As the United Spirits (USL) annual general meeting at Bangalore decides Vijay Mallya's fate as the chairman, two of the country's top football clubs will be watching closely. Kingfisher East Bengal and Mcdowells Mohun Bagan, in which the liquor baron holds stakes through his companies USL and United Breweries (UB), have been staring at a dark future ever since Diageo had checked into the UB Group. Mallya's interest in sporting ventures has been wide-ranging encompassing the sports of football, cricket to Formula 1.
Mallya had taken control of Mohun Bagan through a deal inked between the club and UB in 1996, in which he brought a 50 per cent stake in the club. Subsequently, UB brought a 50-per cent stake in East Bengal and, according to the latest filings, still serves as a director in the board. The deals changed the fortunes of the clubs, as Mallya generously pumped money into the franchisees.
As Diageo took control of USL, funding to the clubs - which was once to the tune of Rs 12 crore every year - dried up and eventually stopped from December last year.
Things got worse after minority shareholders of USL turned down nine resolutions in Decmeber, including the sponsorship deal with United Mohun Bagan Football Team.
"We have not received a single penny from Diageo, despite having a 10-year agreement from 2013 to 2023 with USL. We are due Rs 4.5 crore as of now, and despite repeated requests they have not paid much attention. So, we have no other option but to take legal action and file a creditor's liquidation case against them very soon," said Anjan Mitra, secretary of Mohun Bagan.
With Dutch brewer Heineken NV eyeing a majority control in UB, club officials remain anxious. "It is a challenging environment and we expect more budget cuts," said a club official.
The story is similar for other sporting ventures that Mallya has an interest in. The loss of Royal Challenger Sports Private Limited - the franchisee which owns Royal Challenegrs Bangalore in the Indian Premier League - ballooned to Rs 99 crore in FY14 from Rs 7.85 crore in FY 13 - the highest among all the franchisees.
According to media reports, while the new management at USL has decided against divesting its stake in the franchisee, its future remains uncertain.
A USL spokesperson said the company was seeking the guidance of Sebi on the payment to Mohun Bagan after the shareholders rejected it. "Payments due to Mohun Bagan up to the date of the shareholders meeting have been made by United Spirits to Mohun Bagan. United Spirits is yet to receive guidance from SEBI on the matter," the company said.
An executive with the liquor major, who was with Shaw Wallace when Vijay Mallya took control of the company in 2005 says, "Mallya had the passion for sports and love for the game, what he didn't lend to the franchisees was his business acumen."