Business Companies 26 Feb 2016 Mallya quits as USL ...

Mallya quits as USL chief, gets $75m exit bonus

FINANCIAL CHRONICLE
Published Feb 26, 2016, 9:40 am IST
Updated Feb 26, 2016, 9:40 am IST
long-drawn battle with Diageo comes to an end following allegations of irregularities on loans given to UB Group companies.
 Liquor baron Vijay Mallya
  Liquor baron Vijay Mallya

Mumbai: Liquor baron Vijay Mallya has stepped down as the chairman of United Spirits (USL), now controlled by Diageo, after striking a truce deal with the British company, which agreed to drop all charges of alleged irregularities during his tenure.

It has also agreed to pay Mallya $75 million over five years as part of the exit deal, which brings to an end a long-drawn battle between him and Diageo following allegations of irregularities on loans given to UB Group companies.

 

“The time has now come for me to move on and end all the publicised allegations and uncertainties about my relationship with Diageo and United Spirits. Accordingly, I am resigning my position with immediate effect,” Mallya said in a statement announcing his departure from the company his family had set up. "I am pleased to have been able to agree terms with Diageo and USL. The agreement we have reached secures my family legacy," he added.

Mallya, 60, took over UB Group from his father in the mid 1980s.During his tenure, Kingfisher beer dominated the India market, a position it holds to this day.

 

UB Group also started Kingfisher Airlines in 2005, which was one of India’s top airlines, but soon ran into rough weathers and was grounded due to financial pressure in 2012.

Last year, Diageo had asked Mallya to step down as chairman and director of USL alleging fund diversion to Kingfisher and other UB group entities, a demand he had rejected outright.

Diageo said the board of United Spirits would appoint Mahendra Kumar Sharma, now independent non-executive director and chairman of the audit committee of USL, as chairman.

The development follows amid state-owned banks -- Punjab National Bank, United Bank and State Bank of India -- declaring him, his group holding company United Breweries Holdings and long-defunct Kingfisher Airlines as wilful defaulters. A bank consortium, led by State Bank of India, had decided to auction Kingfisher House in Mumbai on March 17 this year in a bid to recover a part of Rs 6,963-crore debt due from Kingfisher.

 

On his future plans, Mallya, who agreed to a global, excluding the United Kingdom, five-year non-compete arrangement with Diageo, said: "Having recently turned 60, I have decided to spend more time in England, closer to my children."

Commenting on the issue, Mallya said he has agreed to “a mutual release with both Diageo and USL from claims concerning the alleged irregularities disclosed by USL in April 2015.”

“I am now the founder emeritus of USL, which recognises my contribution to building United Spirits to what it is today and evokes great emotions and a degree of extreme satisfaction having steered USL from a sales volume of just under 3 million cases to over 120 million cases when control was passed to Diageo,” he said.

 

On the group's sports venture, Mallya said he would become “the chief mentor of the Royal Challengers Bangalore", which is owned by USL.

“I have been passionate about this team since inception and am determined to do whatever I can to win the IPL trophy. I am glad that my son, Sidhartha, will remain as a Director as he is equally passionate about RCB,” he added.

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