Mallya resigns from Diageo, pocketing £53m

Vijay Mallya has resigned as chairman of drinks giant Diageo’s Indian subsidiary United Spirits, bringing an end to months of ill-feeling between the two parties.

Mallya told the press recently that he would be willing to step down given a “palatable” offer (Photo: Wiki)

Following Mallya’s resignation, the United Spirits (USL) board will appoint Mahendra Kumar Sharma, currently independent non-executive director and chairman of the USL Audit Committee, as the new chairman.

Mallya will be given a $75 million (£53m) pay-off, with $40m paid immediately and the remainder handed out over a five year period.

Strikingly, the arrangement wipes the slate clean over Mallya’s various debts to Diageo, including the £93m the company was forced to pay on the businessman’s behalf after it guaranteed a business loan on which he defaulted for a second time.

The arrangement also gives Mallya immunity from potential civil action arising from the ongoing internal investigation into his alleged financial mismanagement at USL.

Diageo CEO Ivan Menezes said: “The agreement announced today is in the best interests of both Diageo and USL and allows USL to build on its strong platform in one of the biggest spirits markets in the world.”

Mallya has also been barred from involvement with a competitor of USL or Diageo for five years under the terms of his resignation.

Sidhartha Mallya, Vijay Mallya’s son, will remain on the board of the USL group company which holds the Indian cricket franchise Royal Challengers Bangalore.  Diageo will be unable to remove him from its board for a period of two years, as part of the arrangement.

Mallya will be given the honorary title of “Founder Emeritus – USL” within the company. However, in press statement, Diageo said “it is expressly agreed that this title carries no authority, responsibility, rights or benefits.”

Full analysis of Mallya’s resignation will appear on the drinks business next week.