Inquiry launched over £445 million USL loss

United Spirits (USL) has revealed a net loss of £445 million having finally released its end of year results, prompting majority owner Diageo to launch an investigation into loans secured by the company.

USL chairman Vijay Mallya

The group’s full-year financial results for 2013/14 were published yesterday following lengthy delays due to uncertainty surrounding loans of around £140m issued to its previous parent company UB Holdings, owned by Indian liquor baron Vijay Mallya, to help support its Kingfisher Airlines.

USL attributed the decline due to write down on the sale of its Whyte & Mackay Scotch whisky business, which was purchased by Philippines-based spirits producer Emperador for £430m earlier this year. 

According to The Financial Times Diageo, which recently acquired a 55% cut of USL in a deal worth £1.1 billion, has now authorised, along with the USL board and CEO, a “a detailed and expeditious” inquiry into whether company cash had been “improperly advanced” to UB Holdings prior to its takeover.

Adding to the company’s difficulties, Mallya was this week declared a “wilful defaulter” by the United Bank of India (UBI), amid claims he deliberately failed to pay an emergency overdraft lent to him to support Kingfisher Airlines.

As current chairman of USL, the tag could have disastrous consequences for the company as it prohibits an individual or company from accessing banks and capital markets for funding needs.

United Spirits produces the world’s second-largest whisky brand McDowell’s No.1, as well as the Bagpiper and Hayward’s Fine Indian whisky brands.