Mallya exclusive: Why he sees “light at the end of the tunnel” for Force India

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The team has slipped from fourth in the constructors’ championship – for two years running – to sixth as 2018 reaches its midway point. The team principal, unable to attend all but one race per year due to ongoing legal problems, stepped down as managing director earlier this year.

But Vijay Mallya believes there’s “light at the end of the tunnel” for Force India, as he told @DieterRencken in an exclusive interview.

Vijay Mallya has two sporting passions: cricket and motor racing, both activities he fell in love with at an early age. Born into a family of substantial wealth – acquired initially from liquor trading – the now 62-year-old had the means to pursue both sports as competitor and team owner, having variously raced in Indian Formula Libre using Ensign F1 (and other) chassis.

In 1996, during Benetton’s post-Michael Schumacher era, Mallya’s Kingfisher lager brand sponsored the team, while 11 years later Toyota’s TF107 carried “Fly Kingfisher” messages in a deal said to have been brokered by then-F1 tsar Bernie Ecclestone, who had previously acquired one of the few surviving Vanwalls from Mallya.

Mallya was also India’s nominee to the FIA World Motorsport Council, a post he relinquished on July 2017 after his legal battles confined him to London, where he was based when his passports were seized – see below.

Still, there were no doubts about Mallya’s F1 credentials when he acquired ailing Spyker (ex-Midland, originally Jordan) in late-2007. Mallya acquired 70 per cent of the team’s equity with the Dutch Mol family, previously shareholders in Spyker, holding the remaining 30 per cent. After a debt-for-equity swap this split was, over time, diluted to 85/15, with Mallya selling half of his stake to Sahara Group’s Subrata Roy in 2011.

Entering the sport as an independent carried considerable risk, for at the time the sport was (over) populated by manufacturer teams: BMW Sauber, Toyota, Honda and Renault, while Fiat overtly backed Ferrari, while McLaren enjoyed an equity relationship with Mercedes. The independent faction consisted of Williams, two Red Bull-owned outfits, Super Aguri – and Spyker, which languished behind Honda’s semi-satellite team.

Indeed, in the 2007 constructors’ classification Spyker placed 10th. However, McLaren was excluded from the points standing due to “Spygate”, meaning in real terms the team Mallya had just bought ended its previous campaign 11th and plumb last…

Giancarlo Fisichella, Force India, Melbourne, 2008
Force India arrived in F1 at Melbourne in 2008
Following the team’s acquisition Force India endured 29 races without scoring a point. Then it hit a double jackpot: pole position and second overall in the 2009 Belgian Grand Prix with Giancarlo Fisichella – who lost an early lead to eventual winner Kimi Räikkönen – followed by fourth in Italy via Adrian Sutil. Tenth place in the overall classification was the result – ahead of Super Aguri.

The following year brought ninth place, ahead of Toro Rosso, and so began Force India’s climb up the rankings: seventh and sixth in 2010/11 respectively; same again in 2012/3, followed by sixth in 2014. The next three years saw Force India place fifth, much to the chagrin of the majors, for as top-placed ‘outsider’ Force India now qualified for a seat on the Strategy Group. This was followed by two fourths. Currently, at the midway point in 2018, it lies sixth.

Why this history lesson? These statistics are crucial to answers provided to questions I pose to Mallya as we sit in Force India’s ‘Pink Palace’ – so named in deference to sponsor BWT – shortly before the start of the British Grand Prix. It’s no secret that he is currently fighting extradition proceedings to India in London, so cannot travel – and this visit marks his first grand prix attendance in 12 months.

Despite serious fraud allegations – denied vociferously – Mallya is relaxed. He speaks slowly and deliberately throughout, pausing occasionally only to add emphasis, not to backtrack. The charges he faces centre mainly on the collapse of Kingfisher Airlines, which commenced flying in 2005, grew into India’s second largest airline, then hit trouble as the global economic crisis bit and caused numerous airlines to fail.

He believes himself to be largely a victim of economic circumstance and Indian politicking, having been an MP as both independent member and party representative. Whatever the legalities (and politics) – which have no bearing on F1 – he has been hounded within and without India, and recently issued a lengthy explanation on social media channels, stating that he put up the equivalent of $2 billion as securities in settlement.

This was verified by a Reuters reporter based in India, who, however, added the caveat that “some of the security is in the form of attached assets”, but did confirm that these assets indeed belong(ed) to Mallya or associated companies. Still, the matter rumbles on; so do my questions: Is Force India’s asset base included in the $2bn?

“Absolutely not,” he says. “These are Indian assets only. [The matter concerns] Indian banks, Indian loans, Indian borrower, Kingfisher Airlines Limited, backed by assets in India. Why shift the problem overseas?”

