Another Mallya problem, this time from MCF

Mangalore Chemicals may sue liquor baron after auditors Ernst and Young find "elements of mismanagement" in investment

Mangalore Chemicals and Fertilizers (MCF), majority owned by the Zuari Group, says it could take legal action against already besieged liquor baron Vijay Mallya, after its auditors say there could be "irregularities and elements of mismanagement" in the Rs 200 crore investment made by the company in Bangalore Beverages Ltd.

MCF had invested Rs 200 crore in preferential shares in the Bengaluru beer maker during Mallya's regime (MCF was controlled by him, through his United Breweries, till last May), before he sold majority stake to the Saroj Poddar-owned Zuari. MCF auditors Ernst and Young did a forensic investigation into the deal. E&Y also found the same issue with Rs 16.68 crore lent to United Breweries (Holdings), majority owned by Mallya, said MCF on Friday.

"The company is taking necessary legal advice in connection with the findings, " it said.

Mallya, as widely reported, is on self-exile in Britain, after the government and the Supreme Court stepped up pressure to repay Rs 9,000 crore of loans. Mallya's diplomatic passport has been impounded but he has said he won't return. The Enforcement Directorate is also investigating Mallya on charges of money laundering of a Rs 900 crore loan taken from IDBI Bank.

MCF auditors are not the first one to find irregularities in a company sold by Mallya. PwC, auditors at United Spirits, earlier controlled by Mallya, found irregularities to the tune of Rs 7200 crore after they did a forensic investigation into the company books after Diageo bought it. This eventually led to Mallya quitting the liquor business by signing a non-compete agreement with Diageo, after the USL board sought eviction from the company.

Last quarter, MCF had said it was making provisions for potential diminution in value in Bangalore Breweries, as part of financial prudence.

Mallya apart, MCF on Friday appointed former Wipro GE Chairman D A Prasanna as an independent director. It also reported a March quarter loss of Rs 5.8 crore, as against a profit of Rs 34 crore in the same period a year before. Revenue grew 12.9 per cent to Rs 752 crore in the quarter, as against Rs 666 crore in the January to March quarter last year.

The stock closed down Re 1.25 or 2.7 per cent  at Rs 45.45 on Friday on the BSE exchange.

MCF
Majority owned by the Zuari Group, says it could take legal action against liquor baron Vijay Mallya, after its auditors say there could be "irregularities" in the investment made by it in Bangalore Beverages Ltd

Rs 200 cr
Amount MCF had invested in preferential shares in Bangalore Beverages Ltd during Mallya's regime (MCF was controlled by him till last May), before he sold majority stake to Zuari