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Infotech bug bites Vijay Mallya too

Fakir Chand in Bangalore

The infotech bug has bitten even India's liquor baron Vijay Mallya!

Operating his multi-billion-rupee liquor business from Bangalore, India's own Silicon Valley, the flamboyant Mallya could hardly resist the lure of the El Dorado to foray into the booming IT sector though the slick and click industry has nothing to do with his brick and mortar business -- brewing liquor and spirits!

As chairman of Rs 3.86-billion United Breweries Limited, the holding company of the group's core businesses, Mallya formally obtained even the approval of his shareholders at its 84th annual general meeting in Bangalore during the week-end for 'an enabling resolution' to build one of the largest software technology parks in the city.

To come up in phases in the next 2-3 years on a prime real estate measuring around 1.5-million square feet, the STP or the IT Park is being backed by the IT-savvy Karnataka government under the leadership of Chief Minister S M Krishna.

Incidentally, Mallya is related to Krishna as his stepbrother is married to one of the latter's daughters.

Though there is no love lost between Mallya and Krishna, especially in the aftermath of the liquor baron's maiden abortive attempt to get elected to the Rajya Sabha from Karnataka as an independent candidate with the tacit support of the ruling party members six months ago, the state government has gone out of the way to clear the decks for the setting up of a mega IT park.

The only rider the government has apparently set is to reserve a chunk of the IT space for another sunrise industry -- biotechnology -- which will bring about a synergy of sorts. In view of the convergence of technologies and the advantages in leveraging businesses, the government has also asked the UB group to create more space for the development of a financial district in the ITP.

As a first step, Mallya had decided to make an expeditious exit from many of his non-strategic areas keeping in view the paradigm shift in the business environment from the old economy to that of the new one. It is a different matter that the areas into which his group had diversified over the years had been straining its bottomline, and its effect spilling over to the liquor business.

Though Mallya had been toying with the idea of commercially exploiting the 14-acre prime property (located opposite the city's famous Cubbon Park and valued to be over Rs 4 billion when assessed last), economic recession and slump in real estate prices over the last few years, have put paid to his dreams.

As a result, Mallya gave up the dream project of converting the huge area into a massive commercial complex, a six-star hotel, an entertainment plaza, and a multi-purpose utility centre. What's more, he went about buying up properties on the outskirts of the city to relocate one of his oldest breweries in the country, which is presently sitting pretty on the prime real estate, which includes UB's corporate head office, and Mallya's palatial house.

In his address at the annual general meeting, Mallya told his shareholders that he had now finally decided to shift the corporate office away from the prime site, and move the brewery out of the city to make way for the ITP. The upfront investment will be about Rs 400 million in the first phase for a built-up area of 250,000sq.ft. The construction cost is estimated to be about Rs 2,000 per sq.ft.

"In view of the growing recognition of Bangalore as the knowledge capital of India, there is a great deal of foreign direct investment taking place in the IT industry. The promising scenario provides a great opportunity for the group to develop its prime real estate so as to realise its potential value commercially," Mallya claimed.

Though Mallya was reluctant to divulge the detail of investments, source of funding, and any partners to be roped in as they were in the process of being firmed up, the mega project will have a debt equity ratio of 1:1. "Leading financial institutions like the HDFC and IL&FS will be roped in as investment partners."

When rediff.com asked him what was the synergy between his core business and the emerging ITP, Mallya said that the IT-driven Internet is set to become all-pervasive and, thus, it made sense to sail in the direction the new winds of economy were taking.

"The venture will be an investment activity of the group. It will enable us to retire some of our debts, which hover around Rs 1.2-billion. The gameplan is to make the UB group a zero-debt company in the years to come by unlocking the hidden values of its assets, movable as well as the immovable," Mallya claimed.

In fact, the special resolution, moved under the provisions of Section 17 of the Companies Act, 1956, seeks the nod of the shareholders to permit the company to foray into the IT business in a big way, which includes development and implementation of software solutions, applications, products, and services.

When built, Mallya's tech park, to be christened as 'UB Cyber Park' will be the fourth or fifth such mega STP to be located in India's Silicon Valley, which already boasts of the state-owned Software Technology Park of India in the Electronics City; the Information Technology Park Limited on the outskirts at Whitefield; and the Export Promotion Industrial Park.

Besides a host of global IT companies, Mallya is targetting numerous IT or software companies spawning the Garden City for relocating in his ITP as that will ensure state-of-the art facilities, including 24x7x365 uninterrupted power supply, high-speed connectivity, convention centre, conference halls, shopping malls, pubs, cafeteria, and cyber cafes to boot.

As a harbinger of its breakthrough in the IT world, Mallya is set to launch by next month a B2B portal for hosting all his group's alcoholic beverages, wine, whisky, gin, rum, and vodka on the worldwide Web so that his dealers and stockists the world over could check out their requirements and place orders for real-time deliveries.

"The UB group portal will also enable institutional as well as retail buyers, including individual tipplers to place their orders on the Web site and collecting their favourite drink in the shortest time from their nearby delivery point. The payment or entire transactions can take place online. It will not make our branded global products easily accessible, but also available to anyone from anywhere," Mallya asserted.

Mallya claimed that the company's flagship product 'Kingfisher' lager beer commanded a whopping share of around 53 per cent in the Indian market, with sales during the first quarter of the current financial year (2000-01) swinging up by 25 per cent in volumes.

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