United Spirits board urges removal of Mallya
Vijay Mallya, chairman of the Diageo-controlled Indian drinks firm United Spirits, has refused to step down from his role despite calls from the group’s board for his removal.
The board said it had “lost confidence” in the billionaire tycoon following the outcome of an internal inquiry into USL’s finances, calling upon Mallya to resign from the company.
Mallya has, however, refused to do so, prompting the board to recommend that USL’s shareholders to “remove” the chairman.
“In its announcement, the board of USL stated that they had lost confidence in Dr Vijay Mallya continuing in his role as a director and as chairman and therefore the board of USL called upon Dr Mallya to resign forthwith as a director and as chairman of the board and step down from his positions in the company’s subsidiaries,” a statement from Diageo read.
“The board of USL also resolved that, in the event Dr Mallya declined to step down, it would recommend to the shareholders of the company the removal of Dr Mallya as a director and as the chairman of the board. Dr Mallya has indicated he will not tender his resignation.”
The announcement follows Diageo’s order that an inquiry must be conducted into loans paid out by USL after the group announced a net loss of £445 million in its full-year 2013/14 financial results.
The group attributed the decline to a significant write down of its Whyte & Mackay whisky business, purchased by Philippines-based spirits producer Emperador for an estimated £430m in May last year.
However, Diageo questioned USL accounting practices due to loans paid out by its parent company UB Holdings – allegedly for Mallya’s beleaguered Kingfisher Airlines.
The final report of the inquiry has claimed that between 2010 and 2013, a number of transactions at USL were “diverted” to other UB subsidiaries, including Kingfisher, which was grounded in 2012.
Last year, the United Bank of India (UBI) declared Mallya a “willful defaulter” of loans paid out to the airline, casting initial doubts over his future at the company.
UK-based Diageo said it has “certain contractual obligations” to support Mallya in continuing as non-executive director and chairman of USL “subject to certain conditions and in the absence of certain defaults”.
“Diageo notes the recommendation of the USL board and will now consider its position under its agreements with Dr Mallya and United Breweries (UB) Holdings in light of the inquiry report and materials provided to it,” the group said.
Diageo completed its acquisition of a 55% controlling stake in USL in July last year, following a series of protracted negotiations.