The saddest part of Kingfisher Airlines’ danse macabre that we have seen over the last one year is the squandering of a rich legacy. Whatever the financial merits of Vijay Mallya’s decision to sell a majority stake in United Spirits, at one level, it marks a sad end to the business empire set up by the brilliant Vittal Mallya. By all accounts, the elder Mallya, who went to Doon School and Presidency College, Kolkata, was a master builder who in 1946-47 spotted an early to get into the liquor business and started acquiring the shares of United Breweries Ltd. Over the next few decades he expanded the business aggressively culminating in the brilliantly opportunistic acquisition of several breweries and distilleries in 1977, when the ruling Janata Party, following the personal idiosyncrasies of then prime minister, Morarji Desai introduced the era of prohibition. Vijay Mallya’s business inheritance thus came with a savvy genetic code.
Sadly, paternal largesse doesn’t automatically guarantee business acumen. By choosing flamboyance over farsightedness, glamour over governance, a man who could have been king, is reduced to selling the flagship to save the fleet. A sea of debt (nearly Rs 20,000 crore between USL and Kingfisher) has swallowed up what was a promising business group, its future cut short by overreach and delusions of grandeur. Like Shakespeare’s cursed hero Macbeth, Mallya could well admit: “I have no spur to prick the sides of my intent, but only vaulting ambition, which o’erleaps itself, and falls on th’other. . . .”
Perhaps Mallya the owner wasn’t the best choice to manage his own businesses. That the United Sprits stock has risen by 35% since 25 September, when a possible deal was first confirmed, and it has more than doubled since June, indicates that shareholders believe a change in management is in the company’s best interests.
An owner, particularly one as strong-willed as Mallya, will tend to trust his instincts more than a process. Simultaneously micro-managing (think: selecting air hostesses personally) and taking large (very risky) bets when caution and consolidation might well have been more productive tactics, Mallya has actually been the antithesis to what the best family-run businesses across the world do.
In an article published in the Harvard Business Review (November 2012) “What You Can Learn from Family Business”, Nicolas Kachaner and George Stalk of the Boston Consulting , and Alain Bloch, professor at CNAM and HEC Paris, say that family-run businesses are frugal in good times and bad.
“Unlike many multinationals, most of these firms don’t have luxurious offices. The simple conclusion we reached is that family businesses focus on resilience more than performance. They forgo the excess returns available during good times in order to increase their odds of survival during bad times.” Such frugality and conservatism has obviously been anathema to a man whose audacity and drive needed to be tempered with operational excellence and financial astuteness.
If Diageo is paying a hefty price for control in United Sprits, it is because of the expected potential of a market that could be one of its largest. For Mallya junior to be exiting that at this time appears to be a sad travesty of the founder’s vision.