It may have been an exciting birthday gift that UB group's chairman and Rajya Sabha member of Parliament, Vijay Mallya, may have presented himself with, but it is also a dream deal for his shareholders. On Sunday, December 19, 2004, a day after he turned 49, Mallya announced that he had entered into an agreement with Britains' largest brewer, Scottish & Newcastle (S&N) for selling a 37.5 per cent stake in United Breweries Ltd.

The previous day, his birthday, Mallya had signed one of the biggest airline deals with the Airbus group, buying another 20 aircraft for the UB group's proposed Kingfisher Airlines, which will take wings with the company's corporate red and kingfisher as its emblem and logo. The UB-S&N deal is likely to change the current market equations in the Indian beer industry while the airline deal is expected to alter the airline industry.

All these changes in the UB group and the areas in which it operates just underscore one point: - the house that the late Vittal Mallya (Vijay Mallya's father, and founder of the UB group) built is once again going through a major transition.

Prior to joining UB, Mallya worked for Hoechst in the US and the UK. Interestingly, he became the chairman of the company in India, then called Hoechst Marion Roussel India (now Aventis) in 1994, and chairman of Aventis CropScience (prior to its acquisition by Bayer) in which the UB group had become the second-largest shareholder.

Way back in 1980, he began assisting his father who was then chairman of the UB Group, in managing the brewing and spirits divisions. In 1983, when his father passed away, Mallya took over as chairman. His flamboyance (often a source of much consternation to his mother, Lalita Mallaya), however, did not get in the way of business.

Displaying flashes of his father, in 1986, Mallya made his first acquisition - the UK-based Berger Paints with operating companies across four continents - and subsequently sold it in the '90s. He also founded a software company in the US in 1993, which was listed on the NASDAQ in 1996.

In 1994, marketing authorities Al Ries and Jack Trout awarded Mallaya the 'marketing champs award 94' in recognition of taking UB among India's top marketing companies. Next year he was selected to the World Economic Forum's 'forum of young global leaders,' and in 1997 Southern California University conferred on Mallaya its doctorate of philosophy in business administration.

A sports enthusiast, Mallya has won trophies on the professional car racing circuits and is a keen yachtsman and aviator. He participates in a variety of sporting events and promotes and sponsors several sporting and cultural events.

Over the years, Mallya and his UB group have come a long way. He has steered the professionally-managed business to new avenues: new brands, new businesses, global operations and steady consolidation and restructuring. He has metamorphosed with elan from being a business leader and social campaigner against drinking-and-driving to an elected member Parliament.

Mallaya spoke to domain-b's Nisha Das about his latest acquisition and latest passion - Scottish & Newcastle and Kingfisher Airlines, respectively.

What is the nature of UB's deal with S&N?
Under the terms of the deal, S&N would pick up a 17.5 per cent stake in his flagship United Breweries Ltd for Rs217 crore (at Rs575 per share). Further, the British company would infuse Rs247 crore more into the company through non-convertible redeemable preference shares. This apart, the gains to the shareholders would come in the shape of the mandatory open offer of 20 per cent at Rs 575 per share.

Though, S&N is taking upto 37.5 per cent stake in UBL, it will still retain its 40 per cent interest in Millennium Alcobev (MABL), its existing joint venture with United Breweries, formed in May 2003. But, the operations of the two firms will be integrated. Post-acquisition, the UB group and S&N will hold equal holding (37.5 per cent) in UBL, while the balance will be with the Indian public, FIIs and Indian financial institutions (FIs).

UB is already the largest beer maker in the country. What does the UB-S&N deal signify for the Indian beer segment.
Through the deal, we will capture about 50 per cent market share of the Indian beer segment. This will help Scottish & Newcastle to further expand its presence in the booming Indian beer market.

