Vijay Mallya likely to be re-elected as United Spirits chairman

 Mint :TUE, SEP 30 2014. 11 45 PM 


No tough questions at AGM despite alleged violation of rules, final results of shareholder vote by end of the week

Bangalore/Mumbai: It was over in 45 minutes. See, I told you it would be easy,” UB Group chairman Vijay Mallya told a director of United Spirits Ltd. To which the director replied, “Yes, I’m surprised. I thought we’d have to face questions from shareholders.”

The above conversation, recounted by two people who heard it, referred to the annual general meeting of United Spirits, which is investigating whether the company and some of its executives violated accounting and other rules.Mint couldn’t independently confirm whether the conversation took place.

Despite the inquiry and pressure from some analysts to remove Mallya from the board of United Spirits, the embattled UB Group promoter is likely to get re-elected as chairman of the company, which is now controlled by Diageo Plc.

United Spirits shareholders also approved an increase in the pay of chief financial officer (CFO) P.A. Murali, according to provisional results of voting at the annual general meeting held on Tuesday.

The final results of the shareholder vote will be released before the end of the week.

Diageo, the world’s largest distiller, now owns roughly 54.78% of United Spirits after it bought an additional 26% of the company’s shares from public shareholders for £1.11 billion in July. It first bought a 25% stake in United Spirits from India’s largest liquor company and UB Group in July 2013. Mallya’s UB Group now owns less than 5% of United Spirits, after some lenders of Kingfisher Airlines Ltd sold United Spirits shares that were pledged against borrowings.

Coming in to the AGM, some analysts had recommended removing Mallya and even Murali from the board of United Spirits, which is investigating whether the company and its executives violated accounting and other rules.

Earlier this month, proxy advisory firm Institutional Investor Advisory Services India Ltd recommended that shareholders vote against the resolutions for chairman Mallya’s reappointment and also suggested that CFO Murali should resign as director and his pay should not be increased.

“There were no tough questions for Mallya or for anyone. Mallya blamed the media and banks for his troubles,” one of the people cited above said.

Soon after United Spirits reported its thrice-delayed fourth-quarter earnings in September, it initiated an inquiry into the accounting practices of the company as several cases of suspected financial impropriety surfaced.

United Spirits, the owner of popular whisky brands such as McDowell’s No.1and Bagpiper, said the inquiry would look at whether the company and its executives had violated rules by lending money to UB Group companies. The “detailed and expeditious inquiry” would also cover some agreements allegedly entered into by United Spirits with a Kingfisher creditor and certain claims made by United Spirits debtors, some of whom are now refusing to repay the company.

Kingfisher and its directors, including Mallya, were declared wilful defaulters by at least two lenders of the grounded airline, which owes more than Rs.7,500 crore to creditors. Kingfisher said on Saturday it secured a stay from the Calcutta high court on the wilful defaulter declaration by United Bank of India, one of the airline’s several lenders.

Four United Spirits board members appointed by Diageo, all of whom are among the most respected corporate professionals in India, have quit over the past six months; earlier this month, three of them said they wouldn’t offer themselves for re-appointment.

A United Spirits spokesperson didn’t immediately respond to an email seeking comment.