Another blow for Mallya

Diageo-led United Spirits pulls out one more lifeline from UB Holdings

Amid the morass UB Holdings is under, Diageo-led United Spirits (USL) has moved to plug a key revenue earning stream for this entity, also Vijay Mallya's key holding company.

UB Holdings (UBH), through UB Global, a subsidiary, had the rights to export the various spirits brands of USL across some global markets. After Diageo acquired a controlling 54 per cent stake in USL, these rights from UBH have been taken away, the functions assigned instead to USL's emerging markets division (EMD).

UBH is already fighting fires across various fronts - closure notices, debt overhang, being tagged a wilful defaulter. It could find it hard to stiffen its revenues from other sources, as this sale of spirits abroad contributes as much as half of its Rs 800 crore yearly revenue.

This move by Diageo-led USL comes as UBH is stuck with debt of close to Rs 4,000 crore, beside having written off as much as Rs 2,500 crore in terms of loans to now-grounded Kingfisher Airlines, and having been forced to provide (on its balance sheet) another Rs 1,300 crore for doubtful loans.

UBH is also grappling with another significant hit from Diageo-led USL, on how to pay back the Rs 1,300 crore of loans. The board of directors of USL has instituted an inquiry as to how its resources (under Mallya's management) had been used for UBH and its associates. There are indications that Diageo-led USL might even recall the loan.

UBH losing from USL its rights for global markets comes even as the latter is consolidating its emerging markets strategy and is progressing aggressively with a foray into four chosen markets in Asia and Africa - Vietnam, Myanmar, Nigeria and Angola.

The EMD has also extended its footprint to Malaysia, which had recently become the second country outside India to start production of McDowell's No.1 Whisky, which has become a millionaire brand in Nigeria. In addition, USL is doing work to extend its reach to a couple of other countries.

UB HOLDINGS LOSING THE GRIP

• UB Holdings loses the rights to sell USL spirits brands in export markets
  

 

Diageo-led USL might also explore a move to recall a Rs 1,300 crore loan to UB Holdings
 

UB Holdings has written off Rs 2,500 crore in bad loans and has provided additionally Rs 1,300 crore towards doubtful debt
 

UB Holdings has forked out Rs 8,700 crore worth of corporate guarantees on behalf of Kingfisher Airlines, a part of which is being invoked
 

Some more lenders might tag UB Holdings as a wilful defaulter