Giancarlo Fisichella, Force India, Spa, 2009
Fisichella scored a stunning second in 2009
To compound issues, Roy faces challenges of his own, including allegations that he failed to return funds to investors, and subsequent incarceration after he failed to appear in court to answer the charges. He is currently out on parole; thus clearly not in a position to contribute to Force India’s finances and/or activities.

Regardless, Mallya, who recently stood down as managing director of Force India, is the team’s driving force, and in the worst-case scenario his fate could conceivably affect the team. Thus I ask whether he has secured the team’s future regardless of his fate.

A pause makes clear he has grown weary of this must-ask question, then: “Absolutely, that’s always been the case. I mean, the problems that Sahara and me are confronted with are not new; they’ve been going on for over three years. And, within this period we finished fourth in the world championship two years in a row. So, that in itself is pretty obvious that our troubles are not affecting the team.”

Surely, though, he is feeling the pinch, and is no longer in a position to underwrite Force India’s activities, whether via loans or sponsorship from associated companies?

“No, that’s not true,” he shoots back. “Two weeks ago I put two billion dollars’ worth of assets in front of the High Court. I asked them to be sold under judicial supervision to pay off everybody, all the claimants, and to return the balance.

“Bottom line is I have the assets, which I’ve offered before the court – [the list is] there for the world to see. On the other hand, as far as the team is concerned we have much bigger sponsors, external sponsors other than internal sponsors, than we’ve had before. So you see the economics, how they work.”

Paul di Resta, Force India, Buddh International Circuit, 2012
The team’s home race was short-lived
True, the team has virtually no visible Mallya- or Sahara-related funding, now relying mainly on external sponsors such as BWT and driver-linked support, attracted primarily by Sergio Perez. (Note: there is a substantial difference between pay-drivers and those whose performance attract sponsors willing to be associated with them. Fernando Alonso is one such example, Valtteri Bottas another, and Perez yet another.)

“At the end of the day [the backing] is mostly external, now, which has changed over the last two years or three years. Of course, prior to three years [ago] it was the other way around,” he says.

“The management team’s objective is to make the team self-sustaining and not to rely every year on shareholder support. I mean, why are the shareholders owners of a Formula One team? Not to keep dipping into their pockets to have two cars run around.

“So ultimately the objective is that the performance should justify sponsorship, which in turn will justify the economics.”

What about the team’s alleged debts, any comment?

“There is no debt,” Mallya shoots back. There is no external borrowing at all. Zero. Obviously we have creditors, any running business owes money to creditors.”

Sergio Perez, Nico Hulkenberg, Spa, 2014
Perez and Hulkenberg formed an all-new driver pairing in 2014
“Any running business owes money to creditors,” he repeats.

He concedes that some accounts “are more overdue than others”, but adds “there’s nothing that has showed up in 2018.”

Let us, then, put the numbers to the test: Last year the team’s budget ran to £97m, including £55m from in F1 revenues – leaving the team to find £42m. Sponsor income (BWT plus various smaller income streams) contribute an estimated £35m, leaving a shortfall of £7m – in turn funded partly by third-party income (test drivers, miscellaneous income) and shareholders, if required.

While Mallya’s point is taken, the fact is that over the past ten years, since he (and other shareholders) bought into the team F1’s economic and political landscapes have changed totally, what with the excessive bonuses – some of which amount to more than Force India’s entire annual budget – being paid to major teams and their membership by right of the Strategy Group.

Can Force India survive until sanity prevails at Formula One Management from 2021, and revenues are expected to be disbursed on a purely performance basis rather on increasingly nebulous “heritage”?

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“As I basically said during one of our internal discussions, there’s two more years of pain with this grossly unfair imbalance in the income distribution,” he says. “And from 2021, as discussed in Bahrain [where FOM presented its proposed post-2020 structures], when things get smoothed out, yes. We have a lot to look forward to in terms of the [re] distribution of the prize fund.

Could this be the reason for his refusal to entertain genuine and speculative offers to purchase the team, of which I know of at least one of each, in the belief that its value will rise once equitable revenues are paid by FOM?

Nico Hulkenberg, Force India, Yas Marina, 2016
The team peaked with fourth in 2016
“There is light at the end of the tunnel; any prospective buyer I think will have also seen that,” he agrees. “With far more income, obviously the value of the team goes up, and until then we are used to, culturally, working off a tight budget and extracting the maximum performance out of that tight budget.”

There is no arguing with that: over the past three years Force India has consistently been the best team in terms of ‘bang for bucks’ and, on current performance, could do so again in 2018.

Mallya’s resignation as managing director prompted a fresh wave of speculation over the team’s future. He down-plays the significance of the move.

