Fate of USL chairman Mallya hangs in balanceBy Amy Hopkins
Shareholders in India’s United Spirits are set to vote on the continuing role of Vijay Mallya as the firm’s chairman later this month, according to reports.
As reported by Business Standard, the Diageo-controlled firm – the largest drinks group in India – will hold a shareholder vote on 24 November.
In April this year, USL’s board of directors 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 £445m net loss in 2013/14.
USL initially 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.
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.
Mallya has refused to resign as chairman, prompting the board to recommend that USL’s shareholders “remove” him via a vote.
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.
At the time the board issued its no confidence vote, Diageo said: “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.
“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.”
Speaking after the publication of the publication of Diageo’s full-year 2014/15 financial results, the group’s CEO Ivan Menezes said USL’s board revolt had not affected its Indian operations.