Creditors to sell Mallya’s shareholdings in three companies

A group of creditors, led by the State Bank of India, India’ largest lender, will attempt to sell Vijay Mallya’s shareholdings in three of his companies this week.

They are bidding to recover £600 million plus interest and expenses lent to him as he attempted to shore up his Kingfisher airline, which collapsed spectacularly in 2012, having never made a profit.

The banks are seeking to recover over £1.15 billion from Mallya, a figure he disputes.

In the wake of the collapse Mallya fled to Britain in March 2016. He has since been charged with money laundering and fraud and is awaiting deportation to India on an international warrant to face the charges.

More than a year ago Mallya exhausted all legal avenues in the UK courts but he cannot be sent back to India until a “confidential legal matter” is resolved. This is widely believed to be an application for asylum in the UK.

The banks want to achieve bulk sales of shares in United Breweries Limited, United Spirits Limited and McDowell Holding Limited. They prefer not to put them on the open market for fears that their value would be depressed but such large disposals.

According to Moneycontrol, the sale of shares will be overseen by the Bengaluru Debt Recovery Tribunal (DRT), which has authorised the recovery of “Rs 6,203 crore (£6.61 billion) along with costs and interest at 11.5% calculating from June 25, 2013 till the date of recovery”.

The sale will include 22 million shares in McDowell Holdings, 413 million shares in UBL and 25 million shares in USL.

At last week’s market prices, the McDowell Holdings shares were worth £138m, and UBL £557m, while United Spirits shares were worth £165m.

It is widely assumed that Heineken, which owns 46% of United Breweries, would want to buy at least a further 5% stake to give it control of India’s biggest brewer.

However, sources have suggested that a rival existing investor in UB wants to add to its shareholding.

On 8 June, the Competition Commission of India ruled that Heineken buying extra shares to give it control would not raise competition concerns, thus effectively clearing a deal.

Diageo already has a 55% controlling stake in USL, which has formally become a subsidiary of the UK drinks giant.

Mallya has made repeated offers to repay the debts but disputes the interest charges. Those overtures have consistently been rejected by the creditor banks.

Besides Mallya’s shares the Indian courts have also given his creditor banks permission to auction other assets seized from the disgraced tycoon.

Moneycontrol reported that the Economic Directorate has so far attached assets worth around £1.2billion of assets, half of which have been released for debt recovery.

Separately, Mallya is also facing bankruptcy proceedings in London. Final representations to the judge hearing the case are due to be made next month.