The News Minute | Updated November 11, 2014 | 10:47 am IST
They took charge of mainstreaming Formula One to the Indian masses, and seven years after Force India’s foray into the top echelon of the racing business, the team finds itself in the throes of a financial crisis.
The high monetary demands of top F1 competition though have seemingly taken a toll on the company, which posted a net annual loss of £38.5m last year. With a total liability of £49.1m to their name until December 2013, they are increasingly finding it difficult to compete. The auditors, Grant Thornton highlighted the funding coming in from Orange India Holdings as a major cause of concern, questioning whether the parent company would keep investing in the future.
Orange India Holdings Sarl is supported by the Watson Limited and Sahara Adventure Sports Limited.
The F1 team was formed out of the remnants of the Spykar F1 team when in 2007, the Indian business man and Chairman of the UB group, Vijay Mallya and Michiel Moll, a then director at the team, led a consortium to take over the now defunct franchise, thereby spawning Force India. In 2011, the Sahara India Pariwar founded by Subrata Roy bought a 42.5% stake in the company.
The auditor’s report seem to be of the opinion that “There is no evidence available to us to confirm that Orange India will receive the continued support it needs from its shareholders and in turn that that continued support will therefore be available to Force India Formula One Team. This material uncertainty may cast significant doubt about the company’s ability to continue as a going concern.” What is to be highlighted is the £17m Force India received from Orange India last year in order to continue operations.
When contacted, Sahara Force India had this to say. "It is a standard audit comment that is made when accounts are certified on a going concern basis by auditors. The shareholders issue a commitment letter of support every year and this has been the standard practice for the past 7 years.There is nothing new or extraordinary about the auditors comments".
The levity of their liabilities gain traction when you put in context that Vijay Mallya’s business interests have taken a tumble in the recent past with not all hunky dory at Kingfisher Airlines. When you look the other way, Sahara doesn’t seem to be doing too well either, with its founder Subrata Roy still finding ways out of Tihar jail with a Rs 10,000 crore bail to pay. To only add insult to injury, Sahara Adventure Sports Limited is one of two backers behind Orange India Holdings.
What is also disconcerting is the recent fall into administration of two F1 teams, Marussia and Caterham, the latter of which has been using crowdfunding (a move called disastrous by F1 supremo Bernie Ecclestone) to get together the £2.35m it needs to make it to the season finale at Abu Dhabi. Teams like Force India, Lotus and Sauber have also had an appeal turned down which would increase their share of F1 profits, hogged by the big five of Ferrari, Red Bull, McLaren, Mercedes and Williams.
In order to make up the numbers, Ferrari and Red Bull look likely to have three cars on the grid next year, in a bizarre move that will throw up too many complications.
While Narain Karthikeyan behind the wheel of a Jordan in 2005 first brought F1 into the Indian consciousness, Force India as a team evoked some sort of nationalistic pride. The culmination was probably with the Buddha International Circuit hosting India’s first F1 race. Coming to grips with the rigours of the sport though, will have to be the next step.
Read the auditor’s note here.