“Yes… as a director, [I’m] not on the board. But you know, at the end of the day, if you walk up and down this paddock, how many members of the board of directors of anyone of these companies do you see? At the end of the day, in this sport and on matters relevant to the sport, such as the F1 Strategy Group, the F1 Commission et cetera, it is a team principal format and I am team principal. Simple.”

True, but is his specific case not slightly different in that he can’t travel to races, or FIA or F1 Commission meetings unless held in the United Kingdom? Who then carries the responsibility and authority?

“Otmar goes; Bob goes,” he says, name-checking chief operating officer Otmar Szafnauer and deputy team principal Robert Fernley respectively. The latter is his friend and confidante of over 30 years, whom Mallya met during his Ensign forays, a former F2 racer who sold used racing cars before founding his own IndyCar team.

Do Szafnauer and Fernley have full authority to act, or do they report back first?

“On issues, on sporting regulations, on technical regulations, we have protocols,” he explains. “If the matter concerns technical regulations, then obviously (technical director) Andrew Green is consulted, his inputs are taken. Otmar, Bob and me discuss, and then we put forth Force India’s point of view.

“When it comes to sporting regulations, Andy Stevenson is obviously consulted and involved; we collectively decide and put forth Force India’s point of view.”

The protocols appear to work given the team’s on-track performance and political standing. But why resign?

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“It was a question of in India you have to declare all your directorships. If you’re a director of an Indian company, you have to fill up forms that disclose your global directorships, all the time. Globally, you have to. So I’ve quit most of the boards because there’s no point wasting time in just filling up one form after another. It’s [im]practical.”

However, Mallya adds, he is very much in control, insisting his shareholders trust him and denying that his resignation is linked to negative perceptions due to his links with the team.

“I’m not going to analyse it or comment on it,” he responds. Invited to address the speculation, he adds: “I don’t know who gave that reason, but here I am, sitting as team principal, and to me the sport and our participation in this sport is what matters.

Vijay Mallya, Force India 2014
Mallya with a selection of the team’s cars in 2014
“Let’s add another dimension to your questions. If you are suggesting that my ownership in this team is potentially under threat or at risk, it’s only 42.5%. The other two have 57.5% majority control.”

But how realistic is that threat to his position at Force India?

“It’s all a legal process now. That’s going to be decided by courts going forward. As long as the judicial process takes. I’ve tried to put an offer together by offering two billion dollars’ [equivalent] of assets in front of the High Court in India, and hopefully the judges will look at it positively, and if everybody is paid and everybody is happy, hopefully these problems should go away.”

So, if it the offer is accepted it will be business as usual?

“Hopefully, yes.”

What sort of time frame?

“I don’t know. It’s in the hands of the judiciary.”

With that Vijay Mallya prepares for the pit wall for the first time in 12 months. Right now his life sure ain’t cricket…

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

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28 comments on “Mallya exclusive: Why he sees “light at the end of the tunnel” for Force India”

  1. As one of the best bang-for-buck teams (maybe yet to shine as well in 2018), I do wish Force India come out of all this unscathed.

    There were recent accusations from India’s Enforcement Directorate that Mallya diverted loans secured in India for his airline towards Force India, and other entities. I don’t recall this point being touched on in the article above. What risk – if any – does this open Force India up to? Could it result in something as drastic as a request to HM’s Government to attach Force India property in the UK, by way of recovering those loans?

    1. The specific amount in question being diverted to FI was 50 crore rupees (5.5 million GBP), which – while not insignificant – isn’t as alarming as I’d originally thought, in F1 budget-speak.

  2. In the fervour to hang, draw and quarter Mallya the inconvenient fact remains that he is a minority shareholder, and not the 100% proprietor.

    1. OK, and that implies there’s no risk to Force India? If so, that’s reassuring news (from an F1 perspective).

    2. In the fervour to hang, draw and quarter Mallya

      How mistaken would I be to think this fervour extends to Subrata Roy as well (which I think would total to close to 100%)? @dieterrencken

      1. Subatra Roy has been tried and convicted of all the offences he was in trouble for, and as a result is currently sitting in prison. Perhaps unsurprisingly, this removed the hang/draw/quarter impulse.

        I’m not sure he’s in a position to buy out Vijay should they find themselves sharing a cell, but that is 42.5% of the company which is likely to remain in the same happens, unless it is decided that it is in Force India’s best interests to sell it (which is not an eventuality Vijay appears to anticipate at this time).

        1. Well this comment dated quickly…

  3. The Family de Mol is still a part of FI?

    1. Yes 15% – and it’s Mol

      1. Actually, it is de Mol. Dutch family names do include the preposition.

        1. inb4 Endemol turns into Enmol

        2. @klon

          The co-owner of FI is called Michiel Mol. Some Dutch surnames have an article/preposition, others do not. It’s not uncommon for the same surname to exist with and without an article/preposition. For example, the co-founder of Endemol is called John de Mol.

