Heineken expected to raise stake in United Breweries after Mallya ruling

The world’s third largest brewing company, Heineken, is widely expected to increase its stake in India’s United Breweries (UBL) following a court ruling in Mumbai that creditor banks can sell the assets of Vijay Mallya to recoup his debts to them of more than £1.15 billion.

Mallya, whose appeal against extradition to India will be heard in the High Court in London early next month, is the former controlling owner of UB, who sold much of his stake to Heineken as his financial troubles mounted.

By last autumn, Heineken was the effective controller of India’s largest brewer with a stake of approximately 46%, while Mallya and his various entities held 11%. But more than 98% of Mallya’s personal holding in UB is pledged to the banks or otherwise encumbered.

His stake was seized by the courts under India’s Prevention of Money Laundering Act and now the banks have been given permission to sell the shares to partially recoup his debts to them.

However, Mallya’s lawyers have won a postponement until 18 January while they prepare an appeal against that ruling.

It is unlikely that another bidder would enter the market for Mallya’s former holding as it would be unable to gain operating control of UB unless Heineken was willing to sell its stake.

Given that the Dutch brewing giant has previously sought to add to its shareholding, it is much more probable that it will bide its time as the only potential buyer and do a deal with the banks to take its stake above 51%, giving it absolute control of UB.

Mallya, who is accused of fraud and money laundering by the Enforcement Directorate in the wake of the spectacular collapse of his Kingfisher Airlines in 2012, fled India in March 2016 and is now on bail in London. He has consistently proclaimed his innocence.

The British Home Secretary has already signed an order for his deportation to India, where he has been proclaimed the country’s first “fugitive economic offender” under the Fugitive Economic Offenders Act 2018. He has also been held in contempt of India’s Supreme Court.

However, last summer Mallya was given leave to appeal against the deportation ruling. This will come to court in early February.