Vijay Mallya sells 53.4% of his empire to Diageo

The future of the Indian businessman’s group is essential for Sahara Force India since its brands are the main sponsors appearing on the cars of Nico Hülkenberg and Paul di Resta. It can thus be noted that all the team’s main sponsors come from Vijay Mallya’s group: Vladivar, Royal Challenge, Whyte & Mackay, Kingfisher… In total, all the activities owned by Vijay Mallya funded his F1 team by 20 million pounds in the fiscal year that ended on December 31, 2010.

The personal finances of the team’s owner are therefore the key to the strategic choices the team will have to make for the 2013 season. If they are in good shape, the team will be able to afford the services of the drivers it wants. If not, it will be forced to secure the services of wealthy drivers. Furthermore, this could jeopardize the technological agreement with McLaren.

This partnership is all the more crucial for Sahara Force India as the Woking structure provides its chassis, gearbox, and hydraulic system. It was signed in 2009 and renewed in 2011. It is supposed to end at the conclusion of the current season and no announcement has been made regarding a possible extension.

The announcement of Diageo’s acquisition of 53.4% of United Spirits is interesting for the F1 community for more than one reason. Indeed, this influx of fresh money into Vijay Mallya’s bank account, who will remain as chairman of the group holding 15%, can only be good news for his subsidiaries, including his racing team. But more importantly, Diageo is currently a long-time sponsor of McLaren through its brand Johnny Walker. The acquisition can therefore have two distinct consequences: either Diageo will choose to optimize its presence in F1 through a single brand (Johnny Walker with McLaren, thus ending sponsorship of Force India), or Diageo will use its presence in two teams to reach two different audiences.

This second solution seems the most logical. Indeed, India has made its appearance on the F1 calendar, and local spectators have shown a lot of interest in this sport. It naturally constitutes a prime target for multinationals because, unlike its Chinese rival, the Indian market remains largely closed to foreign companies, especially in alcohol due to extremely high import taxes (up to 150%…). India is going to become its second-largest market globally, behind the United States, and has the potential to become its first market in the coming years because it is one of the fastest-growing markets in the world.

The situation is all the more delicate for Sahara Force India as the other co-owner of the team is also not in the best financial position. Indeed, the Sahara group, which holds 42.5% of the team and invested 100 million dollars last year, is also grappling with numerous financial difficulties for several weeks. Thus, it has been ordered to pay 4.4 billion dollars plus an interest rate of 15% to the Securities and Exchange Board of India so that it can reimburse investors harmed by the investments proposed by the group. If it is unable to make its payment before November 15, bank accounts will be frozen and the group’s assets seized.

It is in this context that the Sahara Force India team will have to find a replacement for Nico Hülkenberg, who has decided to try his luck with Sauber. Their third driver, Jules Bianchi, is one of the favorites for this position, but the competition is still strong…

With the participation of www.Racingbusiness.fr