airlines will exit the low-fare segment that will do away with the Kingfisher Red unit.
The capital-starved Kingfisher Airlines, which hasn’t made a profit since its inception in 2005, had debt of Rs 7,057.08 crore as on 31 March. It posted a loss of Rs 1,027 crore on sales of Rs 6,496 crore in the year ended 31 March, compared with a Rs 1,647 crore loss on sales of Rs 5,271 crore in the previous year. The loss in the June quarter widened to Rs 263.54 crore from Rs 187.34 crore in the year earlier.
Silverstone, England-based Force India Formula One Team, which currently holds an Indian licence, was formed in October 2007, when a consortium led by Mallya and Michiel Mol bought the Spyker F1 team for €88 million. The Mol stake has been reduced to 15% from 25% after the investment. The stake sale to Roy values the Force India team at about $235 million, according to Mint’s calculation.
UB group’s Vijay Mallya. By Hemant Mishra/Mint
Apart from the Forumla One team, Mallya also owns Indian Premier League (IPL) cricket team Royal Challengers Bangalore, is building apartments, and controls the country’s largest brewer.
Sahara Group, which has interests in financial services, real estate, media and hospitality, is a major promoter of sports in India. Sahara owns IPL team Pune Warriors India and also sponsors India’s national cricket team. It had also supported the Indian national hockey team.
Shares of Mallya-controlled United Breweries Holdings Ltd gained 9.2% on Wednesday on reports that he was selling a stake in Force India to Sahara Group. The stake sale was announced after the end of trading on BSE. The Sensex rose 2.55% to 16,958.39, while the Kingfisher Airlines stock rose 2.97% to Rs 20.80.
On 7 October, Mallya had said he had no plans to sell the Formula One team and pledged his long-term commitment ahead of the country’s maiden Grand Prix, according to Reuters.
“As team principal, I will continue to run the team and I have no plans whatsoever to exit,” Mallya said at that time.
The country’s first Formula One Grand Prix will be held on 30 October on a 5.14km track in Greater Noida, Uttar Pradesh, being built by Jaypee Sports International Ltd.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s disputes with Sebi. Mint is contesting the case.