Most of United Spirits Ltd’s (USL) investors had voted in favour of reporting to BIFR its ‘sick’ status due to net worth erosion, the company said on Saturday after a resolution was moved at an extraordinary general meeting (EGM) here a day before.
In a regulatory filing to the Bombay Stock Exchange (BSE), the liquor major said 99.9 percent of shareholders voted in favour of the resolution, seeking approval to declare the company’s net worth erosion due to huge accumulated losses.
“Of total votes polled through electronic system and secret ballot, 416 or 99.9 percent voted in favour of the resolution and 21 or 0.1 percent against, while 37 votes were invalid,” company secretary V. Ramachandran said in the filing.
Net worth is the value of a company’s assets excluding liabilities, but including its debt portion.
“The company made an operating profit of Rs.154.26 crore and had a positive net worth of Rs.845.84 crore in fiscal 2014-15. Losses were due to exceptional and non-recurring items,” the secretary claimed in the filing.
As the net worth declined to Rs.846 crore for fiscal 2014-15 owing to a whopping Rs.5,045 crore accumulated losses, the board had decided to report the erosion to BIFR as required under section 23 of the SICA, 1985.
The city-based company informed the BSE on December 29 about the EGM to seek the approval for declaring itself sick due to erosion of its net worth during the last four fiscal years, as decided by its board on December 22.
In a statement later, the company said it had reported profit increasing its net worth to Rs.1,667 crore on better performance during the first six months (April-September) of this fiscal (2015-16).
USL is the Indian subsidiary of the London-based British liquor major Diageo plc after it acquired majority stake (54.7 percent) from Mallya-controlled United Breweries Holdings Ltd and public stock in the open market.
In the absence of liquor baron and company’s chairman Vijay Mallya and full time directors, non-executive independent director D. Sivanandan chaired the EGM.
Blaming the Diageo-led new management for the net worth erosion, veteran shareholders wanted the board to fix accountability and hasten the recovery process.