What is the size of the beer market in India?
The beer market accounts for roughly 10 per cent of all alcohol sales in the country. It is estimated at around 7 million hectolitres. Moreover, beer consumption has increased on an average by 9 per cent over the last five years and shows good prospects for continued growth. India has a population of over 1.1 billion people, and is experiencing a sustained period of strong economic growth.

The market is driven by strong economic growth, favourable demographics (56 per cent of the population is under 25), government deregulation and the growing popularity of beer over other forms of alcohol.

And, in the international markets?
Kingfisher is the well-known Indian beer outside its home market, notwithstanding the undoubted success of relative newcomers such as Cobra, and is already widely available in many European countries especially those with a large Indian ethnic population like the UK.

Currently, UB's Kingfisher beer brand has a presence in over 50 countries. Naturally, the deal will also give the UB group an opportunity to push the Kingfisher brand overseas, as the brand will receive a significant boost in overseas markets through S&N's wide distribution network.

Similarly, the deal represents a significant expansion of S&N's presence in India. It's an all-round win-win situation. The combined UB-S&N venture will be in a strong position to take advantage of this growth.

You have signed another big deal with Airbus for your proposed airline project. Could you elaborate more on this?
Kingfisher Airlines, has signed contracts to acquire 10 A-320 aircraft on firm order with options to buy another 20 until 2008 at a cost of up to $1.8 billion or Rs8,100 crore. Besides these 30 aircraft, the airline has leased another four A-320 aircraft.

Kingfisher Airline has been described as a low cost airline with frills. What does that mean?
Kingfisher Airlines has been modelled after the US carrier, JetBlue, to provide luxurious economy travel. The airline will offer a single Kingfisher Class. There'll be no business class. The front and the back rows will be treated equally, but royally, at janata-class fares.

These days you must have noticed that companies are encouraging their executives to travel in the economy class. For instance, at Wipro everybody from Azim Premji downwards travels economy.

Though it will be a low-cost operation, the aircraft will have frills. We have chosen brand new aircraft. Despite the low tariffs all the seats will offer the luxury of individual TV sets with in-flight entertainment providing movies, videos and a choice of six channels for passengers to choose from.Yet, my fares will be 25 per cent lower than Jet Airways'.

What will be its fleet composition?
We will have eight aircraft in the first year of operations and 16 by the second year. All of them will be the 174-seater Airbus. The first four aircraft bought by the company are expected to be received by the end of 2005.

We are also contemplating wide-bodied aircraft (A380) for operating international routes like Singapore and other destinations in south east Asia and the middle east as and when the government permits private airlines to fly overseas.

When will the operations commence?
Kingfisher Airline will begin operations in May on receiving the four A-320s leased from Debis Air (the aircraft leasing arm of Airbus Industries). The launch has been scheduled for May 7 to coincide with my son Siddarth's 18^th birthday and the first commercial flight has been slated two days later on May 9^th .We should be able to start reservations from April 1^st for the Mumbai-Delhi route.

The airline will launch its services on the Mumbai-Bangalore and Bangalore-Delhi trunk routes in phases during the current year when Airbus delivers two more A-320s.

What is the investment in the venture?
Right now the paid-up capital of the airline stands at Rs60 crore, as against the government's requirement of Rs30 crore for commercial airlines. This will be hiked to Rs160 crore shortly, to meet the operating expenses for the first year.

This will be financed internally through United Breweries Holdings Ltd, the parent company of the airline. We also have plans to take soft loans from European Credit Agency (ECA). Further, the airline will have only one class "Kingfisher Class".

What will be the operational requirements to ensure the viability of the venture?
We expect to maintain a load factor of 70 per cent and break-even in the first year of operations. We also hope to break even in the first year of operations. However, this would depend on its passenger load factor.

Could you tell us about the Kingfisher calendar?
I am very passionate about the Kingfisher brand and the calendar is one of the manifestations of the ongoing, brand building exercise. Since the traditional advertising media is not available to us (read liquor brands), we've always sponsored music and fashion shows. The calendar extends our association with fashion and celebrates the fashion designers and models.