USL is making profits and not declaring sick: CFO

The Diageo-owned firm says its net worth has improved to Rs 1,667 crore as on September 2015

The shareholders of United Spirits (USL) approved a resolution to inform the Board for Industrial and Financial Reconstruction (BIFR) that the company’s net worth had eroded by 86 per cent as on March 2015. USL, however, said the firm was on path to recovery, with a net worth improving to Rs 1,667 crore as on September, and would not declare it sick.

"The company (USL) is not a sick company. We are making profits and our net worth has improved," chief financial officer Rajeev Churiwala told shareholders at a extraordinary general meeting on Friday. "You should not be concerned. In the past two quarters, we have delivered profits."

The Sick Industrial Companies Act mandate firms that lose its net worth by over half over four years should inform the BIFR. USL saw its net worth eroded to 86 per cent due to losses caused by fund diversions to the now defunct Kingfisher Airlines by its chairman, Vijay Mallya.

Vice-chairman Mallya, managing director Nicholas Bodo Blazquez and chief executive officer Anand Kripalu were not present. Independent director D Sivanandan chaired the meeting, which saw shareholders urging USL to take legal action against Mallya for causing losses to the company.

This is the second year that USL, now majority owned by British liquor firm Diageo and owning brands such as Signature and Antiquity, is declaring to BIFR that its net worth had eroded by over half. An EGM was convened last October to discuss recommending to the sick company restructuring agency.

USL, in a notification to the BSE on December 29, said the accumulated losses as on March 31, were  Rs 5,045.45 crore, greater than 50 per cent of the peak net worth of the previous four financial years, which was Rs 5,859.62 crore. USL said that it made a provision of Rs 2,082 crore due to losses and doubtful debts during the last financial year.