Diageo tight-lipped over Mallya USL ‘exit’

Diageo is keeping tight-lipped over reports the controversial chairman of its Indian drinks arm, United Spirits, is planning to step down from his role.

Reports state that Vijay Mallya may voluntarily step down as chairman of United Spirits Limited

According to reports in Indian media, Vijay Mallya, non-executive chairman of United Spirits Limited (USL), is in the final stages of negotiation to offload his remaining 5% stake in the group to majority owner Diageo.

The news comes just days after it was revealed shareholders in USL are set to vote on the continuing role of Mallya at an AGM later this month.

The Economic Times reports that two independent sources have confirmed that Mallya is in advanced discussions with Diageo leave the company, selling his remaining stake and also stepping down from the board of directors.

In April this year, USL’s board issued a vote of no confidence in Mallya and called on shareholders to remove the billionaire tycoon as the group’s chairman.

The board first asked Mallya directly to resign from his post following the outcome of an internal inquiry into USL’s finances, which saw a £445m net loss in 2013/14, however he refused to do so.

The billionaire businessman has found himself in the centre of a storm of debate in recent years, facing accusations of siphoning off USL funds to UB Holdings, in which he remains majority shareholder.

An internal inquiry concluded that between 2010 and 2013, a number of transactions at USL were “diverted” to other UB subsidiaries, including Mallya’s beleaguered Kingfisher Airlines, which was grounded in 2012.

However, Diageo, which completed its acquisition of a 55% controlling stake in USL after a plethora of legal hurdles last year, said it had “certain contractual obligations” to support Mallya in continuing as non-executive director and chairman.

The group has declined to comment on reports the chairman is now voluntarily planning to step down, while Mallya’s camp has denied the claims.

Speaking after the publication of the publication of its full-year 2014/15 financial results, Diageo said USL’s board revolt had not affected its Indian operations.