Dr. Vijay Mallya =
Member of Pariament - Council of States
Chairman - The UB Group
15 April, 2016
Shri Narendra Modi
Honourable Prime Minister
Government of india
New Delhi
Respected Prime Minister:
Since assuming office, you have launched several unprecedented initiatives giving renewed hope
to hundreds of millions of Indians and enhanced the stature of our Nation amongst the Global
community.
| have witnessed various administrations over the past three decades since | was appointed
Chairman of The UB Group at the age of 28 following the untimely death of my father in 1983.
| would like to congratulate you for the path breaking initiatives you have taken and to wish you
all the best in leading our Nation to greater heights.
Over the last three decades | have had the satisfaction of building the World's largest Spirits
Company by volume (United Spirits Ltd) and India's largest Brewing Company (United Breweries
Limited) which together have contributed lakhs of crores in duties and taxes to State public
exchequers and provided employment to hundreds of thousands of people with a manufacturing
network of over 100 factories in India.
In addition we have taken over sick industrial enterprises (Hindustan Polymers Ltd and Mangalore
Chemicals and Fertilizers Ltd) and successfully rehabilitated them for the benefit of all
stakeholders including Public Sector Banks who were lenders.
Our Group's core businesses in Beer and Spirits have a flawless track record of dealings with all
Banks including Public Sector Banks and this can be independently verified.
As 2 non-resident Indian since 1988, | also successfully developed a global business in alcoholic
beverages, paints and hospitality.
Most unfortunately, nothing I have stated above is either understood, appreciated or brought
into the public domain by the media.
| seek your patience and understanding of the severe predicaments that | am currently facing and
appeal to your good sense of justice so that | am treated in a fair manner.
‘Devite’ 20, Sardar Patel Marg, New Delhi- 110 021. india, Tel: +91 11 2611 7010 Email: vimallye@ubrnailcom
Level 16, UB Tower, UB Git, 24, Vital Malya Road, Bangalore - 860 001 India
Tel: +91 80 2227 1180 Fax: +81 802227 1206 Email: vimalya@uomail.com
wav thevbgroup.com| am pained to see that | have become the poster boy of all Bank defaults, accused of looting
public money and fleeing the Nation.
Ihave also become a political pawn about whom politicians across Party lines make reference to
in public statements to either influence the electorate or set an example before several other
industrialists whose Companies are facing financial stress.
In addition, every Government agency -The Central Bureau of investigation (CBI), The Serious
Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED) have started
investigations against myself. Just today | received a communication from The Ministry of
External Affairs suspending my Diplomatic passport for four weeks and giving me one week to
show cause why my passport should not be revoked. This has severely hampered my ability to
raise funds to repay Banks as further explained below.
| left India, as scheduled on March 2nd to attend to my commitments as an International
businessman and this has been misconstrued as deliberate.
In 2004 we launched Kingfisher Airlines and within 2 few years grew to become the largest
domestic Airline operating more than 480 daily flights and providing first time connectivity to
small towns not ever served even by Indian Airlines. Kingfisher Airlines, therefore, was an
important public utility service which directiy employed 8500 people and provided indirect
employment to a further 4000 people.
Kingfisher Airlines was truly a World Class airline and the recipient of numerous National and
International awards.
Unfortunately, the macro economic environment and then Government policies conspired
against us and Kingfisher Airlines was forced to shut down operations in October 2012.
It is important for me to bring the following pertinent facts to your attention.
1. Due to the unrest in Egypt and then Libya, prices of crude oil moved up sharply from
around $ 60 per barrel to a peak of $ 145 per barrel averaging $ 120 per barrel. The
aviation industry was amongst the worst hit globally.
2. In India, State Governments levied a high rate (between 20% and 30%) of ad valorem sales
tax on Aviation turbine fuel (ATF) whose prices were directly based on international crude
oil prices.
3. | made several attempts to request the Union Government to give “declared goods”
status to ATF so that the sales tax rate would be 4 %.10.
iL
12,
| pleaded with State Governments to protect their assumed revenue by charging a flat
rate of tax on ATF rather than a high ad valorem rate which was yielding windfall gains as
a result of the unprecedented high prices of crude oil and therefore ATF. The
additional (incremental) sales tax paid by Kingfisher Airlines over years was
approximately Rs 4000 crores which was a windfall gain to the States which added to the
operating losses.
‘The value of the Indian currency depreciated by 20 % from USD 1.00 = INR 44 to USD
11.00= INR 52 thereby significantly increasing aircraft lease costs which were all paid to
overseas lessors in US Dollars again adding to the operating losses.
Airport charges were increased in Mumbai and New Delhi adding to the woes of the
already stressed Aviation Industry.
Finally and most unexpectedly the V 2500 aircraft engines fitted to our fleet of Airous
aircraft developed technical problems resulting in the grounding of almost half our fleet.
We have sued the Engine manufacturer, International Aero Engines in the City Civil Court,
Bengaluru seeking compensation of approximately Rs 2000 crores.
Due to the collapse in Global financial markets in 2008, raising capital from overseas
investors became impossible despite our best efforts.
Despite several pleadings to the Union Government to permit Foreign Direct Investment
in the Aviation Industry so as to attract Investment from strategic Airline investors, this
was not forthcoming.
