Mallya could lose more of United Breweries

Vijay Mallya, UB Group chairman who has painted himself into a corner over debts for his now-grounded Kingfisher Airlines, might be forced to shed some of his holdings in United Breweries, the maker of India's largest-selling beer, Kingfisher.

Mallya holds a 32.86 per cent stake in United Breweries, after having ceded control to Dutch brewer Heineken in December last year. He could lose another three per cent of his holdings, as a lender controlling 6.3 million pledged shares is seeking to recover its dues.

According to a regulatory disclosure by McDowell Holdings, a UB Group company that holds 4.05 per cent in United Breweries, it had provided corporate guarantees and created a pledge of 6.3 million shares in favour of a lender to secure debt and the total outstanding was Rs 496 crore.

LOSING GRIP

32.86% Mallya’s stake in United Breweries
25.91% Mallya’s UB stake that has been pledged
3% UB Group companies’ stake under threat as lenders push to exercise their right of encash
23% Mallya’s UB stake that will remain pledged even after lenders have encashed 3% stake

"Three such borrowers have committed acts of defaults and the lender has demanded repayment of a sum of Rs 337.52 crore due from them. Simultaneously, the lender has invoked corporate guarantees and exercised its right of pledge provided by the company to realise the above dues," McDowell Holdings said. The company added it was negotiating with the lender to restore the facility made available to the defaulting borrowers and no action had been taken against the company.

However, UB Group executives told Business Standard it would be an uphill task to stop lenders from encashing pledged shares. United Breweries, which has a market capitalisation of around Rs 18,500 crore, is Mallya's last bastion. Lenders have been eyeing Mallya's stake, worth around Rs 5,500 crore, for a while. In 2013, Heineken became the single largest shareholder in United Breweries after buying an additional 1.35 per cent stake from Citigroup for Rs 275 crore. Until then, Mallya and Heineken had equal holdings, of 37.49 per cent, in United Breweries, which controls over half the beer market in India.

As a three per cent stake comes under pressure from lenders, Mallya will have to ring-fence the other 23 per cent pledged by him. He is discussing how to offload more of his holding to Heineken at a premium. Talks have been inconclusive.

UB Group, which raised debt from a consortium of lenders for Kingfisher Airlines, faces the prospect of its corporate guarantees being encashed and pledged shares of group companies sold. Lenders have sold Rs 2,000 crore worth of pledged shares of United Spirits, another UB Group company now controlled by global spirits major Diageo.

From a holding of 22 per cent in United Spirits, Mallya retains a little over four per cent in the leader of the spirits market in India.

The United Breweries stock lost marginally to close at Rs 705.10 on the National Stock Exchange on Thursday.