Mallya clings on to United Spirits chair

Vijay Mallya remains non-executive chairman of United Spirits (USL) as he officiated at yesterday’s delayed annual general meeting of the company.

United Spirits chairman Vijay Mallya (Photo: USL)

The controversial tycoon is facing a growing raft of legal difficulties, not least by being declared a “wilful defaulter” by the State Bank of India at the weekend over loans to his defunct Kingfisher Airlines, which is in the process of being liquidated under debts of at least £1 billion.

Kingfisher has been grounded since October 2012. Since then Mallya has been fighting multiple legal battles as creditors have been exploring all options to recover their loans.

Mallya personally was declared a wilful defaulter by several other banks earlier this year, but his main holding company United Breweries Holdings has now also been branded with the unwanted status by the airline’s biggest creditor.

Mallya told USL’s shareholders yesterday: “I’m focussed on settling Kingfisher affairs with the banks; that’s what my current focus is.” He refused to elaborate further on his future other than to hint, perhaps jokingly, that he might begin to think about retiring when he is 60. His 60th birthday is on December 18.

While United Spirits’ trading fortunes are improving noticeably under Diageo’s control, the company remains mired in legal controversy. It was forced by India’s market regulator to hold its AGM yesterday after a request to extend the existing two-month breach of the time limit was refused. Some shareholders questioned whether yesterday’s meeting was legal, alleging that formal procedures for calling it had not been observed.

Hopes that shareholders would vote Mallya off the board were unrealistic as no formal motion had been tabled for the meeting to consider. Even so, Diageo is still holding a hot potato in the form of an independent report by PriceWaterhouse, which alleges improper diverting of USL funds to bolster other companies in the Mallya empire.

That prompted the USL board, which is controlled by Diageo, to ask the world’s leading premium spirits group, to “consider it contractual arrangements” with Mallya, the implication being that the other directors want him removed from the board.

Diageo has not commented on that request, which relates to the 2012 agreement for Mallya to remain chairman of USL for five years in return for voting in favour of Diageo’s subsequent takeover of India’s largest spirits group. It is widely thought that Diageo does not want a legal confrontation with him as it would distract from USL’s improving trading performance, a matter over which Mallya has no control.

At the same time, speculation is mounting that in an attempt to raise funds to meet some of Kingfisher’s debts, Mallya is poised to sell some or all of his remaining 4% stake in USL (held via United Breweries) to Diageo. Part of the 2012 agreement is thought to require Mallya to control at least 1% of USL shares to guarantee him a seat on the board.