In an announcement late on Thursday evening, UB Group chairman Vijay Mallya stepped down as non-executive chairman of United Spirits Ltd (USL), controlled by Diageo Plc, ending all association with the company.
Advertisement
“Following Dr Mallya’s resignation, the board of directors of the company is pleased to announce that Mahendra Kumar Sharma, Independent Director and Chairman of the Audit Committee, has been appointed the chairman of the board with effect from February 25, 2016”, USL said in a BSE filing. Diageo will pay £28.6m of this sum to Mallya immediately, and the remaining balance will be paid in equal installments over five years. Mallya had declined to decide and had subsequently refused the accusations.
He added: “On the sporting front, I will now be the Chief Mentor of the Royal Challengers Bangalore” IPL cricket team. Mallya is team principal and part owner of the team for the next five seasons.
Diageo CEO Ivan Menezes said: “The agreement announced today is in the best interests of both Diageo and USL and allows USL to build on its strong platform in one of the biggest spirits markets in the world”.
Mallya had then declined to resign from the board of USL.
The development follows amid state-owned banks – Punjab National Bank, United Bank and State Bank of India – declaring him, his group holding company United Breweries Holdings and long-defunct Kingfisher Airlines as wilful defaulters.
However, a Diageo-commissioned investigation into United Spirits’s accounts by PwC past year alleged that Mr Mallya had used his role as chairman to divert funds to some of his other companies, including the now-collapsed Kingfisher Airlines.
These include services agreement with Kingfisher Finvest, advertising agreement with auto racing team FORCE INDIA (under Watson Limited), sponsorship agreement with United Mohun Bagan Football Team among others.
Mallya had sold a majority stake in USL to Diageo in July 2013.
In another clause to the settlement, Mallya can acquire up to 13 domestic properties from United Spirits, three of them – in Mumbai, Goa and New Delhi – at a 10% discount to the agreed market rate.
Advertisement
USL was forced to make a provision of Rs 330 crore for FY14 on this eight-year loan. If you see it in its totality, the governance dispute that was there in the board ever since 2015 (April), it brings certainty to the status of relevant agreements, eliminates all current and future liabilities, protects USL’s business continuity with regards to banking relationships, and takes away the possibility of prolonged disputes and litigations. It is also a relatively older and a happier joint venture that Mallya’s UB group has with Heineken.
