April 27, 2015 – Vijay Mallya is fighting demands from the Diageo-controlled board of United Spirits, the Indian-based spirits company he built into one of the world’s largest, that he resign over alleged financial improprieties. The demand came over the weekend at an emergency board meeting in Mumbai, according to several news organizations.
Diageo’s move came after reviewing an audit report by PricewaterhouseCoopers. That report claims company funds were diverted between 2010 and 2012 to prop up the now-bankrupt Kingfisher Airlines and other Mallya-controlled companies before Diageo bought a controlling stake in United Spirits from Mallya in 2012. The demand that Mallya resign as chairman came days after the company’s chief financial officer resigned in the wake of the audit report.
Mallya denied any improper actions in a statement released to the Financial Times and other media outlets, noting that all of the transactions complied with Indian law and were not only approved by the United Spirits board at the time, but were also accounted for in the company’s financial statements reviewed by Diageo before its acquisition. Diageo ordered the audit after United Spirits repeatedly delayed reporting its results for the fourth quarter of 2014 several times over questions about a $225 million (USD) loan from the company to UB Holdings, Mallya’s holding company for Kingfisher Airlines, United Spirits, United Breweries, and other enterprises.
Under the original 2012 deal in which Mallya sold control of a 28% stake in United Spirits to Diageo, he retained the right to serve as the company’s chairman while agreeing to vote his shares at Diageo’s direction. Diageo later acquired enough shares on the open market to control 55%, and has put new accounting measures in place at United Spirits. Analysts say Diageo could remove Mallya from the board under Indian law by putting the move to a shareholder vote, but Mallya is likely to contest such a move in court. The company’s web site still features Mallya prominently on its home page for now.
Links: United Spirits