In an irony of sorts, over two lakh investors are estimated to be stuck with shares of long- grounded Kingfisher Airlines even as its lenders are now eyeing the Rs 515-crore bounty sealed by main promoter Vijay Mallya as part of a ‘sweetheart deal’ to exit United Spirits.
Diageo, the new owner of United Spirits Ltd (USL), has in return agreed to absolve Mallya of all his “personal liabilities’ with regard to alleged financial irregularities relating to dealings with UB Group entities.
But, USL has asserted that the recovery of loans worth Rs 1,337 crore would be pursued from United Breweries Holdings Ltd (UBHL) through “dialogue or other legal means”.
Interestingly, UBHL is now left with a total market value of just about Rs 148 crore although it continues to have more than 51,000 public shareholders including over 50,000 small retail investors.
Other shareholders include 14 mutual funds, 14 banks/ financial institutions, 10 foreign portfolio investors, one insurer, one government entity and nearly 100 HNIs.
The total number of public shareholders has come down from over 56,000 a year ago, including over 53,000 small retail investors and nearly 175 HNIs.
In case of Kingfisher Airlines, the trading in its shares have been suspended for long due to its non-compliance to various listing requirements including its failure to make timely disclosure of shareholding data and other details.
As per the latest shareholding data disclosure till September 2014, it had over 2.33 lakh small retail investors, over 6,200 HNIs, 13 banks and other domestic financial institutions, as also five promoter entities.
Ironically, the number of public shareholders across all categories was higher than the levels before the airline was grounded in October 2012. The total number of public shareholders went up during this period from 2.1 lakh to over 2.4 lakh. The company now commands a market cap of just about Rs 110 crore, as against that of close to Rs 10,000 crore before it landed in financial mess leading to its grounding.
The airline’s unpaid loans worth thousands of crores of rupees led to several banks, including state-run SBI declaring Mallya, Kingfisher and UBHL as wilful defaulters.
The banks are now said to be eyeing USD 75-million (Rs 515 crore) payment that Diageo has agreed to pay to Mallya as part of the deal for his exit as Chairman and non-executive director of United Spirits, where UB Group had earlier sold controlling stake to the global liquor giant.
The finer contours of the deal, as also the share price movements in run-up to its announcement and the transfer of liabilities from Mallya to UBHL, are already being scrutinised by various regulatory authorities including Sebi and the Ministry of Corporate Affairs.
An USL spokesperson had earlier said they had not received any request from Sebi to date.
“Clearly if we do, we will of course provide any information required,” the spokesperson said on Friday night.
Sources said Sebi is also looking into the arrangement between Mallya and Diageo that the businessman personally has been absolved of any personal liability, but the UK-based liquor major will take all steps to recover its dues from UB Holdings Ltd as this will result in UBHL shareholders paying for the liabilities of its main promoter.
Diageo said the USD 75 million payment to Mallya will be charged to exceptional items in the year ending June 30, 2016.
Sebi is also looking into possible violations of corporate governance and other norms because of this deal, as “serious doubts” have been raised about whether the corporate governance norms have been followed in “letter and spirit”.
A new scrutiny has been launched even as an earlier probe is continuing against Mallya and his UB Group, as also others, with regard to alleged financial irregularities at United Spirits Ltd (USL) relating to loans advanced to UB firms including for long-defunct Kingfisher Airlines.
Besides, various UB Group firms are already facing probes by Sebi relating to listing rule violations, while Corporate Affairs Ministry is also looking into alleged violations of certain provisions of the Companies Act. The role of previous auditors is also under the scanner.
Also under the scanner are financial transactions entered into by USL, Mallya and various UB Group firms with entities abroad, including those before Diageo buying into the company. Some of these deals relate to various sporting ventures floated by Mallya including for cricket and Formula One race. Recently, he also ventured into Caribbean Premier League.
Mallya, who has been known for his flamboyance and used to be referred to as ‘King of Good Times’ before his empire ran into troubles beginning with collapse of Kingfisher Airlines, managed a good deal to end a year-long boardroom battle at USL, wherein he had sold controlling stake to Diageo in a multi-billion dollar deal.
Such an exit arrangement is commonly known in the business parlance as ‘golden parachute’ or ‘sweetheart deal’.
Mallya, who along with his group firms is fighting ‘wilful defaulter’ tags given by Kingfisher lenders, said he would now “spend more time in England” closer to his children.
Banks reportedly want his passport to be seized and have approached the Debt Recovery Tribunal in this regard.
Last year, Diageo had asked Mallya to step down as Chairman and Director of USL alleging fund diversion to Kingfisher and other UB group entities, a demand he had outrightly rejected at that time.
Diageo is the majority shareholder of USL with a 54.78 per cent holding, excluding the 2.38 per cent owned by the USL Benefit Trust.
Mallya personally held a small stake of 0.01 per cent in USL at the end of December 2015, while his group firms owned further 3.99 per cent stake. However, more than half of these shares are pledged with banks.