Vijay Mallya quits as MCF director, shares zoom

Corporate affairs ministry rejects Kingfisher Airlines' application to re-appoint him as managing director for five years

In a surprise move, UB Group Chairman Vijay Mallya has quit as head of Mangalore Chemicals & Fertilizers (MCF), which has been in the midst of a takeover battle between the Shailesh Mehta-led Deepak Fertilizers and the Saroj Poddar-controlled Adventz Group.

On Monday, MCF informed BSE that Mallya, chairman of the company, had resigned with immediate effect.

In a related move, the now-collapsed Kingfisher Airlines informed stock exchanges that the Ministry of Corporate Affairs had rejected its application for the Centre’s approval for the re-appointment of Vijay Mallya as the company’s managing director for five years from October 16, 2013, without remuneration.

Adventz Group is known to be close to Mallya. Both Deepak Fertilizers and the Adventz-Mallya combine now have significant stakes in the company, while the UB Group has been reduced to a minority shareholder.

Adventz had an agreement with Mallya that the UB Group chief would continue to hold the post of MCF chairman for five years, irrespective of his holding.

Analysts said Mallya’s exit from the MCF board might be part of an understanding between Poddar and Mallya to ensure the company managed to secure funding from banks. As Mallya had given personal bank guarantees for Kingfisher Airlines, many banks weren’t willing to give loans to other entities related to Mallya, who owed about Rs 7,000 crore to Indian banks. In September, United Bank of India had declared Mallya a “wilful defaulter”, making it difficult for Mallya-related entities to access funds.

Apart from banks, Mallya has defaulted on staff salaries, provident fund, the tax department and caterers, too.

Other members of the MCF board, which has annual revenue of Rs 3,310 crore, are Mallya confidant S R Gupte, independent director Prateep Narayan, whole-time director K Prabhakar Rao and Managing Director Deepak Anand. Gupte has also been declared a “wilful defaulter” by United Bank of India, as he was on the board of Kingfisher Airlines.

A source close to Adventz Group said the MCF board was likely to be restructured in the coming days. Emails and text messages sent to Mallya did not elicit any response. A Deepak Fertilizer official said the company was “clueless” about MCF.

Reacting to Mallya’s resignation from MCF, the company’s shares soared 15 per cent but later shed some gains to close at Rs 89.25 apiece on BSE, up 9.38 per cent.

Mallya’s resignation comes as a surprise, as under a deal signed in May this year, he was to have a considerable say in the management of MCF even if Adventz Group secured control of the company after a bidding war with Deepak Fertilizers. Mallya was to be the chairman for five years. He could also appoint three directors on the MCF board and have the right of first refusal on Poddar’s shares. Adventz Group could appoint only one director, according to its filings with stock exchanges during its counter-offer to Deepak Fertilizer’s open offer in May.

The agreement was signed as UB Group wasn’t in a position to finance the competing offer, while Adventz was willing to do so, as well as participate in the management of MCF.