'Sick' United Spirits calls EGM as net worth erodes

British liquor major Diageo's Indian arm United Spirits Ltd (USL) has called for an extra-ordinary meeting (EGM) here to seek shareholders' nod for declaring itself "sick" owing to its net worth eroding more than 50 percent of its profits over the last four consecutive years.

In a regulatory filing to the Bombay Stock Exchange (BSE) on Tuesday, the city-based company said its board of directors had decided on December 22 to seek shareholders' approval for declaring it sick under the Sick Industrial Companies Act (SICA) 1985 due to erosion of its net worth.

"In accordance with section 23 of SICA, the company shall report to the Board for Industrial and Financial Reconstruction (BIFR) that the company's accumulated losses as on March 31, 2015 have resulted in net worth eroding by more than 50 percent," the filing noted.

Net worth of a company is the value of its assets excluding liabilities, including its debt portion.

Though liquor baron Vijay Mallya continues to be USL chairman and on its board as a director under an agreement with the London-based Diageo, he holds a mere 4.07 of the blue chip's equity stake after the former bought majority stake (54.7 percent) in 2012 and took control of it soon.

Diageo plc also appointed global audit firm PricewaterhouseCoopers (PwC) India to do forensic investigation of its accounts, following discrepancies, including financial irregularities, which included writing off Rs.7,200 crore from the books.

For 2014-15, the company reported net loss of Rs.1,956 crore on standalone basis and Rs.1,687 crore on consolidated basis on a revenue of Rs.8,353 crore.

In 2013-14, net loss was Rs.5,103 crore on standalone and Rs.4,489 crore on consolidated basis.