The Battle For Shaw Wallace: Vijay Mallya's Long Game

Everything is fair in love, war and business.

Special acknowledgment goes to K. Giriprakash, the author of "The Vijay Mallya Story," on which this blog is based. The narrative draws from the chapters “The Battle for Shaw Wallace” and “Shaw Wallace Again.” The book is highly recommended for anyone interested to read about Vijay Mallya. We are highly indebted to the author for the valuable information that he has published in the book, without which the blog would not have taken shape.

The acquisition battle for Shaw Wallace & Company remains one of the most compelling chapters in Vijay Mallya’s corporate saga. Remarkably, Mallya is among the rare business magnates to have purchased the same company twice—first at INR 55 crore and, nearly two decades later, for a staggering INR 1545 crore.

Shaw Wallace, a Kolkata-headquartered public listed company, boasted a prestigious portfolio of liquor brands such as Royal Challenge, Haywards, Director’s Special, Officer’s Choice, Antiquity, and Antiquity Blue. At the time, London-based Sime Darby owned 40% of Shaw Wallace and sought to offload its stake to raise funds. The remaining ownership was distributed among FIIs and the public. With assets around INR 6 crore and a turnover of INR 200 crore, Shaw Wallace was a tempting acquisition target.

However, India’s stringent forex laws prevented Mallya, an Indian citizen, from directly acquiring shares held by a foreign entity. To bypass this hurdle, he needed a Non-Resident Indian (NRI) partner. After exploring his network, he eventually teamed up with Manohar Rajaram Chhabria, a Sindhi businessman known for acquiring Indian companies with foreign shareholding.

The duo planned to set up a joint venture in Hong Kong, which would establish a special purpose vehicle, “Carrasco,” with equal shareholding. Mallya’s strategy was to later transfer the shares to himself once he obtained NRI status. However, things quickly spiraled out of control.

Sensing an opportunity, Chhabria raised the necessary $26 million funding independently, securing majority control of Shaw Wallace. With Mallya unable to prove his involvement without risking legal trouble, Chhabria took full control. Mallya was left in the cold, and any financial ties between them were legally untraceable.

For years, Mallya waited for the right moment to strike back. As economic reforms hit India in the 1990s, he launched a legal battle in Hong Kong, where Carrasco was registered. Chhabria, through his Singapore company Keysberg Ltd, had funneled money into Carrasco using a complex web of loans and guarantees, further complicating the ownership dispute.

In 1999, Mallya made an audacious offer of INR 250 crore to buy key Shaw Wallace brands, including Royal Challenge, Director’s Special, and Haywards whiskies. His bid underscored the brand value of Shaw Wallace’s portfolio, far surpassing his initial offer to buy the entire company in 1985. The battle took a tragic turn in 2002 when Chhabria passed away, leaving his business empire to his wife Vidya and their daughters.

With the family looking to divest non-core businesses, Mallya seized the chance. Legal victories, including a significant win in the Hong Kong high court in 2004, strengthened his position. Eventually, Vidya agreed to settle the dispute, leading to a public announcement that the decades-long corporate feud had ended.

In 2005, Mallya returned with an open offer to acquire a 25% stake in Shaw Wallace, valuing the company at INR 1200 crore. His persistence paid off when Vidya finally agreed to sell. The final acquisition deal closed at INR 1300 crore, with an overall outlay of INR 1545 crore, including the open offer.

Mallya subsequently sold the beer business to SABMiller, and focused on integrating Shaw Wallace’s liquor brands into his United Spirits portfolio. The merger marked the end of a two-decade-long saga filled with boardroom battles, courtroom drama, and strategic maneuvers.

At a press conference, Mallya declared, “It has been twenty years, three months, and four days since I set my sights on Shaw Wallace. It was a battle worth it, and today, I have handsomely won it.” With Shaw Wallace merged into United Spirits, one of India’s most iconic corporate battles finally came to a close.

Conclusion –

Two key takeaways. 

1) Trust is fundamental in any business partnership. Deciding to backstab your partner for personal gains is not going to be a good decision in the long term.

2) Structuring a transaction without ensuring that the structure will be legally enforceable can cause loss of control and long drawn legal battles to prove that you were part of the transaction.

Personal Opinion –

Vijay Mallya, the king of good times, is now known as a willful defaulter. At the other side of the coin when he headed United Breweries and United Spirits, he had a strong hold of the liquor trade in India and overseas. He was admired, respected and feared upon. The way he was hell bent upon to acquire Shaw Wallace twice supports his stance of not giving up.

An important lesson also to be understood is when to give up. If Mallya would have given up early on with Kingfisher Airlines by accepting that this is not my cup of tea and business cannot be run by borrowing continuously without focusing on end use of funds, we would have found him cheering for Royal Challengers Bangalore at the stadium and players of RCB team partying at his villa.

The IPL team of Bangalore being called as Royal Challengers Bangalore is based on the whisky name Royal Challenge which Mallya had acquired in the deal of Shaw Wallace. If the deal would not have been in his favor, we would not have had this name. However, the name of the team would still have been based on the name of a liquor brand from the stable of Vijay Mallya. Just Vijay Mallya things.

Thank you

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