While the Indian Aviation industry was facing its worst ever financial crisis, the National
carrier Indian Airlines started a price war to try and attract passengers and show attractive
load factors and market share. Indian Airlines made huge losses in the process but relied
on Union Government funding, in effect, using public funds to compete with private
enterprise. The Union Government sanctioned a Rs 30,000 crore bail out package for
Indian Airlines (Air India).
To tide over the financial difficulties faced by Kingfisher Airlines, The UB Group directly
invested a huge sum of over Rs 4000 crores into the Airline between 2005 and 2013.
‘The lead Banker to Kingfisher Airlines, State Bank of India wrote to the Reserve Bank of
India on 31% January 2012 explaining the difficulties faced by Kingfisher Airlines and
further stating that the promoters (The UB Group) had infused funds into the Airline as
external fund raising efforts had failed due to Global economic downturn. A copy of this
letter is attached for your reference as Annexure 1.13,
14,
15,
16.
V7.
18.
ister and
Copies of various appeals made by me to the then Prime Minister, Finance Mi
Civil Aviation Minister are attached for your reference as Annexure 2.
As you will see, | made every possible effort to save Kingfisher Airlines including investing
more than Rs 4000 crores which, sadly has been lost. This was a genuine business failure
caused by circumstances beyond control.
‘The total borrowings (Principal amount) of Kingfisher Airlines including from Public Sector
Banks was Rs 5100 crores. These commercial loans were sanctioned after detailed
assessment by all Banks of the Company's financial position. Compound interest has been
calculated but has not been applied as per Court filings made by the Banks.
‘The Public Sector Banks are vigorously pursuing me personally for recovery due to my
purported personal guarantee and the purported guarantee given by United Breweries
(Holdings) Ltd given towards the Kingfisher Airline borrowings. The media, various
political personalities and Government agencies are accusing me personally of having
"stolen" or "diverted" funds which is wholly incorrect.
| have good reason to believe that the Government agencies - CBI/SFIO/ED are now
dealing with me in a highly prejudicial manner despite full cooperation. It has been
further stated that | have personally brought the private sector into disrepute which
only confirms that | have become the poster boy of all loan defaults in India without
having borrowed a single rupee myself. This public outcry with no factual basis seems to
be influencing the Banks themselves notwithstanding the substantial settlement offer
that I have made as explained below.
Whilst | applaud your Government's actions to curb black money, ensure compliance and
bring defaulters to book, | appeal to you to ensure that this is done in a fair and
honourable manner.
‘The circumstances behind my purported personal guarantee are as follows:
a) Amaster debt recast agreement (MDRA) was entered into between the consortium
of Banks and Kingfisher Airlines on 21st December 2010. This followed permission
from the Reserve Bank of India (RBI) dated 27th August 2010 with a deadline of 120
days. In this letter the RBI has clearly stated that Banks should completely satisfy
themselves about the viability of the airline and not rely on intangibles such as
personal guarantees. The letter from RBI is attached as Annexure 3.19.
b) Notwithstanding the letter from the RBI, on the very last day permitted by the RBI for
execution of the MDRA, the State Bank of india insisted on my personal guarantee failing
which they threatened not to sign the agreement. As | was left with no choice and since
there was no time left for discussion, | reluctantly signed the personal guarantee under
coercion. My objections have been recorded in the minutes of the meeting of the
Consortium of Banks. | have challenged this in the Bombay High Court.
c) | have submitted a statement of my assets and liabilities to the Consortium of Banks
who have recorded the value of my purported personal guarantee as Rs 1571.83 crores.
This is in addition to the tangible securities provided to the satisfaction of the consortium
of Banks,
d) On 9th December 2011 the Minister of State for Finance made a statement in
Parliament about my purported guarantee of Rs 248.97 crores and the guarantee of
e) The MDRA also included performance responsibilities on the consortium of Banks
which they did not perform leading to the collapse of Kingfisher Airlines.
In addition, the Income Tax authorities have made several disputable claims against
Kingfisher Airlines and have attached my personal assets worth over Rs 1000 crores. The
Service Tax authorities have launched criminal proceedings against me personally despite
having attached assets of Kingfisher Airlines.
Such an unprecedented attack on myself personally for a genuine business failure is most
unfortunate. Under your leadership | would request the benefit of fair play and justice.
Notwithstanding any of the above and in good faith, | (including on behalf of Companies under
my control) have made a one time settlement offer amounting to Rs 4400 crores to State Bank
of India which they have rejected, ignoring the important fact that several other secured and
unsecured creditors have to be settled and paid as wel
| believe that | am being discriminated against and not being given an equal opportunity that
other borrowers and Asset reconstruction Companies have been given by Public Sector Banks.
Having lost over Rs 4000 crores that was pumped into Kingfisher Airlines and with the settlement
offer of an additional Rs 4400 crores, | and my group would have lost Rs 8400 crores pursuant to
the genuine business failure of 2 public Company that was a victim of economic circumstances
and then prevailing UPA Government policies.6
As the head of Government, | would request you to please appreciate the facts that | have now
placed before you, | request you to appoint an Ombudsman or a committee to examine all the
facts so that justice can prevail.
Yours Sincerely,
Pipa de
pc
Vijay Mallya