With lenders who had been given the shares as collateral for loans given to Kingfisher Airlines free to sell and several having already sold the shares in the market, Mallya may not be left with enough shares to offer to Diageo in a three-tier transaction.
While a UB Group spokesperson declined to comment, Diageo could not be contacted immediately for its response over the latest development.
As per the deal, of the 27.4 per cent stake that Diageo was to acquire in the first stage, 19.3 per cent was by direct stake from UBHL and certain USL subsidiaries and group trusts.
However, with 97.94 per cent shares (35.2 million shares) of Mallyas 28.1 per cent (35.97 million shares) holding in USL being pledged with lenders and with them starting to sell the shares in the market, he may not not be left with any to offer to Diageo.
At Tuesdays closing price, the pledged shares are worth Rs 6,552 crore.
The only option before him was some relief from the Bombay High Court, which did not come his way on Tuesday. The court refused to grant interim relief to UBHL for a stay on the sale of pledged shares in USL and Mangalore Chemicals and Fertilizers by the State Bank of India-led consortium of banks.
The consortium had initiated the sale of shares of USL that were pledged by UBHL as security against the lending of over Rs 7,000 crore to Kingfisher Airlines.
In a hardening of stance after the court refused any relief to Mallya, State Bank of India chairman Pratip Chaudhuri told Bloomberg that it will seize collateral pledged by the company.
The bank has called up the loan and has asked the company to repay, Chaudhuri said. We will invoke all the guarantees and securities that we hold including shares of United Spirits that is pledged as collateral and personal assets of the people who have given the guarantee, he added.
While the company had pledged a total of 35.2 million shares of USL with various entities, the consortium of 18 banks led by SBI have 2.6 million shares as collateral with them. They have already sold 7,30,000 shares of USL in three tranches as on Tuesday.
It remains to be seen as to how Diageo, which had plans to take its stake eventually to 53.4 per cent, completes the transaction.