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Government to investigate United Spirits’ books
Diageo’s Indian drinks arm United Spirits has continued to see declining sales in its latest financial quarter, as a government investigation into its accounting practices is announced.
India’s corporate affairs and tax bodies are to investigate the finances of United Spirits
Blaming a write-down on the sale of its Whyte & Mackay Scotch whisky business to Emperador for an estimated £430 million last year, United Spirits Limited (USL) posted a net loss of Rs 1,799 crore (£17.4m) during the January to March 2015 quarter.
However, according to a filing at the Bombay Stock Exchange, USL’s total income rose 5.5% compared to the same period last year.
USL, the largest spirits producer in India, is now controlled by Diageo after the UK drinks firm acquired a majority stake in its business.
At the same time as the results were announced, the group revealed it had been served notices by the ministry of corporate affairs and the income tax department stating they intended to inspect its books.
The investigations follow Diageo’s announcement that it would launch its own probe into USL’s finances, looking into potential loans paid out by the group to parent company UB Holdings, and specifically its grounded Kingfisher Airlines.
The UK group revealed its intentions after USL reported a net loss of £445 million in the 2014/15 financial year – again largely attributed to a write down of Whyte & Mackay.
Just last month, USL’s board of directors cast a vote of no confidence in billionaire chairman Vijay Mallya, who has refused to step down from his role.
Mallya was previously declared a “willful defaulter” of debts by the United Bank of India over finances acquired for his beleaguered Kingfisher Airlines.
“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.
However, the firm said it had “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”.