          Also, when using the full name, the article/preposition is written in lower case and when just using the surname, the article/preposition is written in upper case. So the last name of John de Mol is De Mol. English speakers nearly always write this incorrectly.

          1. For the record Michiel Mol and John De Mol are not related, so Endemol is not linked to Force India in any way.

          2. Indeed, I just referenced him to point out that both surnames exist, with and without an article.

          3. Yeah, I do admit that I confused Michiel Mol with John de Mol, because the latter also happened to be a major Spyker Cars shareholder so I thought that’s where we coming from given the history of Force India. I withdraw the comment and go back to the stupid corner.

  4. It is easy to make ad hominem attacks in repsect of Mallya because he is such a marmite personality. The reasons why I fear for Force India have nothing to do with him as a man, they relate to how he does business and they are two fold:

    (a) When Kingfisher Airlines failed, the manner in which his staff were treated left a lot to be desired. I won’t go into it here, but the reports of staff not being paid wages for months on end are voluminous. If he feels so little for his airline staff I see no reason for him to care for his racing team’s staff.

    (b) In my professional capacity I had to deal with the aftermath of the collapse of Kingfisher (I used to work for one of the companies that leased them A330 aircraft) and the state the aircraft (eventually) returned to us was appalling. The airline had cannibalised parts from our aircraft to place on other aircraft in breach of our lease. If he thinks that is an appropriate way to conduct business I do worry for people who have to deal with him.

    1. The reasons why I fear for Force India have nothing to do with him as a man, they relate to how he does business […] If he feels so little for his airline staff I see no reason for him to care for his racing team’s staff.

      @geemac – I think he’d tread more cautiously with Force India’s employees, seeing as:
      a) their employees would be subject to UK’s stricter and better-enforced labour laws
      b) I believe he no longer has a passport with which he can go to another country if things go sour
      c) He currently enjoys some sympathy by playing a victim of a government/nation intent on demonizing him, all that goodwill will disappear if things go sour within FI

      It would be in his own self-interest to treat FI employees well and not run afoul of UK laws.

      1. b) might as well be true for the current discussion – I think Vijay still has his passport, but he can’t use it to travel (only to do things like prove his identity).

    2. I’d heard about a) but not b). That’s an awful way to do business :(

    3. how is that NDA going @geemac? (winks anonymously)

      1. @johnmilk The time period has lapsed…. :)

  5. Very interesting and well-writtin interview. Thank you, @dieterrencken.

  6. Thank you for the article. As far as I can see Force India’s results are well respected in the paddock. On the other side Mallya has… interesting personality.

  7. Mallya, because of his way of doing business, reminds me of Briatore, although he seems a little less mafioso.

  8. Then it hit a double jackpot: pole position and second overall in the 2009 Belgian Grand Prix with Giancarlo Fisichella – who lost an early lead to eventual winner Kimi Räikkönen – followed by fourth in Italy via Adrian Sutil. Tenth place in the overall classification was the result – ahead of Super Aguri.
    The following year brought ninth place, ahead of Toro Rosso, and so began Force India’s climb up the rankings: seventh and sixth in 2010/11 respectively; same again in 2012/3, followed by sixth in 2014. The next three years saw Force India place fifth, much to the chagrin of the majors, for as top-placed ‘outsider’ Force India now qualified for a seat on the Strategy Group. This was followed by two fourths. Currently, at the midway point in 2018, it lies sixth.

    1. I was so disappointed with Kimi overtaking Fisi at Spa in 2009. Not that I dislike Kimi, but Fisi had driven so well, the car had performed wonderfully and he fully deserved to win. Kimi on the other hand had gone off track at the first corner to overtake what seemed like half the field and was allowed to keep all the positions gained. Fisi still would have easily won without the safety car restart where he had no answer to the KERS in the Ferrari going up the hill.
      Damn.

  9. Once again a great article.

    As well as Vijay’s passion, one should also recognise that the collective skill and passion of Bob and Otmar seem to keep Force India running at its peak.

    Their management skills must be incredible to get so much out of so little in terms of budget.

    Compare Force India with a team like Mclaren – the only difference I can see seems to be the quality of its management. Both teams have great drivers, back th have passionate team members but FI’s management seems to be better at making the right decisions off and on the track to keep them in the game.

    I have nothing but admiration for the team and by extension for Vijay whose vision and passion started it all and keeps it going.

  10. Gemma St. Ivans
    19th July 2018, 2:37

    As long as F1 continues to associate with criminals like Mallya and Briatore, Symonds etc. it will never be taken seriously

Comments are closed.