UB group to sell residual stake worth Rs 2,200 crore in USL

Proceeds from the sale would be used to repay loans

Vijay Mallya-owned UB group is looking to sell its residual 4 per cent stake in United Spirits (USL) worth Rs 2,200 crore to repay its loans.

UB group’s stake is currently pledged with banks, which have lent Rs 7,000 crore to the group’s now-defunct Kingfisher Airlines.

Mallya is currently engaged in a fight with United Spirits’ British owner Diageo over Rs 2,100 crore lent by USL to various UB group companies. Diageo owns 55 per cent stake in the company.

On Monday, the United Spirits scrip rose 4.34 per cent on speculation that Diageo might buy out UB group’s stake. When contacted, a Diageo spokesperson declined to comment on the speculation. Mallya did not reply to text messages and telephone calls. As Mallya’s stake is pledged with banks, it will have to take the banks into confidence before selling it in the market.

The news of Mallya selling his remaining stake in USL comes in the backdrop of an impending annual general meeting (AGM) of shareholders, which is expected to be stormy due to numerous observations by the company’s auditors in the company’s accounts. Mallya was even asked by the board of United Spirits to resign from board but a defiant Mallya has refused to do so.

USL had accused Mallya of diversion of funds from the company’s accounts between 2010 and 2013. In turn, Mallya had accused United Spirits board of “sleeping” on the job — the accounts were cleared by the company’s board as well as by the auditors —and raking up the issue too late.

Group insiders say both Mallya and the United Spirits management have come to an understanding, according to which Mallya will exit the company after the November 24 AGM and without any public showdown at the AGM.

In the 2015 annual report, the auditors have once again raised queries to the management on the recovery of dues from USL to Kingfisher Airlines and to UB group entities.

The USL board said it is taking steps to recover the amount from United Breweries Holdings (UBHL), which is facing winding up petitions from various creditors.

Diageo took over United Spirits in 2012 in a $2.1-billion transaction including the open offer. It later spent another Rs 11,000 crore to buy an additional 26 per cent stake in a second open offer, which closed in 2014.

Since then, USL has been taking multiple steps to untangle itself from the UB group. In July this year, it sold 3.21 per cent stake in UBHL for Rs 872 crore to Heineken.